Chico's, which runs its namesake brand plus White House Black Market and Soma lingerie, Tuesday reported that Q3 net sales rose 100% from 2020 and fell 6.4% from 2019 to $453.6 million. Quarter-end inventories were down 18.8% company-wide compared to 2019 — up 36.6% at Soma, down 46.2% at Chico's and down 38.8% at White House Black Market.
Overall comps rose 28% year over year, with Chico's up 23%, White House Black Market up 33% and Soma up 30.2%. Soma comps also rose 43.5% from 2019, with NPD Group data showing growth outpacing in some categories, per a company press release.
During a call with analysts, the women's apparel retailer said it slowed its plans for 30 to 40 store closures this year in light of renewed profitability at some stores. The company swung into the black in the quarter with net income of $18.2 million, from last year's $55.9 million loss and 2019's $8.1 million loss.
In her statement on the period, Chico's CEO Molly Langenstein noted the company just posted its "best third quarter earnings performance since 2016," though it benefited from the year-over-year recovery seen at most apparel retailers.
The question remains whether at Chico's — especially at its eponymous banner — the recovery is sustained, according to B. Riley analyst Susan Anderson. "While we are impressed with the turn [the retailer] is seeing in its businesses, we remain on the sidelines until there is additional visibility on sales given supply chain issues" and longer-term operating profit Anderson said in emailed comments.
"Soma continues to be the star of the show," Anderson also said, with "WHBM sequentially improving vs. 2019, and Chico's slightly lagging."
Despite its relatively lackluster performance, the namesake chain dominates operations, with 506 full price and 123 outlet stores out of a company total 1,279 locations. The company has been able to boost store profits in some cases via landlord negotiations, Chief Financial Officer Patrick Guido told analysts Tuesday.
Tight inventories have helped several retailers avoid the high level of markdowns that had come to plague many in the apparel space in recent years. Recent B. Riley's store checks reveal that Chico's and White House Black Market have pulled back on promotions "significantly," but those analysts noted that "Chico's was unable to see an improvement relative to other brands due to extremely lean inventory levels."
The Chico's brand, which Langenstein said has made product and quality updates, may have over-corrected as it ran into sourcing issues from abroad.
"When you put so much more product and quality into the garments, we wanted to have scarcity, quite honestly, in the brand to be able to create some of that," Langenstein said, according to a transcript from Seeking Alpha. "Now, that does not mean that the inventory levels that we ended with in Q3 is exactly where we wanted to be. There was definitely some inventory slides that impacted us as we discussed ...in our second quarter call in particular with some of the challenges that we were having with Vietnam."