Company Announces Boutique Reopening Plan for North America
FORT MYERS, Fla., April 27, 2020 /CNW/ -- Chico's FAS, Inc. (NYSE:
CHS), a leading omnichannel specialty retailer for women that
operates Chico's®, White House Black Market®,
Soma® and TellTale™, today provided a business
update and boutique reopening plan from the Company's Chief
Executive Officer and President; recent 2020 preliminary sales
information; and details on liquidity and cash utilization.
Statement from Bonnie Brooks,
Chief Executive Officer and President
The Chico's FAS Community – our customers, our associates and
our shareholders – are at the center of every decision we make as a
company, and during this period of temporary closure of our
boutiques, that mindset has not wavered. We continue with our
commitment to doing the right thing in our business.
As previously announced on April
1, we made the difficult decision to place the majority of
our associates on furlough with continued benefits and to
temporarily reduce the pay or hours of the majority of our
remaining associates, including the entire executive leadership
team and Board of Directors by 50%. Our associates in the
Distribution Center, which remains fully operational, are receiving
full wages to ensure the fulfillment of our healthy digital sales.
Across all of our offices and distribution centers, we have
implemented enhanced safety protocols that exceed guidelines from
public health officials and federal, state and local
government.
Strong Digital Sales
Over the past six weeks, we have
seen strong customer demand in our digital channels, including
increased traffic and sales on our websites and increased
engagement on our social media channels. Chico's FAS digital
sales have experienced double digit growth in the six weeks since
the company became a digital-only business on March 18, 2020. The Company operates five unique
websites for its' brands. Driving this sales growth and
double-digit traffic growth are categories of intimates, sleep,
cozy, active and lounge.
Style Connect and Other Technology Investment
Our
digital performance shows that we have been well-served by our
investments in technology. In mid-March, we equipped our store
management with handheld devices that were installed with Style
Connect SM, our proprietary digital styling software
that enables us to communicate directly with the majority of our
customers to drive the frontline business to digital fulfillment.
This action resulted in the above-mentioned double digit increases
in online sales since the temporary closure of boutiques. Style
Connect was designed as a competitive advantage that has further
opportunities for increasing sales as we move into our new
"post-COVID-19 operating model" as it allows for intimate but
distanced connection in a meaningful manner that is resonating with
our customers.
Stores Reopening Phase to Commence May
4, 2020
Research1, 2, 3 shows our
customers' main shopping crossover for all of our categories is
with department stores. We believe we will have some significant
advantages in the next several months as the majority of our stores
are under 3,500 square feet and are located in easily accessible
shopping plazas. Due to the smaller size of our boutiques, Chico's
FAS has the ability to reopen quickly and safely and to follow
enhanced safety precautions. For example, our teams have the
ability to manage the number of customers in the stores, provide
hand sanitizer and masks to customers, create new flexible distance
between clothing racks, and adjust fitting rooms to accommodate
social distancing practices.
Starting on May 4, we will roll
out three phases of reopening our boutiques: first,
fulfillment of national orders through stores using store
inventories; second, buy-online-pick up in store (BOPIS) including
contactless curbside pickup; and third, the introduction of a new
shop-by-appointment service for all brands – Chico's, Chico's Off
the Rack, White House Black Market, White House Black Market
Outlet, and Soma. Store openings will be consistent with local
health and safety guidelines and regulations.
Post COVID-19 Operating Model
As the magnitude of the
impact of COVID-19 on the women's apparel industry became clearer,
we immediately pivoted to a new business plan for 2020 and beyond,
assessing and overhauling every function of our business, as well
as quickly adjusting operations aligned to digital marketing and
distribution. During the past few weeks, we have
significantly reduced our weekly cash burn. Our actions have been
designed to reduce operating expenses by approximately 30% and we
are committed to holding this cost structure for the long term. We
have deferred the majority of payables, and are renegotiating all
contracts, including real estate.
In the first half of last year, the Company faced a significant
downward sales trajectory. In the second quarter, I joined the
company, changed the majority of our senior leadership team, and
worked to immediately overhaul the business. This new team was able
to quickly pivot the business with a 9.4% positive swing in sales
from Q1, to the end of Q4, posting the first positive comparable
sales quarter for the business since 2014, at fiscal year-end
February 1, 2020.
While todays' challenges are of a greater magnitude, our culture
of agility and our ability to grow sales while reducing expenses,
which started exactly 12 months ago, has already served us well
during this period, and we are confident we have a path forward for
the sustainable future of the Company, post COVID-19.
Bonnie Brooks
CEO and President
_______________________________________
1 Chico's Transformation Customer Profiling
7.17.19 Final Updated (customer file
sample)
2 White House Black Market Customer Profiling Study
9.12.19 (customer file sample)
3 Soma Top 3 Intimates Retailers Quick Poll Summary
9.6.19 (research panel sample)
Liquidity and Cash Utilization Update Commentary from
David Oliver, Interim Chief
Financial Officer and Controller
Recent Sales Performance
The following reflects
comparable sales for the periods indicated, in each case compared
to the same period in the prior fiscal year.
Comparable Sales Performance:
The Company's quarterly
comparable sales trends showed continuous improvement throughout
fiscal 2019 as merchandising initiatives gained traction and
customer centric product was introduced. These trends continued
during the initial four-weeks of fiscal 2020 when the comparable
sales increased 2.7% compared to last year.
Fiscal 2019 Reported and Four Weeks Ended February 29, 2020 Demonstrates Sequential
Growth
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|
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|
|
|
|
|
|
|
|
|
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13 Weeks
Ended
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13 Weeks
Ended
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13 Weeks
Ended
|
|
13 Weeks
Ended
|
|
Four Weeks
Ended
|
|
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May 4,
2019
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August 3,
2019
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November 2,
2019
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February 1,
2020
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February 29,
2020*
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|
|
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Total
Company
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-7.00%
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-6.10%
|
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-2.20%
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2.20%
|
|
2.70%
|
Fiscal 2020 Digital Sales Weeks 1-6 Ended March 14 vs Weeks 7-12 Ended
April 25 increased 16
percent*
*previously unreported
We entered fiscal 2020 on strong financial footing and continue
to maintain a heathy liquidity position. As of Monday, April 27, 2020, we had approximately
$103 million of cash and cash
equivalents on hand. We believe our cash position is
meaningfully bolstered by availability under our asset-based credit
facility and our ability to borrow against our owned and
unencumbered Distribution Center and corporate office facilities.
We estimate borrowings on the ABL and leveraging our owned real
estate could generate approximately $100
million in additional liquidity. Borrowings under the ABL
have no required debt repayments until the ABL matures in
August 2023.
Additionally, our cash burn is being partially mitigated by our
strong digital business during this temporary store closure period
as well as meaningful actions we have taken to align the Company's
cost structure with current and post COVID-19 sales expectations.
Those actions to reduce costs and improve liquidity include:
- Partnering with landlords, suppliers and vendors to materially
reduce operating costs and extend payment terms, including in
certain instances withholding payments;
- Cancelling merchandise receipts to better align inventory with
expected market demand;
- Significantly reducing all elements of selling, general and
administrative expenses to better align operating costs with
expected sales;
- Suspending our quarterly dividend, conserving approximately
$31 million of cash this fiscal year;
and
- Reducing our planned capital expenditures to be primarily
maintenance and business essential expenditures.
Our cash burn quarter-to-date reflects the payment of the
previously approved first quarter fiscal 2020 dividend and the
payout under the fiscal 2019 management incentive plan.
Under provisions of the Coronavirus Aid, Relief, and Economic
Security (CARES) Act, we believe Chico's FAS has the potential to
realize a one-time liquidity benefit approximating $95 million based on our current forecast,
primarily related to the recovery of previously paid Federal income
taxes as well as deferral of social security tax payments, employee
retention credits and other tax changes provided for under the
CARES Act. We are looking at ways to meaningfully accelerate this
liquidity benefit into fiscal 2020 and anticipate a portion will be
realized in the second and third quarters.
We remain confident in the future of the Company, and its
financial position.
David Oliver
Interim Chief Financial Officer and Controller
Earnings Call and Annual General Meeting of
Shareholders
The Company today announced that its conference
call to review first quarter 2020 financial results will be held on
June 10, 2020.
The Company's 2020 Annual General Meeting of Shareholders
scheduled for June 24, 2020 will be
held as a virtual meeting.
Preliminary Data
The estimated 2020 sales data
presented in this release is preliminary, is based upon
management's current estimates, may not reflect our actual sales
performance for the full first quarter of fiscal 2020 or any other
completed financial period, and is subject to the completion of our
standard procedures for the preparation and completion of our
quarterly financial statements. These procedures have not been
completed, and we may make further adjustments as a result of
developments occurring between now and the time of the financial
results as the respective periods are finalized. In addition,
estimated sales and cash burn data has been provided to help
investors understand and assess the near-term impacts of the
COVID-19 pandemic, but is subject to variability and may not be
indicative of our results or trends for any full reporting
period.
ABOUT CHICO'S FAS,
INC.
Chico's FAS is a Florida-based
fashion company founded in 1983 on Sanibel Island, Fla. The Company
reinvented the fashion retail experience by creating fashion
communities anchored by our Most Amazing Personal Service, which
put the customer at the center of everything we do. As one of the
leading fashion retailers in North
America, Chico's FAS is a company of three unique brands –
Chico's, White House Black Market and Soma – each thriving in their
own white space, founded by women, led by women, providing
solutions that millions of women say give them confidence and
joy.
Our Company has a passion for fashion, and each day, we provide
clothing, shoes and accessories, intimate apparel and expert
styling in our brick-and-mortar boutiques, digital online boutiques
and through Style Connect, the Company's proprietary digital
styling tool that enables customers to conveniently shop wherever,
whenever and however they prefer.
As of February 1, 2020, the
Company operated 1,341 stores in the U.S. and Canada and sold merchandise through 70
international franchise locations in Mexico and 2 domestic franchise airport
locations. The Company's merchandise also is available at
www.chicos.com, www.chicosofftherack.com, www.whbm.com,
www.soma.com and www.mytelltale.com.
To learn more about Chico's FAS, visit
www.chicosfas.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
This press release contains statements
that constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. The
statements, including without limitation statements made by Ms.
Brooks under "Statement from Bonnie
Brooks, Chief Executive Officer and President," and Mr.
Oliver under "Liquidity and Cash Utilization Update Commentary from
David Oliver, Interim Chief
Financial Officer and Controller" relate to expectations and
projections regarding the Company's future performance and may
include the words "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "plan," "outlook," "project," "should,"
"strategy," "potential" and similar terms. These
forward-looking statements are based largely on information
currently available to our management and on our current
expectations, assumptions, plans, estimates, judgments and
projections about our business and our industry, and are subject to
risks and uncertainties that could cause actual results to differ
materially from historical results or those currently anticipated.
Although we believe our expectations are based on reasonable
estimates and assumptions, there is no assurance that our
expectations will, in fact, occur or that our estimates or
assumptions will be correct, and we caution investors and all
others not to place undue reliance on such forward-looking
statements. Factors that could cause actual results to differ
include, but are not limited to: the effects of the COVID-19
pandemic and uncertainties about its depth and duration, as well as
the impacts to economic conditions and consumer behavior,
including, among others: temporary boutique closures due to
government mandates, the unemployment rate, the extent,
availability and effectiveness of any COVID-19 stimulus packages or
loan programs, and trends in consumer behavior and spending during
and after the end of the pandemic; our ability to successfully
implement any alternatives that we pursue including our ability to
achieve the cost savings described in this release; government
actions and policies; increases in unemployment rates and taxes;
local, regional, national and international economic conditions;
changes in the general economic and business environment; changes
in the general or specialty retail or apparel industries, including
the extent of the market demand and overall level of spending for
women's private branded clothing and related accessories; the
effectiveness of our brand strategies, awareness and marketing
programs; the ability to successfully execute and achieve the
expected results of our business strategies and particular
strategic initiatives (including, but not limited to, the Company's
revised organizational structure, retail fleet optimization plan
and three operating priorities which are driving stronger sales
through improved product and marketing; optimizing the customer
journey by simplifying, digitizing and extending the Company's
unique and personalized service; and transforming sourcing and
supply chain operations to increase product speed to market and
improve quality), sales initiatives and multi-channel strategies;
customer traffic; our ability to appropriately manage our inventory
and allocation processes; our ability to leverage inventory
management and targeted promotions; the successful recruitment of
leadership and the successful integration of new members of our
senior management team; uncertainties regarding future unsolicited
offers to buy the Company and our ability to respond effectively to
them as well as to actions of activist shareholders and others;
changes in the political environment that create consumer
uncertainty; the risk that our investments in merchandise or
marketing initiatives may not deliver the results we anticipate;
significant changes to product import and distribution costs (such
as unexpected consolidation in the freight carrier industry, and
the ability to remain competitive with customer shipping terms and
costs pertaining to product deliveries and returns); new or
increased taxes or tariffs that could impact, among other things,
our sourcing from foreign suppliers; and significant shifts in
consumer behavior. Other risk factors are detailed from
time to time in the Company's Quarterly Reports on Form 10-Q,
Annual Report on Form 10-K and other reports filed with the
Securities and Exchange Commission. These factors should be
considered in evaluating forward‑looking statements contained
herein. There can be no assurance that the actual future results,
performance, or achievements expressed or implied by such
forward-looking statements will occur. The Company does not
undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that
projected results expressed or implied in such statements will not
be realized.
Chico's FAS, Inc. • 11215 Metro Parkway • Fort Myers, Florida 33966 • (239)
277-6200
Investor Relations Contact:
Tom Filandro
ICR, Inc.
(646) 277-1235
Media Relations Contact:
Pashen Black
Director of Corporate Public Relations
(239) 218-3388
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SOURCE Chico's FAS, Inc.