CHICO'S FAS INC.

Future Prospects for Chico's Fas Inc.

Future Prospects of Chico's Fas Inc

Introduction

Chico's FAS focus on outlet channel will enable it to address an increasing pool of value-oriented customers. However, low discretional spending might negatively impact Chico's revenues. In this paper, we will talk about the future prospects for Chico's Fas Inc.

Discussion

Present and Future Prospects

Their 2011 results built on the financial success they reestablished in the prior year:

Net sales increased 11.2 percent to $1.905 billion compared to $1.713 billion for the prior year;

Comparable sales, including stores and direct-to-consumer, increased 8.3 percent on top of the 7.6 percent increase for 2009; and

Net income equaled $115.4 million, or $0.64 per diluted share, a 64 percent increase on the 2009 net income of $69.6 million, or $0.39 per diluted share.

Excluding one-time impairment charges in both years, 2011 net income was $116.6 million, or $0.65 per diluted share, compared to net income of $79.2 million, or $0.44 per diluted share for 2010. They had another promising year in generating cash from operations. In order to return a portion of their excess cash to shareholders, we initiated the company's first quarterly cash dividend in March 2010 and raised the annual dividend rate 25 percent, to $0.20 per share, in February 2012.

They also began a $200 million share repurchase program in August 2011. Nevertheless, they ended fiscal year 2011 with a balance sheet showing $548.7 million in cash and marketable securities, no debt, and inventories at a level consistent with the pace of our sales growth. New store growth was a key contributor to our success in 2011 they opened a total of 79 new stores, including 19 outlets and 2 frontline boutiques under the Chico's brand, 13 frontline boutiques and 4 outlets for White House Black Market and 37 frontline and 4 outlets for Soma Intimates. This year, they are targeting 100 - 110 net new boutique and outlet openings across our three brands.

The new store openings should include 12 to 15 new Chico's boutiques, a portion of the estimated 75 potential locations in secondary markets across the U.S. identified for future Chico's frontline stores. Their direct-to-consumer or DTC sales continue to post substantial gains. In 2011, DTC sales increased 40 percent on top of the 39 percent increase in the prior year. DTC sales have benefitted from the alignment of their web sites with each brand's marketing to better drive customer interest in our fashion apparel and accessories (www.chicos.com).

Companies Potentials

Growth through outlet channel in a value oriented market

Chico's operates 63 outlet stores, the offerings in which are priced lower than in other retail channels. This segment caters to the price sensitive customer base. The clearance of merchandise is now mostly done through direct-to-consumer channel. The company aims to continue this strategy in FY2012 and expand it to the WHBM brand as well in medium to long term.

The specially made merchandise is not sold at mark downs as was originally done, but is lower priced ...