The accompanying unaudited condensed consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 31, 2015,30, 2016, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2015.8, 2016.

As used in this report, all references to “we,” “us,” “our,” and “the Company,” refer to Chico’s FAS, Inc. and all of its wholly-owned subsidiaries.

Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen weeks and twenty-six weeks ended August 1, 2015July 30, 2016 are not necessarily indicative of the results that may be expected for the entire year.

In July 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330). The amendments, which apply to inventory that is measured using any method other than the last-in, first-out (LIFO) or retail inventory method, require that entities measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. We are currently assessing the potential impact of adopting this ASU, but do not, at this time, anticipate a material impact to our consolidated results of operations, financial position or cash flows.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which modifies the presentation of debt issuance costs in financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than the Company's current classification as a deferred asset within Other Assets. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We elected to early adopt this guidance in the second quarter ended August 1, 2015, and have presented the debt issuance costs related to our revolving credit facility as a deferred asset within Other Assets, as is permitted by ASU No. 2015-15, Imputation of Interest, which was issued in August 2015. Such adoption did not have a material impact to our consolidated financial position.

For the twenty-six weeks ended August 1, 2015,July 30, 2016, we granted performance-based restricted stock units (“PSUs”), contingent upon the achievement of a Company-specific performance goal during fiscal 2015.2016. Any units earned as a result of the achievement of this goal will vest over 3 years from the date of grant and will be settled in shares of our common stock.

Performance-based restricted stock unit activity for the twenty-six weeks ended August 1, 2015July 30, 2016 was as follows:

For the twenty-six weeks ended July 30, 2016 and August 1, 2015, and August 2, 2014, we did not grant any stock options. In the years that we granted options, we used the Black-Scholes option-pricing model to value our stock options.

Stock option activity for the twenty-six weeks ended August 1, 2015July 30, 2016 was as follows:

The provision for income taxes is based on a current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items, and the mix of earnings.

For the thirteen weeks ended July 30, 2016 and August 1, 2015, and August 2, 2014 the effective tax rate was 38.0% and (108.1)% and 35.5%, respectively. For the thirteen weeks ended July 30, 2016, the income tax provision was $14.1 million. The income tax benefit for the second quarter of 2015 of $28.2 million and effective tax rate of (108.1)% primarily reflected the tax benefit related to the expected disposition of Boston Proper's stock and the tax benefitimpact of the Boston Proper goodwill and trade name impairment on the annual effective tax rate.

For the twenty-six weeks ended July 30, 2016 and August 1, 2015, and August 2, 2014, the effective tax rate was 37.9% and (32.5)% and 36.7%, respectively. The income tax benefitprovision for fiscal 20152016 of $8.5$33.1 million and effective tax rate of (32.5)%37.9% primarily reflected the pre-tax net income during the period while the fiscal 2015 benefit primarily reflected the tax benefit related to the expected disposition of Boston Proper's stock and the tax benefitimpact of the Boston Proper goodwill and trade name impairment on the annual effective tax rate.

In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be

Earnings per share (“EPS”) is determined using the two-class method aswhen it is more dilutive than the treasury stock method. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted EPS reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs.

For the twenty-sixthirteen weeks weeks ended July 30, 2016 and August 1, 2015, and August 2, 2014, 0.8 million and 0.60.3 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

For the thirteentwenty-six weeks ended July 30, 2016 and August 1, 2015, and August 2, 2014, 0.30.9 million and 0.60.8 million potential shares of common stock, respectively, were excluded from the diluted per share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

Our financial instruments consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to the short-term nature of the instruments. Refer to Note 11 for the fair value of the Company's outstanding debt instruments.

Marketable securities are classified as available-for-sale and as of August 1, 2015July 30, 2016 generally consist of corporate bonds, U.S. government agencies and commercial paper with $26.9$31.5 million of securities with maturity dates within one year or less and $21.1$19.1 million with maturity dates over one year and less than two years.

We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the condensed consolidated balance sheets as they are available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows: 

We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts, and assets held in our non-qualified deferred compensation plan. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our condensed consolidated balance sheets.

From time to time, we measure certain assets at fair value on a non-recurring basis, including evaluation of long-lived assets, goodwill and other intangible assets for impairment using company-specific assumptions which would fall within Level 3 of the fair value hierarchy. The carrying value of the current assets and liabilities held for sale related to the the Boston Proper DTC business approximate their fair value due to their short-term nature. We estimate the fair value of other assets held for sale using market values for similar assets which would fall within Level 2 of the fair value hierarchy. During the second quarter of fiscal 2015, we recorded $81.6 million in pre-tax impairment charges related to assets measured at fair value on a non-recurring basis, comprised of $48.9 million in Boston Proper goodwill impairment, $18.0 million pre-tax in Boston Proper trade name impairment, $12.7 million in property and equipment impairment charges related to Boston Proper and a $2.0 million loss recognized on Boston Proper DTC assets held for sale.

To assess the fair value of Boston Proper goodwill,long-term debt, we utilized an income approach, which incorporated market assumptions. Inputs used to calculate the fair value based on the income approach primarily included estimatedutilize a discounted future cash flowsflow model using current borrowing rates for the DTC business, discounted at a rate that approximates a rate that would be used by a market participant. Inputs used to calculate the fair value also incorporated market assumptions and included considerationsimilar types of multiplesdebt of sales and earnings based on guidelines for publicly traded companies and recent transactions.

Fair value calculations contain significant judgments and estimates, which may differ from actual results due to, among other things, economic conditions, changes to the business model or changes in operating performance.

During the quarter ended August 1, 2015,July 30, 2016, we did not make any transfers between Level 1 and Level 2 financial assets.instruments. Furthermore, as of July 30, 2016, January 30, 2016 and August 1, 2015, January 31, 2015 and August 2, 2014, we did not have any Level 3 cash equivalents or marketable securities.financial instruments. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

On May 4,In fiscal 2015, we entered into a credit agreement (the "Agreement") among the Company, JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and the Lenders party hereto. Our obligations under the Agreement are guaranteed by certain of our material U.S. subsidiaries. The Agreement provides"Agreement) providing for a term loan commitment in the amount of $100.0 million and a revolving credit facility of which $100.0 million was drawn at closing,million. The term loan and maturesrevolving credit facility mature on May 4, 2020 payable in quarterly installments, as defined in the Agreement, with the remainder due at maturity. The Agreement also provides for a $100.0 million revolving credit facility, of which $24.0 million was drawn at closing and was repaid in the second quarter of 2015. The revolving credit facility matures on May 4, 2020. The Agreement has borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest rate margin, as defined in the Agreement. The Agreement contains customary representations, warranties, and affirmative covenants, including the requirement to maintain certain financial ratios. The Company was in compliance with the applicable ratio requirements and other covenants at August 1, 2015.

The following table provides details on our debt outstanding as of July 30, 2016, January 30, 2016 and August 1, 2015, January 31, 2015 and August 2, 2014:2015:

In December 2013,During the twenty-six weeks ended July 30, 2016, we announced a $300.0repurchased 4.9 million shares, under our share repurchase authorization, and immediately prior toprogram announced in November 2015 at a total cost of approximately $56.3 million. As of July 30, 2016, the execution of the accelerated stock repurchase agreements ("ASR Agreements") described below, we had $290.0Company has $203.7 million remaining under the existing authority.share repurchase program. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations.

In March 2016, the Company was named as a defendant in Cunningham v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of San Diego. Plaintiff seeks to represent current and former nonexempt employees of Soma Intimates in California. The Complaint alleges many of the same Labor Code violations as Ackerman, described above. The court has stayed the Cunningham case pending final approval of the Ackerman settlement in light of the fact that Ackerman was first filed and likely covers all of the claims that are alleged in Cunningham. As a result, at this time, the Company does not expect that the Cunningham case will have a material adverse effect on the Company’s consolidated financial condition or results of operations.

In July 2015, we entered into ASR Agreementsthe Company was named as a defendant in Altman v. White House Black Market, Inc., a putative class action filed in the United States District Court for the Northern District of Georgia. The Complaint alleges that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number or an expiration date on customers' receipts.​ The Company denies the material allegations of the complaint. Its motion to dismiss was denied on July 13, 2016, but the Company continues to believe that the case is without merit and is not appropriate for class treatment. It​ intends to vigorously defend the matter. At this time however, it is not possible to predict whether the proceeding will be

On July 28, 2016, the Company was named as a defendant in Calleros v. Chico’s FAS, Inc., a putative class action filed in the Superior Court of California, County of Santa Barbara. Plaintiff alleges that the Company failed to comply with eachCalifornia law requiring it to provide consumers cash for gift cards with a stored value of Merrill Lynch, Pierce, Fennerless than $10.00. The Company is reviewing the factual allegations in the Complaint and Smith Incorporated ("Merill Lynch"), as agent for Merrill Lynch International, and J.P. Morgan Securities, LLC ("JP Morgan"), as agent for JPMorgan Chase Bank, N.A.,is not yet able to purchase $250.0 million in outstanding shares of our common stock. Underascertain the ASR Agreements, we made a payment of approximately $125.0 million to each of Merrill Lynch and JP Morgan and received from each of them an initial delivery of approximately 5.35 million common shares. Themerit or the value of the claims asserted. On initial shares receivedreview, the Company believes that the matter is not appropriate for class treatment; however, it is not possible to predict whether it will be permitted to proceed as a class or the size of the putative class, and no assurance can be given that the Company will be successful in its defense of this action on the date of purchase was approximately $187.5 million. Inmerits or otherwise. Because the second quarter of fiscal 2015, Merill Lynch and JP Morgan delivered an additional 3.9 million shares upon completion of the ASR Agreements, valued at approximately $62.5 million.

FollowingOther than as noted above, we are not currently a party to any legal proceedings other than claims and lawsuits arising in the consummationnormal course of business. All such matters are subject to uncertainties and outcomes may not be predictable. Consequently, the ASR Agreements, we had approximately $40.0 million remaining underultimate aggregate amount of monetary liability or financial impact with respect to these matters as of July 30, 2016 are not estimable. However, while such matters could affect our share repurchase program. The repurchase program has no specific termination date and will expireconsolidated operating results when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier byresolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our Board of Directors.annual consolidated financial statements.

The Company is not aware of any material subsequent events which would require recognition or disclosure in the condensed consolidated financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and our 20142015 Annual Report to Stockholders.

We are a leading omni-channel specialty retailer of women’s private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items operating under the Chico’s, White House | Black Market (“WH|BM”WHBM”), Soma and Boston ProperSoma brand names. We earn revenues and generate cash through the sale of merchandise in our domestic and international retail stores, on our various websites, through our call center which takes orders for all of our brands, and through an unaffiliated franchise partner in Mexico.

We utilize an integrated omni-channel approach to managing our business. We want our customers to experience our brands, not limited to a channel within our brands, and view our various sales channels as a single, integrated process rather than as separate sales channels operating independently. This approach allows our customers to browse, purchase, return, or exchange our merchandise through whatever sales channel and at whatever time is most convenient for her.convenient. As a result, we track total sales and comparable sales on a combined basis.

NetWe reported net income for the second quarter of fiscal 2015 was $2.12016 of $23.0 million, or $0.02$0.17 per diluted share, compared to net income of $30.1$2.1 million, or $0.20$0.02 per diluted share, in last year’s second quarter. Results for the second quarter of fiscal 2016 include the impact of restructuring and strategic charges of $10.3 million after-tax, or $0.08 per diluted share, primarily consisting of severance, proxy solicitation costs, and consulting fees. Results for the second quarter of fiscal 2015 include the impact of Boston Proper non-cash goodwill and trade name impairment charges of $47.1 million after-tax, or $0.33 per diluted share, restructuring and strategic charges of $10.1 million after-tax, or $0.07 per diluted share, primarily related to property and equipment impairment charges for the Boston Proper stores, of $10.1 million after-tax, or $0.07 per diluted share, and a tax benefit related to the expected disposition of Boston Proper's stock of $23.8 million, or $0.17 per diluted share. The change in earningsshare, and the operating loss related to Boston Proper of $2.0 million, or $0.01 per share also reflects a decrease in net income, partially offset by the impact of approximately 14.6 million shares repurchased since the end of the second quarter last year, all of which were repurchased in fiscal 2015.diluted share.

Net sales for the year-to-date period of fiscal 20152016 were $1.374$1.279 billion, an increasea decrease of 1.5%7.6% compared to $1.353$1.384 billion in last year’s year-to-date period. Net income for the year-to-date period of fiscal 20152016 was $34.6$54.1 million, or $0.24$0.41 per diluted share, compared to net income of $70.0$34.6 million, or $0.46$0.24 per diluted share, in last year's year-to-date period. Results for the year-to-date period of fiscal 2016 include the impact of restructuring and strategic charges of $12.5 million after-tax, or $0.09 per diluted share, primarily consisting of severance, proxy solicitation costs, and consulting fees. Results for the year-to-date period of fiscal 2015 include the impact of Boston Proper non-cash goodwill and trade name impairment charges of $47.1 million after-tax, or $0.33 per diluted share, restructuring and strategic charges of $19.3 million after-tax, or $0.13 per diluted share, primarily related to property and equipment impairment charges, employee-related costs and lease termination charges, of $19.3 million after-tax, or $0.13 per diluted share, and a tax benefit related to the expected disposition of Boston Proper's stock of $23.8 million, or $0.17 per diluted share.The change in earningsshare, and the operating loss related to Boston Proper of $4.7 million, or $0.04 per share also reflects a decrease in net income, partially offset by the impact of approximately 14.6 million shares repurchased since the end of the second quarter last year, all of which were repurchased in fiscal 2015.diluted share.

Our overall business strategy is focused on building and cultivating a portfolio of high-performing retail brands serving the fashion needs of women 35 years and older. In the near term, weolder.We are focused on increasing the sales volume and profitability of our existing brands.brands through our four focus areas: (1) evolving the customer experience, (2) strengthening our brands' positions, (3) leveraging actionable retail science, and (4) sharpening our financial principles. Over the long term, we may build our brand portfolio by considering the organic development or acquisition of other specialty retail concepts when ourif research indicates that the opportunity complements our current brands and is appropriate and in the best interest of the shareholders.

We pursue the growth of the brands in our portfolio by building our omni-channel capabilities, which includes managing our store base and our growing online presence, executing innovative marketing plans, effectively leveraging expenses and optimizing the potential of each of our three brands. As part of our continuous efforts to improve our overall strategy while seeking to enhance and support our long-term growth,We have invested heavily in fiscal 2014, we initiated new capital allocation and cost reduction initiatives that are focused on advancing our omni-channel capabilities in order to improveallow customers to fully experience our brands, and not just a channel within our brands. In essence, we view our various sales channels as a single, integrated process rather than as separate sales channels operating independently. To that end, we often refer to our brands' respective websites as "our largest store" within the overall customer experience, reducing overall capital expenditures, re-balancing our store fleet, effectively managing other expenses and improving our inventory management. Additionally, in fiscal 2015, we completed an evaluation of the Boston Proper brand and initiated a Plan to sell the DTC business and close its stores, allowing us to focus our efforts on our core omni-channel brands.brand.

The following table depicts net sales by Chico’s, WH|BM,WHBM, Soma and Boston Proper in dollars and as a percentage of total net sales for the thirteen weeks ended July 30, 2016 and August 1, 2015 and August 2, 2014:2015:

The following table depicts comparable sales percentages by Chico's, WH|BMWHBM and Soma for the thirteen weeks ended July 30, 2016 and August 1, 2015 and August 2, 2014:2015:

The following table depicts cost of goods sold and gross margin in dollars and gross margin as a percentage of total net sales for the thirteen weeks ended July 30, 2016 and August 1, 2015 and August 2, 2014:2015:

For the second quarter of fiscal 2015,2016, gross margin was $366.0$240.8 million, or 37.9%, compared to $351.5$264.7 million, or 38.6%, in last year’s second quarter. GrossWhen excluding Boston Proper from fiscal 2015, gross margin was 53.8%decreased 80 basis points in fiscal 2016 compared to gross margin of net sales, a 140 basis point increase from$255.3 million, or 38.7% last year’s second quarter, primarily reflecting ayear. This decrease in promotional activity in response to improved inventory management, and benefits from previously announced cost reduction efforts,gross margin rate primarily reflects sales deleverage of occupancy costs partially offset by ana slight increase in accrued incentive compensation.merchandise margin rate.

The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and National Store Support Center (“NSSC”) expenses, in dollars and as a percentage of total net sales for the thirteen weeks ended July 30, 2016 and August 1, 2015 and August 2, 2014:2015:

For the second quarter of fiscal 2015,2016, SG&A was $308.4$186.6 million compared to $304.7$207.2 million in last year’syear's second quarter. SG&A was 45.3%29.4% of net sales, a 10an 80 basis point decrease from last year’syear's second quarter, primarily reflecting benefits from previously announced cost reduction efforts, partially offset by an increasedue to $12.7 million of SG&A related to Boston Proper in accrued incentivethe second quarter of fiscal 2015, and lower store labor, stock-based compensation and occupancy costs.marketing expenses, resulting in a slight decline in SG&A rate.

In fiscal 2014, we initiated a restructuring program, including the acceleration of domestic store closures and an organizational realignment, to ensure that resources are aligned with long-term growth initiatives, including omni-channel. During the first quarter of fiscal 2016, we announced an expansion of our restructuring program to further align the organizational structure with long-term growth initiatives, including transition of executive leadership, and to reduce COGS and SG&A through strategic initiatives. These strategic initiatives include realigning marketing and digital commerce, improving supply chain efficiency, and reducing non-merchandise and marketing expenses. During the second quarter of fiscal 2016, the Company continued its cost reduction and operating efficiency initiatives and subsequently announced an organizational redesign which clarified roles, responsibilities and processes across our brands and shared service center.

In connection with this effort, in the second quarter of fiscal 2015,2016, we recorded pre-tax restructuring andas well as other strategic charges of $16.2totaling $16.6 million, primarily related to $12.7 million in propertyconsisting of severance, proxy solicitation costs, and equipment impairment charges related to Boston Proper and a $2.0 million loss recognized on Boston Proper DTC assets held for sale.consulting fees. The after-tax impact of the restructuring and strategic charges in the second quarter totaled $10.1$10.3 million, or $0.07$0.08 per diluted share.

NetWe reported net income for the second quarter of fiscal 2015 was $2.12016 of $23.0 million, or $0.02$0.17 per diluted share, compared to net income of $30.1$2.1 million, or $0.20$0.02 per diluted share in last year’s second quarter. Results for the second quarter of fiscal 20152016 include the impact of restructuring and strategic charges of $10.3 million after-tax, or $0.08 per diluted share, primarily related to severance, proxy solicitation costs and consulting fees. Results for the second quarter of fiscal 2015 include charges of $35.4 million after-tax, or $0.24 per diluted share, related to Boston Proper non-cash goodwill and trade name impairment charges, of $47.1 million after-tax, or $0.33 per diluted share, restructuring and strategic charges, primarily related to property and equipment impairment charges for the Boston Proper stores of $10.1 million after-tax, or $0.07 per diluted share, and a tax benefit related toas a result of the expected disposition of Boston Proper's stock, and Boston Proper operating results.