UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT UNDERPURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Chico’s FAS, Inc.

11215 Metro Parkway, Fort Myers, Florida 33912

239-277-6200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNoo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YesþNoo

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicalpracticable date.

At May 24, 2004,23, 2005, there were 89,144,053180,452,922 shares outstanding of Common Stock, $.01 par value per share.

CHICO’SFAS, Inc.

Index

CHICO’S FAS, Inc.

Index

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CHICO’SFAS, Inc. and Subsidiaries

CHICO’SFAS, Inc. and Subsidiaries

CHICO’SFAS, Inc. and Subsidiaries

CHICO’SFAS, Inc. and Subsidiaries

Note 1. Basis of Presentation

          The accompanying unaudited 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. for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. 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, 2004,29, 2005, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 9, 2004.8, 2005. The January 31, 200429, 2005 balance sheet amounts were derived from audited financial statements included in the Company’s Annual Report.

          The Company’s 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 ended May 1, 2004April 30, 2005 are not necessarily indicative of the results that may be expected for the entire year.

Note 2. Recent Accounting Pronouncements

          In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R (revised 2004), “Share-Based Payment”, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” The original effective date for adoption of SFAS No. 123R for the Company was July 31, 2005. However, in April, the SEC announced the adoption of a new rule that amends the effective dates for SFAS No. 123R. The SEC’s new rule allows companies to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. Therefore, the Company plans to adopt SFAS No. 123R effective for its 2006 fiscal year commencing on January 29, 2006.

Note 3. Common Stock Split

          On February 22, 2005, the Company completed a two-for-one stock split by distributing one additional share of the Company’s common stock to each stockholder of record as of February 4, 2005, for every share of common stock then owned. All prior period share and per share amounts presented in this report have been restated to give retroactive recognition to this two-for-one common stock split.

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CHICO’SFAS, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2005
(Unaudited)
(in thousands, except share and per share amounts)

Note 2.4. Stock-Based Compensation

          The Company usesaccounts for stock-based awards to employees and directors using the intrinsic value method for valuing its awards of stock options and recording the related compensation expense, if any, in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations. No stock-based employee or directorinterpretations, including for purposes of valuing its awards and recording the related compensation cost for stock options is reflected in net income for the thirteen weeks ended May 1, 2004 and May 3, 2003, as all options granted during the periods have exercise prices equal to the market value of the underlying common stock on the date of grant.expense, if any. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standard (SFAS)SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation- Transition and Disclosure”, to all stock-based employee compensation.

CHICO’SFAS, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2005
(Unaudited)
(in thousands, except share and per share amounts)

Note 4. Goodwill5. Net Income Per Share (continued)

          For the three months ended April 30, 2005 and Intangible AssetsMay 1, 2004, of the options then outstanding, options to purchase 20,000 and 55,800 shares of common stock, respectively, were excluded from the computation of diluted EPS on the basis that such options were antidilutive.

          TheDuring the three months ended April 30, 2005, options to purchase 1,275,000 shares of the Company’s goodwillcommon stock were granted pursuant to the Company’s stock option plans, options to purchase 1,224,866 were exercised and indefinite-lived intangible asset are reviewed annually for impairment or more frequently if impairment indicators arise. The annual valuation will be performed duringoptions to purchase 66,837 shares of common stock were canceled. During the fourth quarter of each year. The changes in the carrying amount of goodwill for the quarterthree months ended May 1, 2004, is as follows:

          The purchase price allocationBeginning in the first quarter of fiscal 2005, certain of the Company’s officers, its two non-officer inside directors, and each of its independent directors were awarded restricted stock, pursuant to restricted stock agreements. A restricted stock award is an award of common shares that is subject to further adjustment and will be finalized upon review and refinement of certain estimates.

Note 5. Accounting Developments

restrictions during a specified period. The Company currently applies APB 25holds the shares during the vesting period, and the grantee cannot transfer the shares before the termination of that period. The grantee is, however, entitled to vote the common shares and to receive dividends and other distributions thereon. Unearned compensation related interpretations in accounting for its stock-basedto the restricted stock awards is recorded as a component of stockholders’ equity and is amortized ratably over the vesting period of the award.

          As of April 30, 2005, there were 178,278 shares of restricted stock outstanding. The restricted stock awarded to officers vests entirely on the third anniversary of the date of grant. The restricted stock awarded to non-officer directors vests pro-rata over a three-year period. Total compensation plans. In March 2004,expense related to these restricted stock grants of $4.7 million is being amortized over the Financial Accounting Standards Board (FASB) issued the Exposure Draft, “Share-Based Payment – an amendment of Statements No. 123vesting period, and 95” (Proposed Statement of Financial Accounting Standards). The Proposed Statement would replace existing requirements under SFAS 123 and APB 25. Under the Proposed Statement, all equity-based awards to employees would be required to be recognized in the income statement based on their fair value. The Exposure Draft is projected to be finalized in late 2004 and, if so finalized and adopted, would be effectiveamortization expense for the Company beginning in 2005. The Company is currently assessing the impact on the Company’s financial statements of the adoption of the Exposure Draft, if issued in final form by the FASB.thirteen-weeks ended April 30, 2005 was $0.4 million.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

          Chico’s FAS, Inc. (together with its subsidiaries, the “Company”) is a specialty retailer of exclusively designed, private label, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items operating under the Chico’s, and White House | Black Market (“WH|BM”) and Soma by Chico’s brand names.

          Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited consolidated financial statements and notes thereto and the Company’s 20032004 Annual Report to Stockholders.

Overview

          The primary factors which historically have influenced the Company’s profitability and success have been its growth in number of stores, its growth in comparable store sales, and its increased operating margin arising out of improved gross margin and leverage of operating costs. In the last five years the Company has grown from 200 stores as of January 29, 2000 to 683 stores as of April 30, 2005, which includes the significant store growth resulting from the acquisition of WH|BM in fiscal 2003. The Company continues to expand its presence through the opening of new stores, the development of new opportunities such as Soma by Chico’s and through the extension of its merchandise line. The Company anticipates that its rate of growth (measured by overall growth in sales, growth in comparable store sales, and other factors) can be expected to decrease from the 40% plus rate of overall sales growth experienced in prior years, largely reflecting the Company’s significantly increased size, its 20% net square footage growth goal and the expectation that its same store sales increases will moderate. Nevertheless, even at a reduced growth rate, the Company expects to continue its ability to generate the necessary cash flow to fund its expansion and to take advantage of new opportunities. The Company has no long-term debt and foresees no current need to incur long-term debt to support its continued growth.

          Factors that will be critical to determining the Company’s future success include, among others, managing the overall growth strategy, including the ability to open and operate stores effectively, maximizing efficiencies in the merchandising, product development and sourcing processes, maintaining high standards for customer service and assistance, maintaining the newness, fit and comfort in theits merchandise offerings, customer acceptance of new store concepts, and generating cash to fund the Company’s expansion needs. In order to monitor the Company’s success, in regards to these critical success factors, the Company’s senior management monitors certain key performance indicators, including:

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Comparable same store sales growth– For the thirteen weekthirteen-week period ended May 1, 2004,April 30, 2005, the Company’s comparable store sales growth (sales from stores open for at least twelve full months, including stores that have been expanded or relocated within the same general market) reached 20.1%was 10.8%. This increase represents the third consecutive quarter offollows a similar comparable store sales growth in excess of at least 20%, as well as 2610% in the immediately preceding quarter, with 29 out of the Company’s last 2832 quarterly periods withachieving at least double digit increases in comparable store sales. The Company believes that comparable store sales growth is a critical success factor and a positive indication of the Company’s ability to manage its expansion and its ability to open and operate stores effectively.

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Positive operating cash flow– For the thirteen week period ended May 1, 2004April 30, 2005 (the “current period”), cash flow from operations totaled $64$80 million compared with $36$64 million for the prior year’s thirteen week period ended May 3, 20031, 2004 (the “prior period”). Although over half the, representing an increase in operating cash flow was attributable to the tax benefit from an unusual volume of stock option exercises, the remaining cash flow increase was still quite impressive, representing a growth of over 20%25.9%. The Company believes that a key strength of its business is the ability to consistently generate cash. Strong cash flow generation is critical to the future success of the Company, not only to support the general operating needs of the Company, but also to fund capital expenditures related to new store openings, fundrelocations, expansions and remodels, additional infrastructure costs associated with the distribution center, to continue funding implementation of state of the art information systems and to fund strategic acquisitions. See further discussion of the Company’s cash flows in the Liquidity and Capital Resources section.

•
	•	Passport ClubLoyalty Clubs– Management believes that a significant indicator of the Company’s emphasis on personalized customer service and the success of its marketing initiatives is the growth of itsthe Chico’s loyalty program, the “Passport Club.”Club” and support for such loyalty program from its personalized customer service training programs and its marketing initiatives. In the current period, the Company added approximately 90,000100,000 permanent Passport Club members and approximately 370,000387,000 preliminary Passport Club members. The Company believes that the continued growth of its Passport Club indicates that the

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Results of Operations – Thirteen Weeks Ended May 1, 2004April 30, 2005 Compared to the Thirteen Weeks Ended May 3, 2003.1, 2004.

          Net Sales

          The following table shows net sales by Company-owned stores, net sales by catalog and Internet and net sales to franchisees in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 and May 3, 2003 (amounts(dollar amounts in thousands):

          Cost of Goods Sold/Gross Profit

          The following table shows cost of goods sold and gross profit in dollars and the related gross profit percentages for the thirteen weeks ended April 30, 2005 and May 1, 2004 and May 3, 2003 (amounts(dollar amounts in thousands):

Depreciation and Amortization

          The following table shows depreciation and amortization in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          The increase in depreciation and amortization expense was for the most part due to capital expenditures related to new, remodeled and expanded stores. Depreciation and amortization expense, in dollars and as a percentage of total net sales, was also impacted by the Company’s revision to the manner in which it accounts for construction allowances from landlords of properties leased by the Company for its stores in the fourth quarter of fiscal 2004. Previously, these construction allowances were amortized as a reduction of depreciation expense, while the revision now has the amortization of these construction allowances reducing the Company’s rent expense (as previously described in “General, Administrative and Store Operating Expenses” under the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s 2004 Annual Report to Stockholders).

Interest Income, net

          The following table shows interest income, net in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          The increase in net interest income during the current period was primarily the result of the Company’s increased cash and marketable securities position as well as the impact of higher interest rates.

Provision for Income Taxes

          The Company’s effective tax rate for the current period was 37% compared to an effective tax rate of 38% for the prior period. The decrease is primarily due to an increase in estimated favorable permanent differences for fiscal 2005 as compared to fiscal 2004.

          Net Income

          The following table shows net income in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 and May 3, 2003 (amounts(dollar amounts in thousands):

Comparable Company Store Net Sales

          Comparable Company store net sales increased by 20.1%10.8% in the current period when compared to the comparable prior period. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have been operated as a Company store for at least twelve full months, including stores that have been expanded or relocated within the same general market area (approximately five miles).

          The comparable store percentage reported above includes 2437 stores that were expanded or relocated within the last twelve months from the beginning of the prior period by an average of 1,066875 net selling square feet. If the stores that were expanded and relocated had been excluded from the comparable

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comparable store sales) to, which cash was substantially more than necessary to satisfy the Company’s investment in capital expenditures. The significant components of the Company’s working capital are cash and cash equivalents, marketable securities and inventories, reduced by accounts payable and accrued liabilities.

          Based on past performance and current expectations, the Company believes that its cash and cash equivalents, marketable securities and cash generated from operations will satisfy the Company’s working capital needs, capital expendituresexpenditure needs (see “New Store Openings” discussed below), commitments and other liquidity requirements associated with the Company’s operations through at least the next 12 months.

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Also, during this period, the Company sold 47,45545,376 shares of common stock during the March offering period under its employee stock purchase plan at a price of $36.34.$25.04. The proceeds from these issuances of stock, exclusive of the tax benefit realized by the Company, amounted to approximately $17.0$9.0 million.

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carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no material changes in the critical accounting policies during the thirteen weeks ended May 1, 2004.April 30, 2005.

Certain Factors That May Affect Future Results

          This Form 10-Q may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current views of the Company with respect to certain events that could have an effect on the Company’s future financial performance, including but without limitation, statements regarding the impactfuture growth rates of the acquisition of The White House, Inc.established Company store concepts and the launch of the Soma by Chico’s concept. The statements may address items such as future sales, gross profit expectations, planned store openings, closings and expansions, future comparable store sales, future product sourcing plans, inventory

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          The forward-looking statements included herein are only made as of the date of this Quarterly Report on Form 10-Q. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Litigation

          In the normal course of business, the Company is subject to proceedings, lawsuits and other claims including proceedings under laws and government regulations relating to labor, product, intellectual property and other matters, including the mattermatters described in Item 1 of Part II of this Quarterly Report on Form 10-Q. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the ultimate aggregate amount of monetary liability or financial impact with respect to these matters at May 1, 2004,April 30, 2005, cannot be ascertained. Although these matters could affect the operating results of any one quarter when resolved in future periods, and although there can be no

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alleges that the Company, in violation of California law, has in place a mandatory uniform policy that requires its employees to purchase and wear Chico’s clothing and accessories as a condition of employment. It is the Company’s position that no such mandatory uniform policy exists;exists. Although the Company encourages butbelieved it had strong defenses to the allegations in this case, the Company agreed to participate in a voluntary private mediation on November 10, 2004. A settlement was reached at the mediation, and the parties are in the process of preparing and finalizing the settlement documents. The settlement must be approved by the Court at both a preliminary and a final approval hearing before it becomes final. The Company does not require its associatesbelieve the total settlement costs will have a material impact on the Company’s results of operations or financial condition.

          The Company was named as the defendant in a suit filed in July 2004 in the Circuit Court of Lee County, Florida,Ajit Patel v. Chico’s FAS, Inc. The Complaint alleges that the Company breached an implied contract with the plaintiff, the Company’s former Vice President – Chief Information Officer, and, alternatively, that the Company fraudulently induced the plaintiff to wear Chico’s clothing; although many Chico’s associates choose to wear Chico’s clothing, others do not. work for the Company. It is the Company’s position that no contract, express or implied, existed between the Company and the plaintiff and that the Company did not engage in any fraudulent conduct.The Company has filed an answer denying the material allegations of the Complaint and the parties are now engaged in the discovery process. Based on testimony and information that has been obtained in the discovery process, the Company is continuing its investigation.in the process of exploring the advisability of asserting certain counterclaims against the plaintiff. No rulings on class certification havetrial date has been made.set. The Company believes the plaintiff’s case is without merit and intendswill continue to vigorously defend the litigation.litigation and, to the extent deemed appropriate under the circumstances, assert counterclaims.

          The Company was recently named as defendant in a putative class action suit filed in May 2005 in the Superior Court for the State of California, County of Los Angeles,Marie Nguyen v. Chico’s FAS, Inc. The Complaint alleges that the Company, in violation of California law, requested or required its customers to provide personal information as part of a credit card transaction. The Company only recently received the Complaint. Although the Company is in the process of making a further investigation of the allegations contained in the Complaint, based on an initial review and analysis of the Complaint, the Company does not believe that the case has merit and, thus, does not believe that the case should have any material adverse effect on the Company’s financial condition or results of operations.

          The Company is not a party to any other legal proceedings, other than various claims and lawsuits arising in the normal course of business, none of which the Company believes should have a material adverse effect on its financial condition or results of operations.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

(a)

The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:

(b)

Reports on Form 8-K:

		The Company filed a Current Report on Form 8-K dated February 5, 2004 to report the issuance of a press release announcing the sales results of the Company’s operations for the month of January and to comment on its earnings outlook for the fourth quarter ended January 31, 2004.
		The Company filed a Current Report on Form 8-K dated March 3, 2004 to report the issuance of a press release announcing the Company’s fourth quarter and year-end earnings.
		The Company filed a Current Report on Form 8-K dated April 15, 2004 to report the issuance of a press release announcing two key promotions in the Company’s management structure.

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CHICO’S FAS, INC.
Date: May 27, 2004	By:	/s/ Scott A. Edmonds
		Scott A. Edmonds
		President and Chief Executive Officer (Principal Executive Officer)

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