CHS - Earnings call transcript Q2 2020

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Operator

Good morning and welcome to Chico's FAS, Second Quarter 2020 Conference Call and Webcast. All participants will be in a listen-only mode. Please note, this call is being recorded. I would now like to turn the conference over to David Oliver, Interim Chief Financial Officer and Senior Vice President, Controller. Mr. ahead. go please Oliver,

David Oliver

welcome and Chico's CEO webcast. me also and XXXX and second conference joins call Molly today. to morning FAS the quarter President Good Langenstein our

release date. our the Investor about judgments, today's page. website as quarter Our regarding on forward-looking will and industry, our Relations only be assumptions, our of press on under projections current Today's our expectations, second which releases speaks at can include www.chicosfas.com and statements comments business found estimates, plans,

You rely results factors events our those unduly morning, included should could to that in call. SEC information filings, the this implied Molly. otherwise issue or I'll We revise update or and call from important not in our on obligations discussed statements, required forward-looking on release that, our materially to cause and by or as actual statements any projected or to earnings by forward-looking in any the may this turn call over on disclaim except this With be law. comments made differ

Molly Langenstein

David, morning everyone. good you, and Thank

We quarter were same the closed in as QX. of tough time have effectively amount QX stores as had a

However, our of on ability fiscal because turnaround much results are focused in stay XXXX. for plan started stronger our to our QX

drive trajectory product, the on strategy have from quarter. our future what outstanding best We fourth started an current acceptance could headwinds. for confidence sales improvement sales in proved quarter we years, the and new are In performance six of of first return about our very growth optimistic our XXXX. X.X% posted we we to that in to the energized in are despite the customer last comparable year, QX fiscal of our we Based in

to of to this are stay unprecedented and period We focused. taking laser flexible be advantage

chains, technology and We the supply reengineered organization, reduced initiatives. accelerated have our streamlined expenses,

nimble a talented financial growth strong are fortunate a and loyal position, a store organization. portfolio, solid three digital opportunities, to distinctive have a with robust and very unique brands customers We business,

Our the from delivering substantially improved quarter-over-quarter in first. QX by store business In weeks financial same on performance first in plan closed quarter, the Digital improved performance. despite being we and quarter, as second X.X% of our in the number QX, combined over second quarter. is stores effectively based the enhanced sales

more gross SG&A basis margin million Our rate $XX.X XXXX decreased XX%. by points. rose than expenses or

cash were Our XX%. reduced levels by cash and inventory and equivalents million by our nearly increased $X

are taking company. continue We capture to an market actions and even share to emerge stronger

David reengineered and same technology. base organizational year. store quarter compared XX% and better and We've the and accelerated staffing to disciplines we've applying are have using year's as investments expense will And and continued this aligned We many and these our last assortment additional offer performance. inventory our opportunity in we demand. I SG&A drove to by to by We've color fourth on a innovation rationalize reduced chain year-to-date and catalyst, XX% streamlined last reducing costs that occupancy of our supply actions. structure,

XX weeks. we and had business records digital learnings for stores took have learnings driving new second since moderated a Let's businesses. month-over-month We Digital with quarter sales the and quarter-over-quarter. expertise grown proven have start substantial XXX% channel have the when has the the track and these with reopened, into our became digital We not digital digital. in

up digital way apparel up was Soma quarter our with count with sales grew company year-over-year, digital leading customer quarter, the digital second grew growing a by total XX% and XXX XX%. year-over-year second sales points, over the nearly double-digits For and brands conversion and substantially

boutiques. On all the May, initiated in for storefront, reopening early multi-phase we our plan our of

albeit by capacity limitations. customer XX% boutiques limited were and and was cadence end, quarter slower reopened opening with Our of planned hours than

our half about nearly level quarter. of where experienced of last time opened. levels. effectively generated one in opened boutiques May. our the essentially, amount In quarter slightly our initial were XX% about was aggregate, month July for year's the about closed at sales So, in QX, QX, the This were and the each same of of in boutiques was expectations as all boutiques in above ahead the

Our data Sales where declines. shows COVID improve COVID inversely sales trends to cases case correlate trends.

As to increase customer to level so revenues. conversion the quarter as and our in sentiment second store XX% demonstrated a to Customers product year. compared the improved, traffic last are responding by at plus

down diligence, pivot entered rent. with to inventories swiftly second assortments in the the to how with write-downs right expense significantly manage to and generate $XXX XX% quarter Regarding a After first we we our team quarter This our business. aligned seasonally the and reduced and inventory, expense current or second expect organizational the with needs about inventory before base to ended and inventory. approximately streamlined our in year, I'm our Due plan savings we nearly quarters, pleased the million fiscal continues XX% to of structure second product.

to savings least committed of informed, this with into at We connected. calls we the organization associates entire to and challenging during next are keep continue biweekly is have our calls and time monthly with our year Communication to leverage. driving teams and retaining engaged, year, the half key leadership

the teams to We to for the have year. calendar made of the work through decision end continue corporate our remotely

reduce from landlords we year. and a cut was be next to our suppliers will costs. chain. supply landlord quickly vendors reductions half vendors, and our third-party expect in our continuing In partner we to Shipments almost regards to Regarding suppliers and additional our this chain, agents are especially suppliers, catalyst supply operating with reengineer to COVID our year, and

arduous and have tremendous customer the elevating focused. that our our are products shrink Real up standard, relief. rent to to stores Partners, estate increased a with an rent. on Estate A&G process, started either there we tier turnaround, and We on we landlords in are profitability assist and We to initiatives some square per be as know or being stepping coming consultant, store are XXXX lower focused make year holding our engaged We will real sales through our key foot higher a top continuing remain our in in progress

you few a updates. give me Let

elevation product on customers, First, innovating soft beautiful The deserves. our driven incredibly to most design focus comfort as Soma organization, at and the products we continue expects fabric amazing and products focus loungewear that for proprietary that effortless style and on for a were choice and innovation quarter and overall the produced offer strong developing good categories. quarter. solutions, in Enbliss on the We sales were Wireless she bralette. and and our especially another and for their being that terrific best with all franchise dominance honored Soma comfort named intimate the housekeeping strong sleepwear and

for hours positive July posted and comp of customer operating a capacity. stores Soma month with the with limited reduced

we Our customers merchandising teams momentum take to will from her to accelerating quickly Soma have Market, and investments, brand for of us and apparel continue meet and pivoted confidence as needs White continue casual, living give current home, share. recent and that catapult the working the versatile design lifestyle Black At need our Chico's market results, and our House evolved. and many

to with by throughout customer quarter. focused enhancement casual elevating fabrications Market, and she Our Zenergy and all shop new resonate assortment points wherever touch unique journey, washable Active and customer continually prefers. allowing in Being and however, led, digitizing whenever, and customers White for the performed personalized our Chico's House simplifying, and the at these the franchise to are her and well optimizing newness Black we knit service, jersey

in Style personalized sales proprietary us, and us tools personalization online for for innovative digitally allowing suited creative quarter. connect help an Our continues Year-over-year, part the have great over to of is with new XX% experts compliments and a technology implementation customers reach link to our we integral accelerated her. our service and Style be and service, products our ways. best Connect of customers personal differentiator grew digital style her to to customers to Connect styling

quarter feature, online a conversion past which year This the this We unique third competitive on soft and program about planned shop times we personalized is formal of for next enables digitally their the been functionality their quarter. has was so conversion versus with rates into augment remarkable, early new exceeding advantage launch are year excited site Since the closet personal feature the six also truly launch, accelerated for coordinating rate average. results, to based purchases. closet an launch, second this customers that to our

added enhancing We we are experience For Connect. Style shopping journey. our Look, a we put in continually on is behavior in quickly to business with for and have style available our have changed, customers' and our she innovative customer times increased Shop and The which These swiftly has experts and new, catalyst personalized, of shopping be also differently, are connected month ensure engagement transaction. improvements. the generating center to site our customer shopping to think the pivoted units we tools This digital always ways. can simplified These been as that

David me financial discuss Before I performance, to and minute over turn to the to let take about talk diversity. inclusion a call

named that for year, this so individuality, We we innovates to an were to are inclusive Earlier the our influences of way our employers work. culture, XXXX the celebrates best one we rights committed Equality and and striving the workplace do Index, Magazine, honored diversity environment be in equality, the XXXX related practices always the a human corporate Forbes to and included by to more. campaign by to and we on published policies are Corporate be LGBTQ for

and our We initiatives. are existing continually infrastructure upon diversity building

specific discrimination developing the initiative we We and from us and thoughtful our David? and measurements is and actions to inclusion combat racism, of prejudice, This and keep goals, serious pillars take you We serve. for our our the all council, company is strengths updated and from to which important to of business. have we'll an on want key communities progress. build on and active diversity

David Oliver

and $X continued additional on the by We quarter, first have entered drawls maintain end cash quarter second making quarter We and Molly. facility. in we with the healthy XXXX million of a navigated and financial solid cash equivalents, position. ended million Thanks, the $XXX credit of up without liquidity fiscal a our second footing to

revenues, cost We costs capital align lower preserved reducing including vendors have with extending expenditures. reducing and planned payment lowering merchandise receipts liquidity, and and SG&A landlords, terms, taken our operating aggressively cash expenses, suppliers with and increased steps to to structure partnering

to abatements also active and have to A&G or negotiated have accepted restructure temporarily mutually already We eight figures rent reduced landlords for discussions a and initiative for our find period, in forward have XXXX we store are with the suspended through the our meaningful XX% for as stores locations. with aggregates made that savings, payments the fiscal lease about path closure rent and COVID-XX during achieved to portfolio reopened. We're our a payments rent in stores remaining

permanently during with the America. ended across Focusing We the real XX. to closing stores closed estate, North second year-to-date quarter, we boutiques our XX on quarter bringing X,XXX

closing permanent anticipate For additional XX the we of remainder of our year, consistent with XX the to plan, stores.

We favorable canceling or and are closures, forecasted thoroughly re-evaluating of each some value, and portfolio postponing our process which locations rent certain profitability based to or on may in lead reviewing closures the concessions. strategic accelerating

We have short. relatively because average additional remaining flexibility our lease terms on are

As Molly either or foot noted, we square per higher sales profitability are to through our standards, stores holding increased rents.

we performance, of same financial were to first. effectively as the quarter in second the closed overall Turning weeks our call number the that stores

reopened. So loss started but closed gaining part this meaningful year-over-year digital the offset from stores and of Digital traffic sales positive the quarter and growth performance slowly helped achieved the momentum doors. as

was when stores temporary million the declined of net permanent re-openings. of sales staffing reflecting year-over-year limited of Compared store continued closures, second opened pandemic, year to disruptions last quarter sales with related strong the in since XX% and stores store and the to quarter XX%. digital capacity. reflects, the the continuation customer reduced of including quarter prior performance quarter. the approximately second quarter store net year, the first decrease sales XX opened, year last the up operating $XXX.X while and of X.X% This second Productivity total benefit hours closures hours, Second from

the we COVID primarily net diluted period. a second $XX.X sales per the For or store loss million reflecting lost quarter, share, closure during reported the $X.XX of of impact

year deleverage with was than margin in and XX% well current inventory a entered points became apparel due second mentioned. write-off decline trapped more million cost also X,XXX X.XX of the for second per gross the occasion of and we after in an of down quarter occupancy demand. appropriately just our elevated quarter that store $XXX share. inventory We were primarily decrease quarter the taken entering of rate basis that wear quarter Our sales in sales, margin million when in through quarter net the the plant current total XX.X% and last QX. second last future inventory quarter, the SG&A in balanced, with Gross back for or addressed cadence compared inventory line inventory of re-openings. inventories write-off expenses tax improvement included The slower-than-planned prevented work held compared believe to reflects somewhat reduction excess reductions primarily as million our procedure The and write-off of loss half year. this the the year-over-year first as $X inventory quarter stores in future We the and Ending quarter. the The are second special decline XX% million, receipts, to year's was first expectations. with year time XX% current, nearly product $XX with liquidation. aggressive second second the a are with align the quarter to from to cost the structure to in and $XX an due represents SG&A

expire of of cash underutilized. credits. federal taxes quarter, $XX.X rate previously that net valuation we CARES state credit benefits benefit a paid Act, allowance Under certain XX.X%, income realized CARES For provisions for the tax expected a the the was to employee provided by the carry to forwards retention recovery quarter million income related of the reflecting second and the second effective Act, are in

that Additionally, recovery 'XX other in and sheet The years. to future reflects $XX an our also receivable law the years benefit fiscal referral employer tax Company tax $XX an of realize changes. million million the in in to repaid paid security federal taxes social income balance related related to expects prior will payments of

the in year QX, pandemic. take reduce the and to sales expenses aggressive manage In can actions cash monetize impacted of flows to Our was change half the first by drive flows. and cash we inventory,

taken bolstered strong brands Sales navigate position, being our Our across actions financial availability sales. solid future our make enable Uncertainty our reopened and environment predict. structure better will to the facility extremely to believe strong expense we a and all stores with retail credit us financial our are performance of successfully brands. competitively We to with costs pandemic company. position our current liquidity combined the align emerge positioned performance have by leaner surrounding the to digital difficult continues and and at

unable the to Q&A. are guidance. we So, turn operator forward-looking to back provide for now call the I'll

Operator

Thank first Anderson you. be we Riley. Instructions] question comes B. to your from Please Susan And At today's happy time, take ahead. this will with question. [Operator go

Susan Anderson

was to could then in how Thanks work comfort for back or to much for morning. Good flow Hi. I versus the wear half? And the product if year? free for you've fashion for you the what if could taking also been Thank about just my to the talk David, you. of question. wondering, about able shift or maybe more talk expecting cash back you half you're casual

Molly Langenstein

development and shifts in product finalizing back half, middle the the to regards in in were for So, of fall March, our orders the we for were we QX.

to the cancellations go we occasion make necessary assortments of were on able was knew in of work, upon QX the a we based with So, and needed pivots what and significant forward-looking XXX% the the is behavior make at time. new and QX were influenced that customers, in

feel made shifts we in the demand. half confident. the product back We've that So customers reflects significant

In addition, and across QX out changes. in have these well three pivot in changes addition and David? we had significant in us already brands served laid all to cozy that casual comfort

David Oliver

in comments we flow the good regard, or the cash back year, Yes. the to not that news With but providing are is. forward-looking respect of in half guidance

and expect be hotspots We develop. to stores that might savings our open

flow. incremental sales the have And going our to so, cash benefit improving we are of

year delivering to expense we're We our plan, back in going in benefits. the of place cascade also and half see that some put across the and to million savings $XXX

So, first cash have to looking versus improved run for the we but flow we definitely are half, the numbers.

Operator

Our Stichter today Jefferies. next ahead. question with go comes from Please Janine

Janine Stichter

little Hi. morning. ask Good about a I want digital. more to bit

also changes XQ? made in some said color to that you stores and just Thank closed the accelerate of when on you you. accelerate learnings seeing provide some more what the were think you some first in mentioned you from And cadence that the I into digital Can digitally quarter, then month-over-month. the business? help there you're a then to of interested

Molly Langenstein

in year, digital. we that I were period, a in half applied the a accelerating of path we had learned when we initiatives Janine. that back way closed we of digital our and had will the we through start during including to XXXX. the lot the glide digital lot XX-week only, March morning, that all Good we stores period, with Yes, where our a

As opened in talent of made ask emphasis investments our that question, in made that structure we've investments improvement benefited can in also focus. digital our the been done and more to technology, that changes repeat has month-over-month our second business, across to half all stores I you our we the the by that our in we've quarter, the we experienced which put And brands channel we've believe, second organizational and digital any on of three Janine?

Janine Stichter

kind at to made seeing I the business think of I more store close trying where I'm terms that you in had understand XX% you the follow-up productivity the the to you've the I I when quarter. just of at of changes it. performance. what were some in answered that first a stores you're think is was hear little guess results. digital similar a as just to after you Yes, the the bit on reopening interested to first you about quarter updated

build are curious, plateauing seeing if kind or they of the just continued XX%? you're stores to So around at

Molly Langenstein

cases. the upon depends COVID really It really

the finding sentiment is of COVID. following customer are shopping the behavior really that We

of traffic biggest customer states improve. have some five receive, the those the in as the Then when hotspots across we June, in some saw country became saw of in, that started and in of month So the we know, stores a retraction month the you states. that July, of to of we

follow sorts. we a really, of behavior rolling sort versus cases So, see COVID this really escalating of plateauing and

that is and also centers and a strip for been see center versus mall improvement the pretty consistent The thing we XX-point that's malls other enclosed open lifestyle in quarter.

Operator

from with our ahead. Marni The Shapiro Please And question today next comes Tracker. go Retail

Marni Shapiro

in planned Congratulations older where have questions. for have your just as you, today are currency, and making the the it Molly, inventories quick your shape. of back inventories good where Could to liquidated are year? talk of the the through about inventory a and couple for ability I as far this half

Molly Langenstein

terms that we we know, prior yes, of all holiday our QX liquidated as fall stated So, of inventories, in inventory. you in the and

just current So, the we we into long living. were be way spring on stores had closed the the quarter. we didn't goods know time to were is first as walked impact What how the and going they people, at

in categories, of And dress particular, that weddings wear second for were so that the we us second summertime apparel for two more important goods and have and liquidated, categories brands was challenging in for quarter. the had the we wear the the that also special write-down or that which quarter, in career are occasion part

feel aligned So, our in the that of our with we go by and channel. forward inventory have have by inventory and we we confident today brand level sales projection

Marni Shapiro

just Fantastic, on place. guess, update precautions, me in quick a and the You at have store good very can level? guys COVID then, you give cost I

cost is works this And stores? an out? curious so is that by being offset it payroll? lower Just Or how extra

Molly Langenstein

on state. because that right by different capacity of the limitations It's is now

part-time yet. They're lower the with in staff still furlough. one, have our back managing costs on are We not we because full payroll, stores, do

manage scrutinizing know our so, doing safety of first an managing but to putting and really challenging. outstanding And which predominantly safety the you customer's that we're is as the associate's experience, job teams expenses,

Operator

Dana with Please Today's Group. [Operator comes go Instructions] Telsey ahead. Telsey Advisory next from question

Dana Telsey

everyone. morning Good

delivery both holidays How on lastly, there that about how How than merchandise it planning think is of terms terms digital what marketing? seeing logistics? Thank of the Molly, changing? thinking flow of season, holiday prior you differently years? expense you're you and are upcoming chain, in supply As channel, and about shipping the are costs, you you. in And

Molly Langenstein

wherever, dissected overlay In and morning, sure good we that year, regards for the customer this Dana. half our customer year's make the you seamless how be behavior shop. strategy to in day channel, by for have available back the traffic including our new and new to shop Style experiences, and and pickup, strategy traffic shopping with last surgically that back and and of half. curbside she also built Connect, year's to and current data the by detailed we digital Thank her appointment wants to digital utilizes features This whenever,

As you know, retail is about details.

been which terms help our trying shipping between have customers a in holiday of offer half back year, effort orders So, us building earlier, and timing is In efforts expense. an and shipping to more channels. sales earlier free have dissecting this our both we details, to reduce potentially costs for key regards higher larger delays, amount the have to of our these capture shipping in shifting this will to that driver and of strategy upgrades

looking one into at make are calendar channels each built the expenses we've offset we So, structure. to calendar that, that dissecting and by we the the have meticulously so the of sure day, the

Dana Telsey

on rent you much occurring, and just they expense forward? are foresee going having occupancy can are And renegotiations lowered rent lastly, concessions the how that

David Oliver

the the also going forward Well, expense realized. on amount that we depend occupancy will

but through remaining to lease going our over are benefit. this get cash benefit immediately, it. that in indicated, eight from the cash take roughly that when fiscal at look statement. We'll see amortize the the we going initiative. have XX% and flow we will to perspective. you term to time, -- accounting is not we're the figures that going about savings are The to are at We're see an earnings said As be you cash you inflow, Since 'XX

Operator

ahead. Janet today question Research. with next JJK go from our And comes Kloppenburg Please

Janet Kloppenburg

and little late. could with about year-over-year? little move your half, as into you you brand? And wondering, higher you. by a back we if category it'll inventory current to the be if a trends got report talk bit I aligned that, Thank content I was Hi. we if think should

Molly Langenstein

for you Janet, joining us. morning, and Good thank

Janet Kloppenburg

course. Of

Molly Langenstein

we expected and for our that are demand. positions positioned We half well inventory feel back the are confident in we

also intimate We the wear feeling lounge are and demand categories Soma we in high casual, and on the trend the fueling capitalize apparel to within are space.

period, So, this that, we the not closure during did good product a whole miss thing milestone. is

we So, reflect the the able receipts to back-half current customer pivot sentiment. were to

Janet Kloppenburg

focus? we at where there's more Even House White look if were

Molly Langenstein

look Yes, I welcome to to Janet, on at. and you site go the

Janet Kloppenburg

site. see often at not at you're but and I it look I the what it now. look I doing, I'm right customer

So hands I'm swept in -- and every my day.

give me of idea So an seeing? you're what

Molly Langenstein

pivoted Yes, the last the of not we a about House we really White part QX thinking were that made changes brands.

take So of singularly brought career and to casual addition that the and really this that site place. washable the a attribute new lot products that categories team the we categories. elastic organization blended in put the to knit, I the ease two And what brought a you're applications. you on and all talent new of in lot to really the can that T-shirt that's that have seeing fabrications of lifestyles new growing we've kinds way, leadership and denim

in that due today reflected was our and of just to the year. continued QX we that seeing started assortment, all you're have So, changes that in this

Janet Kloppenburg

is as your the your but And entering go digital cautioned is how leading know the business, around now? I right what's store forward? we outlook customer there

Molly Langenstein

the see the in get stores really She's changed. not get has, back anxious her, speaking to and with sentiment has May to we trusted that across her No, associates, to since board. and customer

data we see However, customer the follows COVID. in do that our

cases as recede. escalated have does hotspots, in the So and spike traffic

pay to. sentiment… the that we close something is But And attention so, that

Janet Kloppenburg

for Are with you now? in the states sites seeing moderating then improvements

Molly Langenstein

Yes.

Janet Kloppenburg

Okay.

environment and kind you're comment of what promotional on Lastly, the could seeing you pressure their?

Molly Langenstein

year. in half a no additional to flat back the back of believe We are place the for the inventory believe environment for for that and last shutdowns in half. we promotional the right future. experiencing are our great we year, the inventory We to position slightly down The positions are planning,

Operator

And Langenstein ladies question-and-answer remarks. and the over gentlemen, like turn session. to any conference for Molly back to this final the concludes I'd

Molly Langenstein

extremely joy. special Great, to I our and each time, confidence that flexibility, and thoughtful give customer communities dedication I'd privileged our challenging to through this Especially them associates understanding, that as lead obsessed to we and offer this and product like thank associates solutions other. company and their customers, women these am navigate our of brands for

and position, We are opportunities, a sheet business, e-commerce with fortunate estate team that's customers balance and financial agile organization. real solid to loyal have growth strong unique an a portfolio, brands a distinctive talented a experienced and three robust

navigating and Our the becoming and challenges successfully company is stronger nimbler.

customers to financial actions our taken have excited today. and for our forward. and we us and interest look a Thank We third measures to the of company, our about the enthusiasm quarter future propel company in joining our you Chico's call. of us positioned significant I FAS. for to brands, am have so The continued emerge saving foundation in for our many place have cost November with We us in the again for forward speaking you stronger

Operator

This you concluded today's conference presentation. call. We thank all for today's attending

your wonderful day. a lines disconnect and may now have You

Chico's Fas (CHS) 26 Aug 202020 Q2 Earnings call transcript