CHS - Earnings call transcript Q3 2020

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Operator

Welcome to Chico's FAS Third 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 call over to David Oliver, Interim Chief Financial Officer and Senior Vice President, Controller. Mr. ahead. go please Oliver,

David Oliver

welcome Molly Chico's President, Langenstein, me and XXXX also Third Conference today. Call. our to morning, FAS the Quarter joins Good CEO and

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

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

Molly Langenstein

good everyone. Thank and morning David, you,

We have continue prepares and for definitive and momentum to a in we created taken that financial beyond. firm foundation actions and quarter, and positions the the believe business third see us we XXXX in

cost to these additional will process and reductions. and David commitments abatement of and nearly support transformation And the today's Specifically, our customer with completed higher flexibility of continued and credit fast-tracking several enhanced actions we offer comprehensive engagement. digital We $XX structure real million extended business. digital-first our financial call. million a are and landlord and We organization our on estate have streamlining sales reducing liquidity our our detail driving investments our during technology, accelerated rent review, facility. company, to our in which $XXX we innovation significantly obtaining amended I and in

this third and the XX% Our delivered quarter, second deliver Total the performance business nearly our from financial rebounding results the over quarter In continued by the quarter-over-quarter improved on revenues. driven we store in objective, to plan third substantially is again quarter. performance. improved second, digital strong this enhancing sales year

Our margin and fixed $XX a We occupancy the and sheet nearly on with XX.X% of price generated basis selling strengthened rate points, gross rose cash inventories equivalents reflecting leverage for our full Soma costs. leaner million, greater balance XXX comp quarter. cash and increasing

and of a First, of let's all the XX digital our focus on this technology for March in pivot and generate investments us with to to our as shifts year, we making and ago, sales double-digit digital XXX% In art innovation state stores transformation. we growth became business the our through continue accelerated we three technology overnight, digital enhancement. engine of as months year-over-year that talent brands, strategic prioritized increases. reopened, major company. primary digital-first transformation to Even digital now our

way with a solid digital-first we are increase. three Soma growth to fuel leading positioned brands continue total a digital All As in channels gain XX% and sales year-over-year and and the our of beyond. growth new share competitively market to accelerate customer company, achieved XXXX with growth. believe customer Digital we

and year-over-year XX% count points. For nearly customer up XXX third conversion was basis digital the grew quarter,

true a is story. Soma success

to the business We digital-first replicate a now success can is and we brands. boutiques learnings our Soma supported apparel country. the Soma by believe throughout of

In units added Style over the to component Look her again style has and Connect, increased we the innovations third quarter, Connect, second in consider Year-over-year, and expert we more of about some generated more we which as increased specific engagement have XX% Style doubled tool, in advice. QX sales The than Shop quarter. connects our competitive personalized that customer talk place Style put with advantages. digital me receive Connect styling Let than our per a meaningful once transaction.

formal coordinating of Closet with tool past doubled the by conversion launch. QX, will the We site we'll exceeding Connect. recommendations. to this this Style the functionality Sales enables accelerated as expand to QX and continually tool, with its Personal time enhance to successful closets after which customers such for average has Since been their purchases remarkable, rate. feature, our from additions this third My augment sixth launch, soft rate of conversion to quarter the outfit feature continue launch a We Closet, into new

believe I even closet. customer also can't purchases happy and three a successfully shared, closet, she I know that picked customer you my all coordinate brands. Here making a up $X,XXX the what's she sales. how my example know social proofing her tools customer In Chico's and in purchases, with digital these Style what's sale. appointment, out in for of an impact out This tested through the her in where third past resulting we showed investments curbside. new quarter, rolled is reached to don't virtual Connect, A products associate new in

customer allows proofing in reads build provides they influence excellent real-time and urgency create buy. confidence the customers purchases be customers into Social to insight as show room. her to behavior, fitting for to peers results. allowing her Early might conversion shopping This feature

enhanced mobile across incorporates engine Our points brands. prioritization search to touch AI all and digital navigation POS, also optimization

tools that for launch our new building in the best demand on selling and XXXX We our greater Newsweek, Online We channel. our of Shop leading recently fulfillment each company were digital online designation. brands online drive customer were named have to Best by also of edge accelerated honored

loyalty transaction finally, season, their our the some and with robust sales increase the Afterpay able interaction. and and messaging leveraging and to and with now personalize average personalized we of And a shop, customer to rates in overall commitment in our read well company meaningful drive retail. purchase. create tool companies, We journey have and of than targeted a as customer a digital Connect later decades, reads new driving unit and actions based In of invested interest-free predictive participation modernize strategic track experience. three that using Salesforce, online Salesforce deliver customer our highest processes unified productivity collected and program, paying digital them marketing channel, This better of on as trends continually for including using path are more leading to upon and the additional customers CRM be Salesforce, our engaging, to Contentstack To which recently to are and investments analytical October, has every every intelligence customer to with way customer driving boutiques, relationships, Early holiday or a new has leading technology that been made Afterpay. and all value sales behavior double-digit track of a growth. adjust further in us our brands. enjoying Contentstack order show streamline record per to commerce includes purchases This optimize to view with customers millions in to we the best leverage Company's the real-time have has innovating digital through data real-time across take experience marketing enabled their conversion omni-channel experience actions. we help for her and more improvement. installments partnering greater new

quick single our omni-channel the times customer single leverage about A more our be spends We average to converting than customers the digital continue nearly customer. channel note omni-channel investments, as X.X to stores. channel customers,

grow customers our last brand. responding of rebound and to up were to to quarter, are year, popularity, XX% boutiques each level the the that continued All opened to traffic XX% sales at the demonstrating month-over-month and quarter. from store during continued expanding products. for picked from nearly second our Curbside Conversion grew and

state Third boutiques productivity located to The quarter an sales, outperform hours in last and closures. of in malls, mandates for mall to local reduced our monitor we was over quarter nearly the are outdoor year's centers store second two-thirds those enclosed of XX% continuing and performance. improvement continued and

the and continue well-known the awareness, traffic in customers. generate quarter virtual increase several front, to On new build partnerships to and influencers partners and engagement, and events multiple drive our with media social organizations, on acquire throughout organic participated brand marketing efforts social we

Our new we quarter separate House payoff. the Market Soma the Chico's saw and including to White third marketing marketing both campaigns in Black product customers,

site digital year. last well to retaining we new Our are newly as our and rate customers driving and and as store acquired customers marketing than store higher traffic are at our brands, efforts meaningful a

spend quarter-over-quarter for up. is existing customers addition, for and In reactivated customers both

At and share our from and Soma, Black we solutions, shifted our and and and newness We we by elevate soft to current continue out. that needs customers casual, and innovating to and product ideas and be White synonymous have laser-focused our offering versatile comfortable on intimate with product. expanding our Chico's fabrics the living investments lifestyle customer home, results. brand. franchises to Market focus are Customers the responding are market most working pajamas colorful, are style selling that are our comfort and functional in and products are beautiful our incredibly both House At apparel. as and the customers' evolved have creating Continual driving best to are products

are As move season, messages inventories prints. we holiday and into with the positioned colors and whimsical uplifting gifting

products, sales and to marketing important during creative period. right drive personalized service We David? have the this

David Oliver

cash and and meaningful up nearly XXXX has commitments debt ended to well reductions facility. a it the quarter million expense quarter third by Thanks, solid aggressive we partially with with We the second increasing Molly. million financial without a fiscal on cash the for third $XX of equivalents, and We improve, entered as driven And end foundation, continued through navigated as the abatements our reductions. of credit $XXX rent from quarter. levels

of confidence to term brands. with October, mature on credit $XXX and scheduled sustainable new the company replaced $XXX Speaking financial enhanced year. in XX. have our our in the flexibility closing or to fiscal our and the believe do demonstrates agreement, of was not long-term further five-year maturing facility expect which this lenders in October access future currently our our next million senior for a success the August million in credit amended which We our facility, facility facility substantially our liquidity XX, we by the We

in million to-date, our of and us suspended commitments rent in In store deferrals closed in $XX the to we over result future a Realty rent six payments resulting the engaged estate about portfolio, rent beginning in and pandemic, AMG renegotiated in consultant, Partners our of leases. million abatements our plus years. $X months, last restructuring XXXX assist to April due in reductions a top-tier stores leases XX% temporarily As have of the to we real

majority these So realized of year, far, On with balance fiscal realized fiscal amount numbers our expectations. this be a the 'XX. to million the be in $XX this is cash expected basis, approximately of have met expected to

purposes, over statement the reductions income rent lease and these For rata abatements pro recognized remaining be terms. will

additional locations bringing have our seven opened quarter XX, four more closed the the year-end, with 'XX. January, XXX During permanently and one fiscal We planned boutiques. beginning third closings locations to of approximately we for quarter, closings At net with X,XXX third we of since year-to-date the store, end the ended closed 'XX. fiscal

closures work, up certain of received. rent result over we we a available postponed are based our three nearly to As the of the kickouts canceled lease on coming or and negotiations with complete, favorable years. have flexibility expect leases maintain for rent renewal restructuring becoming After XX% next strong our concessions

X% we three to shrink as We existing make available base anticipate To are come continue fiscal economic leases we'll XX% sense. next in the between further primarily future, kickouts are our activity, buyout higher store over stores these profitability fleet closing our and holding of due, our or years. improve standards, the to store to

by revenues. Let's up financial the reflecting robust of quarter, third Net the performance. total closures sales in now quarter XX.X% sales store from a year, growth XX and to sales digital as digital decline impact the million, permanent a the last store in-store $XXX.X partially Compared third reflecting performance months, offset in rebounding second XX sales. XX.X% quarter net to turn decreased the double-digit last well totaled as

For quarter, impact per store of of the the $XX.X share, sales. we third diluted $X.XX lower primarily reported reflecting million or loss a net

believe full million costs $X.X nearly XX% reductions lease entering loss paid swiftly a quarter. component of remaining pretax related of previously quarter, quarter reflect meaningful SG&A expenses pro restoration of share our align rent a not per quarter improved currently CARES cost, margin, a technology careful Gross and the terms. am temporary are or the how pivoted higher provisions quarter expenses occupancy sales. million fixed does decrease the furloughed improvement technology partially year an of was $XX.X assortment This were inventory offset QX, Compared XXX from down the and rata We related related as third last sales, third benefit quarter write-off. X% third I SG&A reopened recovery stores, $XX.X management, our reflects to prior to of realized these Compared selling, the of reduction million, is quarter, that Note which our Under savings balanced abatements income $X.X has impairment with net and higher write-off. by fourth expense a to a inventory. recognized reductions, million our $XX write-off. inventory, increased team impact to ongoing federal Our payroll third year, of taxes. gross associates of we information reflecting reflecting properly from and third third charge primarily cost is margin third to technology from pleased on being million. down reductions, managed returning structure to associate to charge pretax sales, in with basis the over the points degree $X.X our $X.XX cash the leverage occupancy the pay price included in of quarter initiatives the quarter year's Act, million the from salaries second cost work this to related

that income security million of sheet balance related years. the in fiscal federal of deferral repaid benefit in payments our Company year a tax cash ratably to the $XX taxes million employer social this also future were receivable realize recovery Additionally, expects to a $XX years. reflects related paid prior The to

to are flow. cash manage We continuing carefully

aligns by Our bolstered financial opened digital with sales. at performance better strong position cost a brands, sales stores and and are across leaner significantly being liquidity structure all retail expense that

cash quarter and the was abatements position reductions. lower our Additionally, cash from improved by lease payments in rent

credit under performance with emerge to so positioned our us provide make have the extremely to and We surrounding competitively to facility, enable a solid future are company. for brands to our stronger turn our call still over and financial the forward-looking increased XXXX position, beyond combined have predict, we Continued the guidance. for actions and positioned operator now the emitted we uncertainties believe us our current I'll environment back flexibility Q&A. will unable difficult taken,

Operator

Thank you.

go We will the now from Anderson [Operator ahead. question Susan begin Instructions] Riley. Today's comes session. first question-and-answer B. Please at

Susan Anderson

White that then product consumers into that mix I'm increase are have versus how mixing managing guess, historically? on And through much the I'm I really in them product able curious to, House. curious, get also, you a environment. guess to I know job reaching to Nice in you been more how back there? casual let there's just you're stores tough out to casual that Chico's and them

Molly Langenstein

you thank questions. for Susan, so much the

working the on March started we April. fourth product quarter So, in and

the to able make significant assortment. So, changes we to were some

One And brands. a that high our telling loyalty you're customers? all and percentage so inventory penetration that we're the we is, seeing the apparel you're seeing brands. in gift that, of in of the we certainly in both of amount have How of enjoy

penetration share -- and leverage high our in also be we our catalogs, the expression changes in through in that the on and heavy well changes be from as to loyalty addition both in been, associates outreach of our as lean our stores engagement what know able assortment. Connect, utilizing the social marketing show customer able they So through to customers and catalogs have to that to and to the and customers Style one-on-one in sales

Susan Anderson

capacity year holiday curious sounds the stores than then Great. holiday, very similar in and last you're you holiday for like a are in then last Should And versus managing how you're given there. than the expect to year? the then last gifts this constraints also, I'm the of gifting also promotional we it year? more focused be front, just penetration on And different

Molly Langenstein

this In House for So, in in in bigger, bigger about Chico's, White will bit holiday gifting terms Number bit what based the in assortments period. a particular. how upon the time one, bigger, gift we we and thinking through are giving actually the customer is how than think in Soma, quite a and year we're little be thought gifting. last the assortments of it and actually

so traffic on constraints As to of that of the parts share our relates traffic, in but sure moving we to not lines, a by all busting able the delays we Connect experiencing managing happening in the that it line Style amount customers. are far pleased using I'm the with to by state. stores, are do serving we be are make that have system to In

we So each changing are day environment. navigating this in

Susan Anderson

holiday, the Great. And just you're expecting? on what environment for then promotional

Molly Langenstein

Yes.

about Sorry that.

than more not promotional We are to last year. be planning

our now, all for plans year last in flat so brands. right are three And to promotionality

Operator

today I question Roxanne from from our apologize it comes next Telsey Group. Telsey Partners. Advisory comes next MKM Meyer with like question Our with Dana looks

Dana Telsey

million, of about impact for delivery As out the holiday, digital-first environment, expenses And are being surcharges a impressive. on And of delivery the how that with you expenses also, adjusted? are add moving are think to expense $XXX buckets shipping year the to budgeting XX% you rent the And there? that is that is expense, that especially given What additional this streamlining? opportunity? could what savings an the

David Oliver

next higher really in quarter forward, customers where retailers, cost to moving pandemic, and Starting it's our are adjusting plans shipping. year And we questions. But shop plans the for like have mentioned, online. well. as and it we're factored that as mitigate to to dials more demand pivoting to great Sure, possible, navigate plan. as extent are, that our for And fourth our can. the we you pricing. has increased The into shipping, But we market are with we seeing other

was And so the that first question.

expense reduction. question The related second to

where Last significant of took include spring, our the as still structure organizational component components restructuring we're a the well are we payroll in of field. So, below marketing. cost out levels million, we amount universally. the well. field labor, Today, as labor. the historical is still did We $XXX tracking looking in at biggest of corporate a Other

Our versus marketing in down quarter the our plan. third is

about specifically. asked rent You

at our reductions not because the on modifications. go-forward ratably of treated You meaningful be rent in and We these seeing over is -- P&L this taking impact term. it we're from a abatements any lease concessions basis to are going as That lease the is time.

benefit that's so seeing a go-forward And something right versus you're now.

Dana Telsey

third sales? the of then you it. lastly, terms November any in just for And is how commentary Got starting you? exit would how quarter on And

Molly Langenstein

which say, as third mentioned in last specifically, about the not that. opened that digitally. would stores quarter not there I is were investments we open fourth traffic in I cases many so sales seeing did the traction in three as news change And we quarter good the quarter, from we excited The all additional are a rising improvement, is, the brands as the why COVID and all fallen November, were and to call able move store quarter beyond. the to we and whole of in stores that has some into are customer year, and lose us pivoted and are get we growth would digital in we as our that forward the maintain have about that third that, in

digital to we and be are traction bullish quarter. able So about are in we that next whatever the robust comes tools in to manage getting the our

Operator

Roxanne go question at ahead. our Please Partners. Meyer today comes from And MKM next

Roxanne Meyer

in see over company you where could to stores? brands? years new count XX% know your about hear digital those your really And up? total How strategy on evolving customer mentioned versus of to that terrific. a fleet? that few how a drive to terms your the stores end which where thinking is also longer-term about you digital-first in they store of perspective, comments to the margins of they already customers percent digital increase what next to where your X% are existing new going to for how a the -- And you're count, for ability that is about I'd means outlook question think strategy based and love at I being on are customer then stores reduction My what XX% you talked in how is follow-up across company. you customers for customer many a from know were the growth? digital-first versus of I And impact

Molly Langenstein

Thank you, Roxanne.

that tools the write-down being that and of long hard with are the digital investments meet gave impact that actually on we the her store. And can that tools. we that we and let's purchase as and our that immediately her delighted be to as actual to transaction our she ends to up, the $X able where customer the business was digital us. and in that online and or that had seeing in million so about in whether the would to wants pivot thought is to customer the dollars what that company. important able the about interaction example know, be to digital knew So start she specifically channel a was we because we making digital-first didn't with into did versus we that take closet, That's is the are shop We needs wherever I business our and more think investments

tools, that in QX. that a we proofing, traction. of QX, Closet, into things traction on, social things So saw we are improvement and seeing the launch of My each Whether and should those -- are we one to soft Connect, gain all Style the the started continue

that to to and lot store, that so only we of continue it consumer transaction of a shops important a be a we're on this an base get online that channel. in drive, that strategy themselves single part that incredibly that well. just is channels those can us aided not serve how customer but lot both that we also provide that I at in continue shop customers There's investments valuable transaction of So, but mentioned going the associates just large is stores that that it And are the more feel customers And our times going that's to for shop customer that growth. consumers. is why is online have and sales to can can X.X

that customers, which each customers is of we rate acquiring New actually believe they brands. us new an indication these you three assortment, did in We're new our terms the Roxanne, are returning the are a stickiness at of brands customers of coming than across seeing is board. of year, that mentioned our that faster one and our into last of all

In are addition a to overall they bit customers similar younger there had we're age, that, the seeing but that are we've in profiles that little in the past.

So, customers a the brand. broadening we coming to see just of new that our are

Just one our really use this the a customer messaging the the on be the over personalized that bit, be so the her all will in ROS for Roxanne, from years why of that sitting customers believe very specific and responsiveness. relationship we've mountain terms reason a That standpoint, more on that of to that and a of collecting shown, to she speak we're be in -- more important. that data had we've to also and data customer actively Salesforce in something add us to been the to new we little past from behavior has but the purchase positive able with that's incredibly is

Operator

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

Marni Shapiro

to holiday, completely absolutely case direct-to-consumer in little a been a short outstanding stores the to Chico look period for Molly, I talk of could very significant obviously In Congrats. you the shift amazing bit a time. me. the forget, there's

has direct-to-consumer across that cadence your did your shift the shopper you And for can fourth And return then, that plan looked prior like about to the it with you for talk how quarter? brands? since the happened? what has So

Molly Langenstein

in only store the the that's shift the customer Marni, mean, You from shopping channel?

Marni Shapiro

people you store did moved you have manage returns up and your that? in manage about The normally Yes because yes. fourth is shopping quarter, seen do the online, shopping animal anyway? do which Well, she's it that? she's How online. for think how How different you a pop now always very you as shop, more and

Molly Langenstein

to in into closed, to quarter wasn't able was to weren't the to second it it not customers fair stores that important when felt We back were return. be able Yes. penalize stores incredibly that that get

decision make to customer and first that wanted consumers. we So, accommodate

we them second in and the in trust ease we a quarter, our return a our at made have window feel So, made from them that of organization. positive lot extended customers and lot feedback more had

as where not a change. to to far As of it one brands, seen each in of stayed It's has past. flat been returns the a really the percent we've

have seen we QX QX. during in not of so, increase And three an any or brands the

Marni Shapiro

fantastic. follow-up? then Is I in-store know pickup double-digit I can your pretty buy a And at into had think, a the part side, I that curb in said and you've point? it That's Is of increase significant significant sales online, of now? especially. sales it just this you the percentage

Molly Langenstein

month-over-month. growing it see We

they to the curbside to one earlier month for them it October time And back terms packages shipping, of -- -- largest the sure that in the Our easy our of the be pick with the for be that we it's for also challenges in last fourth want centers, being quarter pick to was outdoor in curbside. of period, when to up convenient packages. two-thirds escalating able questions make in we for are very makes seamless marketing about it to pick because able we want to up customers assurance up days, And to fleet their their packages. and XX believe

and that going we to part continue to become do October the from quarters, in business is QX, and saw just way going of hopeful it the momentum to a got So, doubled QX that the forward. in momentum we we're where

Marni Shapiro

to That's stores luck The with fantastic. holidays. really Best the look fantastic.

Molly Langenstein

Thanks Marni.

Operator

the like call session. to for back turn over And ladies and closing any question-and-answer comments. Molly gentlemen, I to concludes this would the Langenstein

Molly Langenstein

and Rocco, them give offer privileged that to product confidence this and much, distinctive very lead so customer-obsessed company and and and you thoughtful and Thank women's coming special solutions morning. three everyone, extremely I thank brands associates you, joy. this am these of for

financial are that business, growth the our and sheet foundation portfolio, to a the shareholders. digital and value each and a and -- take the real nimble have a solid of a I'm about to fortunate are and and establishing years and strong unique our We actions team. I of talented have we estate excited for position robust have and we a continue brands experienced thrive very create meaningful growing solid we in have opportunities future taken believe that balance FAS. ahead Chico's

you especially my to experiences I who thank you all distribution our terrific special associates, the conclude I a of lines this in center our and on to Before wonderful remarks, customers in your disruptive holiday want assure offer a for stores, our forward season. have year-end will for We interest front our Chico's those during us fiscal has FAS Thank speaking Thanksgiving. in safe so everyone and February with call. again you and much look today. our I in hope to joining for

Operator

has for now Thank you presentation. concluded. conference attending today's This

now disconnect. may You

David Oliver	Interim Chief Financial Officer and SVP Finance, Controller
Molly Langenstein	CEO and President
Susan Anderson	B. Riley
Dana Telsey	Telsey Advisory Group
Roxanne Meyer	MKM Partners
Marni Sapiro	Retail Tracker

Chico's Fas (CHS) 24 Nov 202020 Q3 Earnings call transcript