CHS - Earnings call transcript Q3 2021

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Operator

Welcome to Chico's FAS Third Quarter 2021 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 Corporate Controller, David Oliver. Mr. sir. go-ahead please Oliver,

David Oliver

welcome and Chico's webcast. and 'XX third conference call to morning FAS the quarter Good

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

cause our release, as statements. otherwise should required implied update or and to actual unduly are or could on earnings on made revise factors You by from any by or law. today's statements may results this be these to projected on comments except call. Important SEC information disclaim materially call, not forward-looking differ obligation filings We included events in that any rely those discussed the this our

President Now, CEO to I'll and Langenstein. the call turn Molly over

Molly Langenstein

officially you, of We David the to Guido continues. to on experience, good I him company morning, with to He everyone. Thank we are today. like and on and financial have board his achieved wealth as the a call Officer. another Chief welcome quarter great and us and the comes Financial PJ retail in role pleased to would momentum

Market increase XX% digital expense management. enhancements in performance since quarter was margin driven to expansion, fabrication which outperformance extraordinary by selling, and return meaningful meaningful reduced gross on quarter Third quarter The margin sales growth, markdowns is products our and continue Chico's represents price Dramatic productivity, the and of The margins. improvement drive in faster new to five comparable are apparel healthy price all significantly progress and in since at fit demonstrates third turnaround years. our sell gross significantly year-over-year to brands share indicated brands more generated fact, respectively, the continuing $X.XX across store Both third are diligent better increase quarter-over-quarter. and have third inventory significant strategy. quarter Black levels. we company's three earnings fabrics driving propelled lower gross quality, continued full third profitability The best and performance sales full to new per XX% quarter more quarter in maintained gross our And higher enthusiastically best continued as margin Existing customers third increased by margin product was the sales comparable House brands apparel XX% rates, White through updated and by robust XXXX. quarter our fit best of and year-over-year comp of their meaningfully by third make performance offerings. sales responding driven and than XXXX

top sales increase quarter XX% on third quarter a marking Soma last comp an posted year's XXXX, of of quarters XX% increase sales over growth. of comp comp sales consecutive third the in five

continues data additional capturing sleepwear. a to well-positioned journey brand. to staffing. to data Continued have necessary research NPD growth market market is share recent performance our strong from that We shows becoming along that months this non-sports driving invested Soma Group the market Twelve outpace business a we in panties inventory and and capital bras, is trailing believe Solma's continue with on forward, the in this indication our billion-dollar

on strategic performance we are making priorities. quarter five remarkable the our third Our highlights progress

few you a minutes to on take me Let each. update

ongoing our continuing First, transformation. digital

this seamless FAS last into have successfully and customer digital a transformed as a the by years, of Chico's time. Over the half our evidenced led over first digital company we trajectory two sales

remained to technology investments talent have in paid digital sales and continued Even very as off. The have store made strong. we rebound have revenues have

and engaged And these customers traction. digital are And channel valuable new values. more proprietary rates growth. average a These customer continue tools customer. three single are and to gain most year-over-year to conversion Our multi-channel continue tools using drive have our customers higher tools order sending these times

outfitting customers grows customers leverage the representing higher MyCloset using every personalized are We and StyleConnect our conversion experience average site their those not their X experiences value customer of million engagement now wardrobe coordinating in X.Xx enabling and purchases Approximately the customer to closets StyleConnect. augment past online order quarter. significantly and the at nearly than active our generates enrolled MyCloset, continue to by file with feature. average half

enhancing pay allowing efforts launched UPC Pay, last drive to their conversion feature be to continues is about customers to sales online, including shop-a-look exceed also up in continually ago, a still driver. has double personalization remained a and it it in By also are expectations. our purchases launched store We proven to for year the our After terrific year. engagement, and installments digits. orders popular our has and pick Since growing

our Second, refining further product.

doing are market each at of take key our and results. two to brands On drive share the front, things we product

menu features our customer constantly insights elevating our to jackets find White every hits, Continually data are Year-over-year responding fact Chico's core no three beautiful for big stores Customers denim improvements denim continue XXXX be elevated quarter, she pairing and We sweaters solutions outstanding House response panties year-over-year drove for an well. to comfortable, House is the which from our bra brands. returned our the creating doubling sitting. all XX% by levels. benefit with quality revenues our comfort occasion. can White and With clearly to person responding our brand. woven, Market key our growth and She's as Sleepwear bra three innovating denim absolute year strong revenues up Soma for selections leveraging last and the were fits of customers First, outfit. great her denim a to to all had and and offer versatile full [indiscernible] needs. and are pairing nearly bottom. She's We and Black double-digit Market Black complete of right for boosted with are that in quarter. across the At shirts iron fabrics. and so she and bra in our silhouettes in and that fabrics are the continues to second, styling solutions elevated make assortment. to new new pant over new new the

Next, new insights, driving acquiring customer Through and engagement. enhanced data we which our elevated analytics traffic awareness, efforts, have generating driving customer marketing and brand and targeted customers. are

digital continue more and digital, storytelling social other efforts. resources to We influencers allocate to

We are more generated user our organic using including content. elevating and content

are Our social media customer responding. engagement grow and customers to continues

and In the Live brands engaging sales. over third are weekly videos social Facebook events gain our X.X apparel and live quarter, example, our real. For selling traction views had and in continue million to generate selling

X% continue reinforces for the average three from prior We brands. quarter, This the to and our count their cost Priority all up discipline. than the operating customer with continues new nearly year third four, and runway customers. to maintaining data trend age acquire customers existing younger

One strategic of and our gross in rates leverage promotions, achieved accomplishments quarter gross higher since in third improved most corresponding our price management costs full performance. XXXX, highest on meaningful quarter margin sales, was occupancy margin reduction our inventory driven of and the third sales. We by strength

leverage lower quarter the resulted sales than disciplined and XXXX. a XXXX third SG&A of in both costs efforts Continued third and quarter rate

delivered investment sales [ph] presence. traffic delivering strategy we productivity an higher during have be And store was [Chico's] profitable part estate delivers Stores as fact, SG&A rate and digital a quarter. integral Store the that we healthy, our in In make our retail performance portfolio. the we our overall markets very where are strong third best continue strong posted since finally, the indicates to growth real brands for sales store of data portfolio higher where return. in sense growth XXXX.

the same expectations, more our shop-in-shop and new store Soma which order open to as productivity, our customers we to to higher estate are time, XX overall plan Chico's to rationalize quarter. further digital exceeding opened real business. store in successfully tighten and driving profitability. lifting both inside fourth In have continue We We expanding stores, the shop-in-shop brands, appropriate. nine portfolio deliver At

overall will a stores to portfolio. decisions process. to close This was when it We remains dynamic the make accretive

year the performance a combination successful example, and to store XX For due XX to beginning locations year, number XX at we have negotiations. that this expected favorable of to but of close lease fiscal the to reduced

on turn to over to call the me PJ? PJ performance. you financial let our update Now

PJ Guido

XXXX This expansion margin year's third all three third contributing since leveraging quarter with brands gross income. quarter meaningfully a shared platform, marks higher performance earnings our operating growth, best sales and to significantly

Market increase increase XX% product to million last Black This brand comp XX.X% sales and sales the of selling by comp XX by comparable marketing is comparable and to full improvement in XX sales price net driven reflects year. XX.X% grew quarter store last grew XXXX. drove At offset White the sales Third closures which efforts and XX%, House partially a in $XXX.X compared level, enhanced Chico's sales grew meaningful over million Soma $XXX.X net XX% months.

Looking at quarter note XXXX, House White I our pre-pandemic compared Market to comparable XX% of improve with close and XX% X% the Soma Chico's reaching to and levels, White reinforcing by the level Chico's to XX% with of down XXXX on achieved sales down Market compared profitability. XX% and inventories growth focus was overall with higher on House inventory lower achieved continued XX% third that respectively. Black XXXX with sales hand and much increasing to down a Black managing inventories inventories productivity this would

The to occupancy compared current year reflected and and gross gross full to margin our quarter performance sales rate price in margin third sector. XX% higher best year consecutive the levels The continued in impact XX.X% XXXX. retail XX.X% was last quarters and XX was improved

XX.X% down and $XXX.X sales to sales in XX.X% Moving of the totaled quarter million of SG&A or in for XXXX. the P&L, XX.X% sales, expenses XXXX third of compared

that in expense with like more be realize basis, since with a through invest going strategy highlight flow year forward. three of cash as than we significantly will working. fiscal much will a more On all the priority we higher third EBITDA million fuel generated of behind XX us million have have a capital XXXX. to improved will grow all and key for and flexibility, to reduction significantly Fueling that EBITDA us a that coupled meaningful is profitability us flow year-to-date addition allocation leverage sales which would XXXX, last basis, higher to cash enabled to XX of I continue generation is year-to-date and us On free discipline cost improving to brands. flexibility give giving initiatives, financial Continued provide quarter, growth

of a loss For a period XXXX. $X.XX in year share prior for months we the to loss nine compared a $X.XX same and the nine months posted in current year, the EPS of $X.XX, of

even million, XXX.X shift strong, fuel further to with XXXX facility over balance increase the our let's balance on XX% by our remained quarter manage sheet, the third quarter position to a with providing to We remained make and On repayments. momentum. a inventories the cash the total lean securities a liquidity flexibility us the slight and long-term down investments second relative and with the debt and quarter to credit marketable reducing after very our for to hand relative Now XXXX. of cash business ended million XX% down borrowings $XX

productive XX% XX% last year margin Our never has high were inventory apparel the us, inventory in brands more and and for down gross XXXX. delivering down on especially to hand very been was

$XX year, negotiated of for and addition an going XXXX. to forward. renegotiation since million Turning A&G These will from commitments $X lease profitability This securing the a XX total store we million landlords. of rent store in total with our partners, continued Real is provide renegotiation third commenced leases to quarter, the last renegotiated further in savings XX in tailwinds occupancy estate, year-to-date our in enhanced million, the reductions incremental real bringing reductions million initiative to program commitments we Estate in

our come Molly [indiscernible] to were right As leases due sense. we lease are noted continuing make as are checkouts buyouts size economic available store base,

of We for the have our available to three over for two renewal flexibility coming checkouts up XX% approximately with next years. leases

closings closed During the boutiques. our stores XX the with to third quarter, we and bringing quarter XXXX five ended year-to-date we

continue estate portfolio will profitability. to overall we actively real enhance store our forward, to manage Going

our demand will for be outlook, Now we our our the three quarter momentum get strength sustained of fourth customer brands, all quarter. that we turning the as are further confident into given of to

and XXXX expect total to closer XXX million. XXX fourth We sales continue million to quarter to to accelerate reach

rates to well XXXX in expect as faster to XXXX This gross XX.X%. We above full range quarter inventory price as through XX% sales and the a a rate continued management fourth incorporates higher of expectation percent and as chain and higher of with sell costs. supply margin be sales,

in manage the We and are of expect to SG&A as expense continuing to to range be XX.X% our a sales XX.X%. of percent rate the structure

be full to fourth to XXXX rate tax $X.XX and to And effective we well for a full approximately flat our XX% quarter, diluted deliver for the rate expect for both XX% year. will the We year. us which EPS expect us give about and of the for putting quarter, the quarter XXXX the

go I with Q&A, we Before you key to would to leave on like thoughts. three

our First, our initiatives to due strategic accelerated has and turnaround cost continued discipline.

our fundamental business and created three we of growth the that operating of to contributing profitability. navigate path growth successfully well to current profitable the And all future. brands us Second, tailwind and have macro the meaningfully last, allow improved and will have a a greatly of into sales sustainable model environment are continue on the

the Operator? call to Q&A. operator for Now the I'll turn over

Operator

first of yourself limit Today's Anderson questions. comes one Thank the we Riley. you. to At question this take from interest [Operator your time, question. In time B. be consideration Instructions] and please happy of Susan others, to to will

Susan Anderson

to I front. guess the curious on improvement Hi, chain morning. It's good just quarter. nice supply in see I'm the the

margins? terms inventory? what there the not did into sure how you had to then, In any do three then, I late And impact of holiday, say but And be feel level? like was this deliveries? if did your And you inventory will the you inventory missed feel enough I'm about looking you

Molly Langenstein

to Thank you, freight and Susan. deliveries pass late and chain I'll I looking will PJ holiday impact. take it supply the then of terms in inventory into

been First challenges. years, we now COVID of for through two all, many nearly have managing

that continue efficiencies ability we And assessing, materially to managing the remaining decisions the not meet We have to in and I way able in to we have this sure to chain supply demand. forward. quarter, in limit the mentioned be had we've the because chain we anticipating swift diligence that been been make and and us to third did actioning operating our make so do aligning, will move model. supply

liquidity period, you during if flow. we've elevate COVID demand timeline, at to able this and look customer grow and fact, three In our satisfy the all entire been brands cash

PJ Guido

inbound your on and as cargo XXX XXX was Susan over air seen margin ocean the ocean points as impact well gross freight outbound freight $XX in Obviously, costs, and approximately freight. the total roughly and question, so both basis points includes the And or to quarter have just impact basis million. we higher that was

Susan Anderson

was Great. And I guess above that, the free excess normal?

PJ Guido

Yes, correct.

Susan Anderson

how the level where that And And mentioned you still margins were gross their looking opportunity since curious to relative of XXXX. that sustainable? front? margins think just much guess Thanks. I think I'm then, reached history? highest then do And Okay. on March there's is margin you to forward do you more

PJ Guido

the So higher in margin regards expansion majority the maintain to margin, two-thirds over of due gross AUR. is with to the margin,

accrues sustainability, greatly that enhanced had terms margin. operating maintain the the in obviously, of of have So obviously And the business. to model we

inventory, going our price selling, managing that feel we sustainable. higher So forward full is

view we So challenge as us. that for a

Molly Langenstein

it relates like piece I'd product as chain. margin and supply Susan, And to add the to on one the

the also that we've landing products, that to the in strategy, than product, year part And putting you're the three fabric, materially seeing been and four because responding new is to supply quarter she through all in it challenges, is our the into fifth of in quality, spend our in we've of with a what and enhanced was customer the the And so we our is in our AUR, years we're have four margins, sell deliver the price different product turnaround chain years, cost our higher per third softer the apparel goods that of brands. that ago. regular better an in able fastest the brands. as high apparel results at is all-time had all particular have our three pulling ABS, We in

Susan Anderson

I And add good to hear. That's more. can Great. just one then,

think customers around I you your And there's market give brand. mentioned quarter, last curious then, by loyal I'm seeing to any if also if that data started you're share? increase could again. increased that you

Molly Langenstein

customer count three brands. our all Yes, is in up year-to-date

is the at House is year only key, XX%. quarter. is XX%, think that and we up three is I which not four for customer, Chico's brand spend also a by per is activated new, brands the for but all XX% is high Specifically and Soma White And up up customers

Susan Anderson

much. Great, so hear. good to Good that's Thanks holiday. this luck

Molly Langenstein

Susan. you, Thank

Operator

comes We Marni next from with today Retail our question Shapiro have Tracker.

Marni Shapiro

to call. guys, on Good you congratulations. PJ. Welcome, the hear Hey,

sales walk just was think that been So little stronger guess down anything I planned time? could substantially? and sales then, to your down even your you you that that Could are I about, what right levels a have of I if dynamic? in us if inventory just of strength bit, break guess that those thinking Am was the late. was along through could And on inventory the percentage I'm lines, delayed? versus

Molly Langenstein

Absolutely, Marni.

in we that those inventories reasoning 'XX were lower to did quite more both the we plan quality able yes, to is been in in lower and you reset. than brand we into and scarcity, multiple than we garments, in create particular, heavy have product that years in The much to So had apparel we of honestly, wanted planning behind levels. that. 'XX a the promotion so have And brands that the of when put some be of

that, customer in often. a the came frequency brand. with to also -- have And the with they particular is have some being are gravitating in it having all Vietnam. you really in of House that frequency white the us does newness. second wanted actually works is inventory mean the was third in now the ended together. the where we're the we able us more definitely particular being more or that quarter discussed week and challenges with she of that sort second getting as And of that a in little hitting inventory She's at shopping Chico's with And because merchandise levels impacted because slides black to of we week it month. if brand of call more some right look as it came QX winning were be. is quarter has than towards first lot particular that go delivered often, because sporadically stores. Whether customer is in that Now, Having is we the deliveries exactly that in of month, in past. enjoying us in a that in said There our the we White we in more not How

On Soma, a gift inventory sure not that the House. overly quarter are brand, is is giving the apparel in in pretty because made actually impacted the normalized we we Chico's quarters for White our or across the in And it's Some as flip had biggest side, two brands year QX, QX.

advantage Soma us so level we gift up we particular holidays. end So the at ended in inventories in to that in with we the through of pajamas inventory last why the to get up quarter had the year and giving XX% the

Marni Shapiro

That makes sense.

you no, day, do feel it of more back so her let would the had or if inventory end And come at you worked apparel, have hungry? better like the in

Molly Langenstein

Yes.

more in that's I for But to us supply customer chain our next did opportunity think the to done meet we demand. would and ability able year. quarter have materially business not be limit

Marni Shapiro

Amazing. The of weeks. fantastic. next with of the Best luck couple stores look

Molly Langenstein

Marni. you, Thank

Operator

with question Telsey Dana We today comes have our Telsey next Group. Advisory from

Dana Telsey

to progress. Good morning, everyone. the see Nice

pricing think materials talked we for this the have other you now? then, chain, do quick I and on follow How terms Have any about what end you of about pricing taken leading raw And in As spring? to supply ups? is pricing? the

Molly Langenstein

you, Dana. Thank Yes.

are is certainly components that product like that to at In of as value that pay holistically quality And are better there saying into outlets particularly have guiding just in able novelty with of item, that item find and so out a a to is make the you managing stepping and way based business our pressure outlet are the those into garments, that we teams, we which inventories that and put pricing believe versus the forward that looking what we been item that terms keeping honestly, commoditized the fabrics to our is categories certain pricing at at quite terms the lateness challenges and tight the raw deliveries, back be there an that challenges more that we're price items, and it. are way and as individual more in terms the we way would go overall maybe cotton anymore. look outlets. are And have is, big it would we versus there as merchants within customer business have to that with our the with example. our advantage the categories we're for material part room upon if not Those of in of looking going an pricing, of that items, are we've our place garments, leeway material we on in

continue right that's that now working the the two years, last been in for supply we'll So to manage us same for manner. and chain challenges

Dana Telsey

renegotiation Got estate million then estate And to from the side, you store given more you real base do forward? about next the quarter, that reduced on for think is number have real there it. come got XX the of How store year? closings? you And this benefit the

PJ Guido

Dana. Hey,

XX of the at portfolio, landlords. the on feel like most we've do major least million, through So with been we the

would but opportunities level. be more forward, going renegotiate, to, at to it continue muted to there be will So a

it's in and breathing the would store Going right? model, constantly a say, performance, terms profitability. I monitor forward living, So we refresh, of stores,

in possibility certain that it's the profitability. return they'll keep So And not to to closures. them there that profitability we year, is And because XX obviously with we've we've targeted -- saw store right a we'll identified we XX we're below open. seen some in that, and that this coming improvement stores, given

stayed over it's of we've our close I XXXX. to model. forward forward, XX%, stores living caution that, a roughly But over XX% going probably again, going will again, So would

the that. as a obviously, work stores constantly forward. profitability will momentum in we'll improve to the remain it go The business, store given So evaluate And, strategic asset we us. for

Dana Telsey

of between line how you'd Good. full stores Monday, commentary Black to make Friday, stores, the the Cyber And and to lastly, you. the that performance and relative outlet expectations? difference on your performed want any Thank just any

Molly Langenstein

both outlet frontline much really in versus stores results. traffic end same pretty in and The Yes. the have managing been

As the to of and both in QX performance we've Friday, weekend, has pleased Black it that over and Thanksgiving stores past we into are seen inclusive this holiday week. momentum November online, our carried relates the QX with throughout

Dana Telsey

Thank you. of Best the luck with season.

Molly Langenstein

you, Dana. Thank

PJ Guido

Thanks, Dana.

Operator

[Operator Instructions]. Today’s Janet next Kloppenburg Research question with from JJK comes Associates.

Janet Kloppenburg

morning, on Good I And outlook all, Hi, freight -- good a first going got I congratulations for Molly, forward. gross everyone. the on you I bit what PJ. late. of quarter. from little performance. for impact the wanted it I the was just know margin the wondering defined about third was

identified to You wondering on from points sustain you. learning the House that hit year? to but embed continue And inventories that it. the going I have will the moderate? didn't I continue if margin Molly some margin it standpoint What category, to Thank perhaps back you seeing customer you Is and shopping. next may third give get next for a or momentum. down? Do opportunity also White back freight that you fiscal you're from year just is prices opportunities that come and be product the price able how or 'XX that Chico's, into but by flow this it's to gross was you quarter to to got possibility an of own it, have high, see said be Is

Molly Langenstein

I'll take question them then gross category Janet. answer for and to Thank pass points, outlook margin on opportunity will Great. by third price quarter the freight. your on I PJ the learnings on and you, to

it apparel a to denim, in having the that One in are I fueled being levels, XXXX very running so of In share about a silhouette denim. would that XX% and by up category. of the the excited learning in things resurgence is terms we're and we category, it's in shift product because is

on full outfitting, that to and of that that to digital no categories create jackets underpinnings as then soft pairing iron stores upside outfits is ability continue categories, both our that also brand tools year. we the drive us the next to forward. to use like the in opportunity we to be learning and the for see for other The tools, create categories to up for top shirts and be best-in-class pairing [indiscernible] customers, continue our those move White and House brand jackets and dresses, our in going Chico's also able in dress we're We

we're So of excited on the product front. good Janet, things, lots about that

PJ Guido

On to raw higher do continue. the around XXX full higher that we I price note expect it And your and costs, we And XXX been the roughly that our roughly points chain In impact cargo in QX so probably has margin. form to freight mentioned best question fourth to about costs, would the and to of gross supply higher XXX impact. basis points selling ocean defense in quarter, that the freight. air was costs, inbound materials basis turning of inventory came faster.

geared So toward is those model business digesting costs. our

it. We is become to continue It to it's it do we'll headwind. a So cost expect a of doing navigate business. continue

into expect XXXX. So headwind do this going we

be to likely with while. So us for a

Janet Kloppenburg

for be gross PJ? worse the of receipts freight thing, it or improvement margin your unchanged. should be kind be we quarter, that to the look No impacts that the you will as second first thinking the could So and

PJ Guido

check it's visibility to today there's some not along cost Yes, points as that difficult out several anticipate a when do But chain, say, the supply are there high at end. the there'll there of is given relief we point. so lot there and this be to could

but come out environment still So down, there. will which that assumes volatile cost

Janet Kloppenburg

you to much. Talk later. so Thanks guys

Molly Langenstein

Janet. you, Thank

Operator

gentlemen, any session. concludes turn closing like the to Ladies conference question-and-answer remarks. the and I back Langenstein for this would over Molly to

Molly Langenstein

working. our turnaround year, strategy our is this quarter Each and momentum you. have Thank become results points fiscal that proof

clear We are a digital for profitable first customer-led company a path growth. with

unique share their with each brands, bases, their market customer for and We have opportunity sale. expanding own three

our and improve build We strengthen our team infrastructure. to performance, and balance continue sheet operating our

over We and long-term to shareholder are have the an ahead. future value generate exciting poised

sustainable express I company. my Before would with a Oliver, resumed our confidence years other has put during and David I shareholders end commitment controller have our the speaking top-line would come you close, year unwavering whose our profitability to call. look to like to also has CFO and back sincere great on us and served the team growth with and invested his improved Interim last I all who thank as have the like to for who forward stakeholders across and in path role two again Chico's fiscal the to of FAS. We company appreciation to has future

Operator

Ladies gentlemen, thank today's today's attending conference you. Thank concludes for all and call. We presentation. this you

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

Chico's Fas (CHS) 30 Nov 212021 Q3 Earnings call transcript