- Earnings call transcript Q3 2022

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Operator

Good day and welcome to the Chico's FAS Third Quarter 2022 Conference Call and Webcast. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the call over to Corporate Controller, David Oliver. Mr. ahead. go 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

any cause may statements. should in implied or call. discussed release, actual except and unduly this today's are Certain Chico's page. information We this by on law. could call. call, on earnings this reconciliation Investor factors morning You be filings from Relations included on our by non-GAAP measures or to required schedule our comments today's release, revise statements results these may to referenced projected Important as non-GAAP disclaim materially on not is forward-looking A differ earnings included any update events in be in made posted FAS to otherwise the or SEC that presentation rely those our the GAAP obligation

Thank CEO morning, Now, call the over Molly to and everyone. David, President, I'll Molly Langenstein. our Langenstein turn you, good and

continued. solid sales operating EPS posted growth, digital from Our income robust resulting quarter and momentum outstanding year-over-year leverage. and of and digit double We strong and another consecutive sales growth quarter of our seventh expense continued store

portfolio, confident and sales our plan. are The by our in we performance performance toward three-year substantial very of continued the demonstrates billion over remain pillars our in our pleased progress we strong that strategy is Our quarter $X.X are strategic three working execution and after and XXXX. and driving momentum brands delivering quarter our strong of unique power with

by performance on with comparable This line than Let me driven of a and strong of nearly of Consistent XX%, product performance last XX% sales average solid greater over year. We newness, of comparable expense results quarter. third some per growth. digital Customer posted price traffic was highlights. more quarter customer. year-over-year top EPS store and We during was spend in combined and diluted with this bottom increase year's another very cover growth full enhancements $X.XX, sales generated unit retail XX% behavior drove and the sales healthy remained strong quarter. innovation, last and leverage, selling,

a needs product. wear. was in and Black last anywhere comparable customers apparel White responded dressing, Our continues results seasonless up XX% AUR special to overwhelmingly customers and recording brands with posting the both sales from building quarter. Market House to brands outfits responded in to meet deliver XX% fabrics, elevated of innovation Market growth for House our gain Chico's exceptional to Chico's comparable with sales complete work to solution-oriented our White newness, product product versatile fashion and occasion Black and year.

performance second foundations to Soma our with in strength particular Our compared quarter improved business. the

Soma to of comparable XX% the quarter grew third fiscal sales compared XXXX.

power long-term in take NPD, overall market the non-sport share according bras panties indicating strength and Soma to continues and the of to brand.

trend of Strategic high up cutting-edge last younger. customer year-over-year customer third up single to digits, age continue With per brands. marketing customers product over make and new investments our continuing drive total innovation. quarter, in to customers count average to the We spend more continues year's to

sheet on quarter $XXX ending quarter well X%, more expense third margin operating debt. Our year's the in million cash X.X%. above We strengthened than growth our of and leverage after balance with XX% margin last of delivered of million sales repaying operating solid $XX

on guide our to plan. and deliver excellent digital-first to us operationally Our four strategic pillars, strategic customer-led, three-year product-obsessed, continue

on Let update brief give each. me you a

lifetime customers driving customer our to and brands experiences, through in seamless customer engagement customer unique power is extraordinary interact on and The three focused double-digits a forming long-term our quarter. are and creating memorable increasing and both and grew digital of growth Store with led, lasting enabling value. manner. powerful us the for three sales by community connections, creating We relationships, platforms,

to are often community centers our stores so products our searching connection the Stores for and our disconnected in and experts knowledge and Chico's foundation great Digital retail. customers way the loyal and to for experience in is brands possible hub a the a exciting customers stylist of and physical some that and content and dedicated enthusiasm skillfully with brand our Our where first in teach, are social way a community loyalty. has information customers many digital. FAS customers inspire. are of And impression of and world. bra a stylists strong is the the community stores sales share connects most our and uniquely drive most

exceed are Our to rates. that sentiment, continuing loyalty redemption programs in recently expectations were relaunched enrollment, and customer

new through customers We elevated are already adding strong and programs. these customer strengthening our relationships

casual each enhancements and bought are and nearly quality continually are to and best-in-class we House moving solutions. customers At growth. value to both in to sales customers that elevating and and Black beautiful customers instead items, comfort denim, Chico’s, in category, revenue price pants our fabric Chico's, customers, elevated driving and dressier, and on Market, confidence innovative are innovation customers drove head full both inspire care, Customers brands to of the and product joy. completing focused to business look responded and and our pieces basket her product are delivering respond House seasonless merchandise and apparel and style, receptive bottoms House for focused and jackets. increases. in At tailoring At We with obsessed, every our complete tops, and White White easy fashion, and newness she innovation outfits At and which enthusiastically brand, wrinkle-free, driving that Whether something toe dresses on fabric. Market shoes. for to categories. sweaters and and details fit, Market our and single wovens and paying jewelry, demonstrating including the are in or product versatile accessories Black our apparel to premium climate-right fashion jackets, offering Soma and in White sweaters, product forward At woven, higher responded denim appreciate continue brands, tops size. offerings key solutions that dresses, She's Chico’s solutions knits, increased was AUR looking AUR in Black and feminine

solutions beautiful to continues make bras our in business in panties. to continues in and Soma investments foundations growth fuel both that

has growth years of and that of team with to We expert track our a are business. delighted record, apparel XX our to Merchandising will evolving Design I foundations Chris, at a Munnelly proven this plus experience who drive welcome SVP in to Soma. as and team Soma am Chris work design confident

We engage to leveraging to are and deliver our digital-first, channels brands. customers technology across and

X%. White last the we digits high total by customer Over was by months. XX Black count Chico’s XX also XX%. Soma grew our grew rose over up Spend Market XX% and House single the months, trailing added X%.

wardrobe Black We to especially four Each And three younger we White to brands. XX and years our digital in attract store. new are and at find customers driving of are Chico's, trending continuing to online the touchpoint House Soma. and at frequency for brands across than customer at by they inspires and Market, years build years solutions existing are visits

StyleConnect further value fueling third grew Combined are represents it engagement over digital tools growing. fueling quarter, tools, to Our FAS continue who both year's in is overall spending significantly drive now sales tools the customer average StyleConnect These styling last more and multichannel total valuable grow stores. My and and is order is so channel tools customized to XX% Closet than and Xx Digital higher of nurture so single us, channels. growth. growth in digital the customers most sales. powerful driving

mobile value and site and expectations apps are Our month and the than over average month with driving average. growing our conversion order higher exceeding engagement downloads

being apps are become the designed key Our loyalty hub our of new program. to

are the add-on are convenience. are a operationally store customers store in increased add stylists in to Buy has responding suggest. we expert as pick revenues excellent. our only double app We And digits growing to items excited really our online StyleConnect that January. but remained year-over-year, coordinating feature not Revenues customer last, are to

on cost estate, generating supply bottom cash delivering expenses healthy flow a real and sales, continually of and We strong focused chain, inventory, are our managing line. diligently

Higher During year. costs the freight, occupancy than unit quarter, we retail. partially had by offset lower raw solid gross last material margin while performance higher and slightly average were leverage

the Our year-to-date year. gross margin points XXX ahead basis was of prior

operational and to processes our We efficiencies lower drive on help constantly focusing logistics sourcing, are and improving costs.

product have inventory in and managed carefully flow be timely to will our We manner. to customers calendar our a assure available

overall third air freight quarter our have of mix We freight for third quarter, by year's prudently reducing from ocean XX%. controlled costs nearly XX% last down the with versus costs also air

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

PJ Guido

good you, Molly, Thank morning, and everyone.

growth. consecutive line cost well where growth results were earnings and our of flexible than year-over-year and strong of structure. Bottom product a The resulting third an execution channels. EPS across as double XX% great leverage increase quarter by performance marked line our last digit expense delivered top $X.XX, and over posted more We of seventh driven quarter diluted year as profitability another from more

by of $XXX year, and both nearly greater driven increased last basis, store comparable Third more sales online. on million traffic quarter than of depth over total XX% sales by a XX% and breadth and in complemented strong product

level, brand quarter once generating was comparable leading House apparel and the Market comparable sales with Black again the the gain. White sales for posting Looking Chico’s XX% increase at XX% a performer a

the cozy are categories. to primarily of XX% a decline posted sales affected third of compared Soma quarter the of comparable and continued X%, quarter XXXX. But lounge by up the nearly Soma slowdown comparable third sales

core year-over-year and Continued panty AUR higher management inventory and foundation, resulted within innovation bra growth in the categories. and active

Third expenses in was full expense to compared inventory XXX normalized and million steady in driven basis this above quality, XX.X% of basis The management of for ongoing face the or by and full quarter is price XX.X% higher margin sales last of year. was quarter third XX.X% year's fiscal pressure. third gross sales selling. compared sits totaled XX% reflects XX% of margin SG&A This margin product, and on quarter. quarter year's points last higher a $XXX margin quarter leverage the Gross inflationary points selling. of XXX our to XXXX, focus and flow indicative price gross healthy the

SG&A, across marketing to second expense, leveraged bucket all help our generate continue marketing active quarter, customer During three drive traffic within largest our and we expense and the brands. efforts growth

an quarter, last $XX posted income, operating of the million over XX% we nearly For of increase year.

Our and Xx EBITDA than well $XX over for earnings last clear and margin produced more $XXX leverage evidence for expense XXXX. the close and of on X%, the place X.X%, above focus of well higher of year's of above flow. what million months, sales, of generated to we an was sales in operating margin nearly we year, year nine quarter last million the full first the all and cash

Now overall let's and financial balance turn our to strength. sheet

providing repaying of total increase align with our million, our cash management total total assortments we debt, million primarily growth. At to business demand year growth. investments liquidity sales $XX liquidity remain planned consumer ended Our and us $XXX flow The seasonal quarter, and to third support year-over-year to capacity to credit and inventory nearly cash one position, very of $XXX with of compared strategic $XXX on inventories X% the ago. inclusive manage to operating million the facility. the the $XXX the further our were with million propel strong, of make reflects million end flexibility After cash of quarter

end move lower we sales. expectations, we fourth to the have quarter with our maintain sales are last we the XXXX healthy fourth quarter, year. and on customer levels appropriate fiscal As price ability we Based facing than to inventory our inventory full expect believe into

Now, fourth quarter the let growth remain on me top-line full-year. quarter the We give for our believe on outlook track some and and full-year. for color solid we fourth for

up We are our that show existing customers new delivering conversion we the and in and cautious though, Both quality macroeconomic because and healthy consumer customers are the as younger very are by continually Therefore, dollar have are attracting new for even the are to brand. sale. fourth and style, channels and adjusted uniqueness, on based customers we seeing us our for quarter, innovations, we expect, to we plan traffic, continuing average environment. our both behavior measured not

down we will currently gross occupancy selling, and through chain to supply forecasting reach management, price target we XX% the product mix, margin annual are healthy believe and that of cost well leverage, are path sustain We by XXXX. full margins our

is manage has finish and resulted Continued to will and accruing full economic environment, air, our year. our continue sales. growth. Because flex demand expense to well bucket to another date, expense, to support and we we structure feel conditions drive great fulfill to continue supporting biggest AURs. price support ability expenses price freight the and selling actively are and in we mix higher year-over-year store strategic start a Managing impact gross in have our ocean investments actively cost with the strong are programs which our favorable our To higher to to adjustments inventory managing labor, margin, marketing prepared should customer higher sales our

We are all investments prudent capital to that three traffic and continuing across channels. fuel make will conversion

of new Chico’s for digital are $XX $XX and and platforms marketing between total stores XXXX million our invest fiscal well to Our out planned Soma our million expected to capital build stores. to upgrades as as fleet in expenditures existing to

personalized commerce platform, opened XX will during plan open of the the for person in stores XX and standalone quarter the offer seamless, and Soma the more we digital quarter, connected fourth a are which On side, XX. year customers experiences. our out the We to in integration bringing building to digital total

the XX. original balance results material although not heavily for we Ian store have stores stores base, are expected XX impact up our quarter, a on end. to due remain And productivity financial Also, most of to improving now expect our down addition, XX target four renovated and by and to have of year from In damaged we for the of profitability productive closed did to were boutiques Chico’s our continued will the close of this year, the year. our Hurricane

EBITDA Let highlight flow financial and our also to cash we from me expect strengthen to continues our here. grow, base that and position

flow base to in cash EBITDA some Growing are navigate allowing we year for In growth expense retailers. is seeing has allow addition cash strong years. environment strategic to allowing us and flow uncertain us three us And that investment invest our presented our to an will fund on most pressure investments, we plan. challenges ongoing leverage in to higher coming SG&A, support expect although to the and

quarter, be SG&A to total sales approximately range; rate of XX%; XX.X% as as fourth EPS XX.X% XX.X% gross the range; to rate for sales million; sales an $XXX effective diluted a of in that, we of XX.X% $X.XX a be with to $XXX the to and of percent So expect to million of in margin the to $X.XX. tax percent

$X.XXX keeping of to our well to existing to three and and EPS term. our strategic and to billion; progress. $X.XX. in we a year are XX.X% a you value, percent we look billion diluted $X.XXX in of shareholder as effective closing, gross percent ability momentum to of year, on rate sales margin expect long and our forward fuel In our XX.X$ the full an the positioned For in be rate to total sales XX.X$ XX%; create be of of remain to XX.X% to the approximately the confident range; both as plan over now to range; sales tax We SG&A posted $X.XX

to back Operator? the the turn I'll operator. call over Now

Operator

our [Operator Telsey first from And go Dana Group. with come today you. Thank will question ahead. Instructions] Please Telsey

Dana Telsey

on Hi. progress. Good nice the congratulations morning, everyone, and

as and the at to merchant Soma forward? talent progress XXXX? Thank easing. benefit you at And trends, the just are view then In lastly, supply seeing November the see going tailwind through terms of the plans and that October, your what's you'd to into new what we've frame and fourth And going date frame into fourth you. hearing the would quarter? way to your been current How of or we Soma, as we promotional you're the want move quarter current any chain that what environment should we're what about with

Molly Langenstein

you, Dana. Thank

business remain and customer also healthy, AUR and strong increased by our results evidenced and QX from higher driven and our current traffic, by our our customer Our frequency digital spend overall our store our customers. and ADS,

ahead. the are forward changes fourth any to in quarter we So not our look consumer and seeing

Monday to to have Black time built relates it fuel and into plan to has calendar As for however, we in been that to certainly We and growth the strategically be key that promotional Cyber built less competitive built promotional, events. QX product do plans, Friday our be that promotional we period.

and the our I that to in the to talent, market general taking and success just forward. new our really merchant excited it share to As continue propel brand in business, the opportunity about strong to to we're pun am a have and growing relates panty The the and opportunity continuing for foundation leverage is really just the are your supply on do supply greater. business normalized; bra intended no that in see transit even expertise is to ports narrowing. as easing terms the chain, of question and growing windows in ocean, business the that Chris that then chain sleepwear terms of in times definitely that regards brings and those more And apparel our last in we our have

little our but fluid. able take closely, been it is calendar, very we've decisions customers, because to we're to watching it So the reduce bit still be able make extended closer to to a situation

Operator

next And our question come Shapiro with from Retail Marni Tracker. will

Marni Shapiro

Congratulations. absolutely look stunning. guys. absolutely stores stunning, The Hey,

improvement So at I are had a sets is they're timely, there? going supposed typically way you about something that up floor are would Is there still that. the point you've you say to bit they're to, follow way chase? I the ability are do? supposed you delivery And remember, do -- your the to room flowing to, wanted Could or can't for have goods on deliveries little this issues, you talk

Molly Langenstein

Thank goods we put you, in benefit demand. early, ahead had had we Yes. discussed being our where call inventory as QX the Marni. Actually, of we've of

by October that where early. in we we received pulling that So that is the us were demand up had -- deliveries helped actually really fueling

put were able front all put earlier, manage in little a of inventory three being bit and able in we've we the -- flow to to we to consumer able been actually were holiday of the So brands.

us that's last weeks XX moved been that year. calendar the So serving we actually

And balance that's continue of this see opportunity that's so why as to for the an year. we into we receiving now right us early and that goods believe we we're that go

I As ability that chase, and fabric And production platforming things we've we color we made. and shore like not half that more in near tighten in also be to some chase most be can time. it's terms dyeing the able would still able in us do But get hemisphere industry to be this as basic some chase most to have at to bodies so to to the moved of do this time. think of

Marni Shapiro

That's I fair. can for up one just follow And Soma on then second.

to like for You guys and while like things to still kinds are your the sleepwear opportunity stores feels White there? into it's Soma, if awareness? -- outside know and her still even we all your awareness send away sales your to has leading are those you the service, -- far Soma customers banner Are as that. associates it very just is brand StyleConnect. from the tools customer I'm also familiar really also the from looking, led using to foundations your brand Are picture, bigger have but there and is Chico’s the Because raise with her is and just get brand trend thinking low, sell good. you moved using as business House digitally prop of

Molly Langenstein

organization And that that FAS year really that that with and will has we of White in a What's change House we out, re-platform. And to that have simple checkout. have promote is the is have brand tight the that to team in the the you this be an us that Chico’s are able cart us next as to come both the promotes three areas the in will so they management as the and in that re-platform did we A so all well we one place allow year you universal actually other's come team. earlier will apparel Soma allowed is later work when management year -- that put very Soma. to stores answer. geographical brands of combined Yes each check as

the on Black So there's Chico’s a White able leverage to and to Soma, in be more horizon lot being good things basket. every Market House

Marni Shapiro

are for holiday. but congratulations, stunning. luck the take of Best rest I offline, stores absolutely will the

Operator

the question-and-answer you. our any for thank over This session. like Langenstein And closing concludes to back I'd Molly conference remarks. turn

Molly Langenstein

Thank you.

that Our validate results pillars our momentum and our fueling are strategy.

brands growth. product-obsessed, path a unique clear operationally company profitable customer-led, digital-first, excellent three a for We of with portfolio are on continued

track are We on plan generating meaningful shareholder and achieving to value. year three our

to Before about say headquarters Hurricane I close, the words of and Ian our our Fort a let me on community. take and Myers associates impact minute few a

foremost, serve thankfully along and reconstruction fund and host by partners, for our and and safety a created and to wellbeing over & Light are our the distribution an for business became the of who We of after and volunteers work the our campus First financial Board of the men members, our hub the the burden and all incurred XX assistance of by many generosity company, was our associates. storm, employee losses concern our women, our tirelessly supported associates that Power associates, eased for safe. hours of community. associates, Red corporate Florida Cross X,XXX with

our we remain damaged stores Lastly, four store. including original Chico's Sanibel closed, have that

rebuild. will We

look in amazing difficult Ian. of you Thanksgiving your This to action during We season, and to call wonderful times. Have third year conference are of thriving our Hurricane making and COVID true holiday Thank again resilient speaking because for quarter during the and and our February. surviving post with associates difference. company, is forward and interest a We collaboration for their time. you a emerging you teams tenacity, a end during in stronger sense thank our and and

Operator

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

time. now may lines disconnect this your You at

David Oliver	Senior Vice President, Finance, Controller & Chief Accounting Officer
Molly Langenstein	Chief Executive Officer & President
PJ Guido	Chief Financial Officer
Dana Telsey	Telsey Group
Marni Shapiro	Retail Tracker

Chico's Fas (CHS) 22 Nov 222022 Q3 Earnings call transcript