Chico’s reports best Q2 earnings in years as Soma sales surge

Marianne Wilson
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Chico’s FAS returned to profitability during a better-than-expected second quarter that was dominated by another strong performance from its lingerie and intimates brand, Soma.

“Our second quarter earnings performance was the best second quarter Chico's FAS has posted since 2013, and these results show the incredible progress we continue to make in our turnaround strategy, despite pandemic challenges,” said president and CEO, Molly Langenstein. “Soma, which posted a 53% sales increase over last year's second quarter, is well positioned to become one of the largest intimate apparel brands in the U.S.”

The women’s apparel retailer’s net income totaled $26.2 million, or $0.21 per share, for the quarter ended July 31, compared to a loss of $46.8 million, or $0.40 per share, in the year-ago period. Analysts had expected a loss of $0.07 per share. Chico’s had reported a loss of $0.2 per share for the second quarter of 2019.

“Our return to profitability in the quarter was driven by our strategic actions that grew sales, expanded gross margin, and diligently controlled our expenses," said Langenstein. "Our robust second quarter sales across all three brands were propelled by our meaningful enhancements in product and marketing, which continued to drive full-price selling, reduce markdowns and produce higher gross margin.”

Total sales rose 54% to $472.1 million, up from $306.2 million last year. Analysts had estimates sales of $407.4 million. 

Total company comparable sales for the second quarter compared to the second quarter of fiscal 2019 declined 1.6%. By brand, comp-sales jumped 38.1% at Soma and fell 14.3% at Chico's and 5.4% at White House Black Market. 

The company noted that 47 Soma shop-in-shops are now opened inside Chico's stores and are exceeding expectations, “driving new customers to both brands and further expanding the company's digital business.

Citing “the uncertainty caused by the pandemic,” Chico’s said it is not providing specific fiscal 2021 third quarter and full year guidance at this time. In addition, the company said it is facing “macro supply chain headwinds” in the back half of the fiscal year that it expects will impact sales and gross margin, including higher freight costs, extended inbound transit times and product supplier handover delays driven by the pandemic.

Chico’s did provide high-level outlook expectations for the third quarter and full fiscal year 2021. For the third quarter, it expects year-over-year net sales improvement between 18% to 22%. For the full year, it expects consolidated year-over-year net sales improvement between 32% to 35%.

“We believe there are ample opportunities to further grow our customer bases, market share and sales in each of these amazing brands. We look forward to reporting our progress in the quarters ahead,” Langenstein said.

As of July 31, 2021, Chico’s operated 1,284 stores in the United States and sold merchandise through 66 international franchise locations in Mexico and two domestic franchise airport locations.