- Prachi Singh |
Chico's FAS, Inc. has announced strategic initiatives to build on the company's omni-channel platform, which include rebalancing the mix between its physical store presence with its digital network and to close at least 250 stores in the US over a three-year period. The company has also updated its outlook for the fourth quarter and now anticipates a low double-digit decline in net sales compared to its previous expectation for a mid-teen decline and a mid-single digit decline in consolidated comparable sales, versus its previous outlook for a high single-digit decline in consolidated comparable sales.
Commenting on the growth strategy, Shelley Broader, the company's CEO and President, said in a statement: "Our focus is on implementing those initiatives that drive the greatest levels of growth and profitability of our business. This includes continued improvement in each of our differentiated brands, increased flexibility and efficiency across our organization, and fully leveraging the capabilities of our robust omni-channel platform to meet the ever-evolving needs of our customers and to enhance shareholder value."
Chico’s to close 250 stores to drive growth
The company said that store closures will allow Chico’s to take advantage of its lease expiration cadence, while improving profitability and return on invested capital. Closings will be across the three brands and weighted to years two and three.
Building upon management's strategic decision to right-size its fleet, the company has commenced a comprehensive review of its operations to ensure that the business is structured for innovation, agility and speed. The company added that this comprehensive review will further include an assessment of SG&A expenses and business processes across the entire organization.
Chico’s updates Q4 outlook
Updating its outlook for the fourth quarter ending February 2, 2019, the company added that based on results to date, total fourth quarter net sales and comparable sales are trending better than its previous outlook. Specifically, by brand, fourth quarter comparable sales for Chico's are trending in line with expectations. In addition, Chico’s added that White House Black Market comparable sales are trending better than expectations, and Soma is strong with sales trending well above expectations.
The company expects fourth quarter gross margin rate to decline approximately 500 basis points compared to fiscal 2017, primarily driven by the initial ramp-up in costs from the company's omni-channel programs, more aggressive promotional cadence to clear through seasonal merchandise and deleverage of fixed costs from lower sales. This compares to its previous expectation for a 400 to 500 basis point decline in the company's gross margin rate.