Chico’s FAS Sees Hope For Direct Channel In Weak Quarter
Chico’s FAS Inc. generated $394.2 million in third quarter net sales, a drop from the $415.9 million it realized a year ago. The company’s net income plummeted from $23.6 million to $2 million, primarily due to increases in the cost of goods sold and retail store operating expenses. The quarter ended Nov. 1.
Net sales for the direct to consumer channel increased by 2.2% from $18 million in last year’s third quarter to $18.4 million in third quarter 2008. This rise is attributable to higher sales for the Soma and WH|BM brands offset by decreased sales for the Chico’s brand.
In a statement accompanying its financial results, Chico’s indicated it held high hopes for this channel due to a number of factors, including continuing customer acceptance of the offerings within its Soma and WH|BM brands; increased traffic in the direct to consumer channel; and a series of planned improvements to its Web site and call center infrastructure.
“The Soma e-commerce site, soma.com, continued to realize strong double-digit sales increases versus last year driven by significant increases in both site traffic and conversion,” said Chico’s president and CEO Scott Edmonds, according to a transcript of an earnings call.
In the same call, Kent Kleeberger, Chico’s EVP and CFO noted “the current year reflects the benefit of the cost reduction measures primarily as a result of improved efficiency in our direct mail efforts including reductions in circulation due to lower levels of prospecting and reactivation efforts.”
Kleeberger also noted that the direct to consumer segment produces “superior operating margins” for all of the company’s brands.
