Store expansion up, profits down at Chico’s

Women’s apparel retailer Chico’s FAS increased its store count by 99 units in the first quarter even as traffic declined and profits tumbled.

Total sales for the company’s first quarter ended May 3 increased 1.6% to a record $681.6 million. The modest gain was driven entirely by a net increase of 99 stores as same store sales declined 2.6% on top of a flat performance the prior year. Most of the comp decline was driven by weakness as Chico’s White House Black Market stores which slid 8.6% while comps at the Chico’s/Soma Intimate brands held up better  and increased 0.4%.

Overall, the sales difficulties were said to reflect lower average transaction sizes that were the result of a highly promotional environment in response to lower traffic due in part to inclement weather.

The increased promotional activity took a toll of gross margins which contracted by 150 basis points to 56.2% of sales. Net income fell to $39.9 million, or 26 cents a share, during the quarter compared to $51.7 million, or 32 cents a share, the prior year.

Chico’s ended the quarter with a total of 1,496 stores in the U.S. and Canada.

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