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Chico's finances strong, despite slowing apparel sales

At a time when many women's apparel retailers are suffering, Chico's FAS Inc. today released a set of rosy financials.

The Fort Myers, Fla.-based retailer reported a 26.8% increase in overall January sales, and a 45.7% rise in total annual sales.

CFO Charlie Kleman says the company has worked hard to carve out a niche for itself among baby boomers. The retailer sells private-label casual clothing for women ages 35 to 55.

"It's all about product, of course," Klemon says. "But the baby boomer market is a very under-served market from the specialty apparel side. We're one of the few retailers in that arena. Everybody seems to want to focus on Gen X and Gen Y."

In the financials released today, Chico's reported:

Overall January sales rose to $28.9 million from $22.8 million in 2001;

Total annual sales rose to $378.1 million from $259.4 million in 2001;

January comparable store sales for the chain's 300 company-owned locations rose 22.4%;

Total quarterly sales rose to $101.4 million from $73.1 million in 2001;

Quarterly comparable store sales for company-owned stores increased 17.9%;

Geographically, Chico's did best in Los Angeles, Chicago, Cleveland, Texas and most of the Mid-Atlantic and New England, Kleman said.

In a statement, Marvin Gralnick, chairman and CEO, noted that the 17.9% same-store sales increase for the fourth quarter followed same-store increases of 32%, 27%, 39% and 20% for the past four years, respectively.

Small beginnings

Chico's began as a small store on Sanibel Island, Fla., in 1983. The median household income of a Chico's shopper is roughly $70,000.

Chico's locates most of its properties along street-fronts, in strip centers and in outdoor specialty centers. It does locate some stores in Class-A regional malls — it's top-performing location is at Simon's Phipps Plaza in Atlanta, for example.

The retailer recently completed a major roll out and now operates a chain of 311 stores, 11 of which are franchised. James West, VP of real estate, recently told SCW that Chico's plans to eventually be a 500- to 700-store chain.

Chico's plans to fuel that growth with a national media campaign this year. The company began buying regional TV ads for the first time in 2001. It has advertised in national magazines for two years.

"We still are building our brand name," Klemon said. "We've come a long ways but we still are a little tiny company compared to the rest of the retailers. We just closed our year at $378 million. Compare that to the Gap, the Limited, Talbot's. They're all in the billions."

Klemon said Chico's plans to spend about 3.5% of its total sales on its national marketing campaign. "There will be more spots," he said. "We've got more money to spend. It's a lot bigger number than it was last year or the year before.

"We think we can double the size of this chain," Klemon said. "There's a lot of strips and streetfronts that we have yet to uncover."

At a time when long-established retail chains are declaring bankruptcy and closing stores, such words almost sound strange to hear coming from a retail executive.

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