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Summary The stock has been pressured due to a weak fourth quarter, but the issues of weak traffic terjemah and a highly promotional environment terjemah will reverse this year. The retailer is revamping its product assortment to better resonate with shoppers, while also making tech a bigger part of its stores to support its omni-channel strategy. The continued push into international markets and a greater contribution from its lesser-known brands will drive the stock to $23 over the next couple terjemah years.
Chico's FAS ( CHS ) is already down nearly 12% year-to-date, compared to an S&P 500 that's essentially flat, after a fiscal 4Q earnings announcement, marking four straight quarters of earnings misses. Granted, the weather played its part in the weak quarter, terjemah but after digging terjemah deeper, it's easy to see that there's more to the story, including some merchandise missteps. I believe the company can easily correct this, and the recent terjemah pullback will prove to be an attractive buying opportunity.
2013 appears to have been a transition year. EPS came in at $0.85 for fiscal 4Q 2014, compared to $1.09 in the same quarter last year. Comp store sales were down 1.8% for the quarter, compared to the 7.2% last year. Part of the problem was weaker-than-expected store traffic. Never fear, I see the traffic decline as more of a cyclical issue, one that the entire industry fell victim to.
Shoppers, especially teens, can be fickle and somewhat irrational. Just ask Aeropostale, terjemah American Eagle or Abercrombie & Fitch. Trends change direction quickly and without warning. I believe Chico's has a good beat on the women's apparel market, and it also caters to a more mature audience than the teen retailers.
Chico's has noted that 2013 was the most heavily promotional year since 2008. Retailers went crazy pre-Thanksgiving, opening stores on Thanksgiving Day, and many stores were offering 50% to 75% off. The company did have to up its promotion to some degree, compared to previous quarters, in order to drive sales. This put significant pressure on margins. As a result, gross margin was down to 50.7% for the quarter, down a full 250 basis points on a year-over-year basis.
With the severe weather terjemah starting to subside, Chico's company-wide comps have turned positive since Valentine's Day. I think fiscal 1Q 2015 could shape up to beat earnings if the warm spring weather arrives on time. 12 of the 19 analysts following the stock have already revised earnings expectations downwards over the last thirty days for the April-ending quarter.
Some of the biggest headwinds include the fact that White House | Black Market might have shifted too far from its core specialty fashion-focused products. It added "color" to its product line a few years ago, but ultimately failed to continue innovating with color. It didn't have enough color this holiday season, nor enough pattern. Then, on the other side, Chico's had too much career-focused clothes, and not enough color and print.
Thus, the cyclical pressure on margins should reverse terjemah over the next couple of years as the company gets a handle terjemah on product offerings. Meanwhile, days of inventory are at near decade-highs. Inventory turnover is at 4.7x for the trailing terjemah twelve months, which is well below the 5.9x historical average that Chico's is used to. However, the overall rise in inventory comes as Chico's continues to open stores.
To help navigate the promotional environment, I'd look for Chico's terjemah to rely more on its loyalty program. Despite already having over 90% of its transactions terjemah tied to loyalty members, it's revamping its loyalty program for 2014. Part of this leads back to better marketing, where its loyalty programs are fundamentally sound, but most shoppers are unaware terjemah of them. 2015 should bring a rewards program for its Boston Proper chain.
"Omni-channel" has been thrown around a lot when it comes to apparel retail. Chico's is no different, now turning its focus to omni-channel terjemah development for 2014. We'll continue to see a heavy focus on brick-and-mortar retail, where spending by in-store only customers is 2.5x internet-only customers. But what's even more important is the focus on a retail-online model, the omni-channel. That's because the multi-channel terjemah customers spend 7x the internet-only customer. The key for keeping brick-and-mortar retail relevant, where shoppers still want to touch and feel the merchandise, is to keep the stores small and efficient.
Beyond that, the second half of 2014 will also bring about a new POS system, which will enable mobile checkout. This includes launching smartphone terjemah apps. It is also fusing its CRM information into a cloud-based data stream that will be accessible with secure iPad tablets in stores. It's already being tested in Chico's stores.
This month, terjemah Chico's Soma brand is launching a new bra. This is a bra the company believes contains some "breakthrough" technology. terjemah The launch will s
Summary The stock has been pressured due to a weak fourth quarter, but the issues of weak traffic terjemah and a highly promotional environment terjemah will reverse this year. The retailer is revamping its product assortment to better resonate with shoppers, while also making tech a bigger part of its stores to support its omni-channel strategy. The continued push into international markets and a greater contribution from its lesser-known brands will drive the stock to $23 over the next couple terjemah years.
Chico's FAS ( CHS ) is already down nearly 12% year-to-date, compared to an S&P 500 that's essentially flat, after a fiscal 4Q earnings announcement, marking four straight quarters of earnings misses. Granted, the weather played its part in the weak quarter, terjemah but after digging terjemah deeper, it's easy to see that there's more to the story, including some merchandise missteps. I believe the company can easily correct this, and the recent terjemah pullback will prove to be an attractive buying opportunity.
2013 appears to have been a transition year. EPS came in at $0.85 for fiscal 4Q 2014, compared to $1.09 in the same quarter last year. Comp store sales were down 1.8% for the quarter, compared to the 7.2% last year. Part of the problem was weaker-than-expected store traffic. Never fear, I see the traffic decline as more of a cyclical issue, one that the entire industry fell victim to.
Shoppers, especially teens, can be fickle and somewhat irrational. Just ask Aeropostale, terjemah American Eagle or Abercrombie & Fitch. Trends change direction quickly and without warning. I believe Chico's has a good beat on the women's apparel market, and it also caters to a more mature audience than the teen retailers.
Chico's has noted that 2013 was the most heavily promotional year since 2008. Retailers went crazy pre-Thanksgiving, opening stores on Thanksgiving Day, and many stores were offering 50% to 75% off. The company did have to up its promotion to some degree, compared to previous quarters, in order to drive sales. This put significant pressure on margins. As a result, gross margin was down to 50.7% for the quarter, down a full 250 basis points on a year-over-year basis.
With the severe weather terjemah starting to subside, Chico's company-wide comps have turned positive since Valentine's Day. I think fiscal 1Q 2015 could shape up to beat earnings if the warm spring weather arrives on time. 12 of the 19 analysts following the stock have already revised earnings expectations downwards over the last thirty days for the April-ending quarter.
Some of the biggest headwinds include the fact that White House | Black Market might have shifted too far from its core specialty fashion-focused products. It added "color" to its product line a few years ago, but ultimately failed to continue innovating with color. It didn't have enough color this holiday season, nor enough pattern. Then, on the other side, Chico's had too much career-focused clothes, and not enough color and print.
Thus, the cyclical pressure on margins should reverse terjemah over the next couple of years as the company gets a handle terjemah on product offerings. Meanwhile, days of inventory are at near decade-highs. Inventory turnover is at 4.7x for the trailing terjemah twelve months, which is well below the 5.9x historical average that Chico's is used to. However, the overall rise in inventory comes as Chico's continues to open stores.
To help navigate the promotional environment, I'd look for Chico's terjemah to rely more on its loyalty program. Despite already having over 90% of its transactions terjemah tied to loyalty members, it's revamping its loyalty program for 2014. Part of this leads back to better marketing, where its loyalty programs are fundamentally sound, but most shoppers are unaware terjemah of them. 2015 should bring a rewards program for its Boston Proper chain.
"Omni-channel" has been thrown around a lot when it comes to apparel retail. Chico's is no different, now turning its focus to omni-channel terjemah development for 2014. We'll continue to see a heavy focus on brick-and-mortar retail, where spending by in-store only customers is 2.5x internet-only customers. But what's even more important is the focus on a retail-online model, the omni-channel. That's because the multi-channel terjemah customers spend 7x the internet-only customer. The key for keeping brick-and-mortar retail relevant, where shoppers still want to touch and feel the merchandise, is to keep the stores small and efficient.
Beyond that, the second half of 2014 will also bring about a new POS system, which will enable mobile checkout. This includes launching smartphone terjemah apps. It is also fusing its CRM information into a cloud-based data stream that will be accessible with secure iPad tablets in stores. It's already being tested in Chico's stores.
This month, terjemah Chico's Soma brand is launching a new bra. This is a bra the company believes contains some "breakthrough" technology. terjemah The launch will s
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