<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
For the Quarter Ended: Commission File Number:
November 1, 1997 0-21258
CHICO'S FAS, INC.
(Exact name of registrant as specified in charter)
Florida 59-2389435
(State of Incorporation) (I.R.S. Employer Identification No.)
11215 Metro Parkway, Fort Myers, Florida 33912
(Address of principal executive offices)
941-277-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
At December 12, 1997, there were 8,011,117 shares outstanding of Common Stock,
$.01 par value per share.
<PAGE> 2
CHICO'S FAS, INC.
Index
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - November 1, 1997 and February 1, 1997 . . . . . . . . . . . . . . . . . 3
Condensed Statements of Income for the Thirteen and Thirty-Nine Week Periods Ended
November 1, 1997 and October 27, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Cash Flows for the Thirty-Nine Weeks Ended
November 1, 1997 and October 27, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
CHICO'S FAS, INC.
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
As of As of
11/1/97 2/1/97
----------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,390,143 $ 832,176
Receivables, net 872,864 763,451
Inventories 8,560,681 7,845,362
Prepaid expenses 507,252 473,444
Deferred taxes 1,229,000 1,290,000
--------------- ---------------
Total Current Assets 15,559,940 11,204,433
--------------- --------------
LAND, BUILDING AND EQUIPMENT:
Cost 23,444,068 22,330,612
Less accumulated depreciation and amortization (6,227,477) (5,093,660)
--------------- --------------
Land, Building and Equipment, Net 17,216,591 17,236,952
--------------- --------------
OTHER ASSETS:
Certificate of deposit 1,000,000 1,600,000
Deferred taxes 564,000 552,000
Other assets 627,116 654,673
--------------- --------------
Total Other Assets 2,191,116 2,806,673
--------------- --------------
$ 34,967,647 $ 31,248,058
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,846,019 $ 3,301,990
Accrued liabilities 3,133,351 2,461,026
Current portion of noncurrent liabilities 308,777 456,602
--------------- --------------
Total Current Liabilities 7,288,147 6,219,618
--------------- --------------
NONCURRENT LIABILITIES:
Notes and capital leases payable 5,493,052 5,604,677
Credit line payable - 284,919
Deferred rent 1,189,700 1,118,246
--------------- --------------
Total Noncurrent Liabilities 6,682,752 7,007,842
--------------- --------------
STOCKHOLDERS' EQUITY:
Common stock 79,018 78,841
Additional paid-in capital 7,606,138 7,555,708
Retained earnings 13,311,592 10,386,049
--------------- --------------
Total Stockholders' Equity 20,996,748 18,020,598
--------------- --------------
$ 34,967,647 $ 31,248,058
=============== ==============
</TABLE>
Page 3
See Accompanying Notes
<PAGE> 4
CHICO'S FAS, INC.
Condensed Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended Thirteen Weeks Ended
11/1/97 10/27/96 11/1/97 10/27/96
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Sales by Company Stores $ 56,304,505 $ 47,703,631 $ 18,332,112 $ 15,102,836
Net Sales to Franchisees 1,419,240 1,399,472 591,262 624,426
----------------- ----------------- ----------------- -----------------
NET SALES 57,723,745 49,103,103 18,923,374 15,727,262
Cost of Goods Sold 25,318,077 19,791,672 8,039,187 6,358,899
----------------- ----------------- ----------------- -----------------
Gross Profit 32,405,668 29,311,431 10,884,187 9,368,363
General, Administrative and Store
Operating Expenses 27,255,961 24,559,809 9,220,152 8,177,078
----------------- ----------------- ----------------- -----------------
Income from Operations 5,149,707 4,751,622 1,664,035 1,191,285
Interest Expense, Net 273,163 290,292 70,503 98,321
----------------- ----------------- ----------------- -----------------
Income Before Taxes 4,876,544 4,461,330 1,593,532 1,092,964
Provision for Income Taxes 1,951,000 1,784,000 638,000 437,000
----------------- ----------------- ----------------- -----------------
NET INCOME $ 2,925,544 $ 2,677,330 $ 955,532 $ 655,964
================= ================= ================= =================
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.36 $ 0.33 $ 0.12 $ 0.08
================= ================= ================= =================
Weighted average common and
common equivalent shares
outstanding 8,137,236 8,088,416 8,216,096 8,119,022
================= ================= ================= =================
</TABLE>
Page 4
See Accompanying Notes
<PAGE> 5
CHICO'S FAS, INC.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
11/1/97 10/27/96
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,925,544 $ 2,677,330
----------------- ---------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,598,110 1,378,596
Deferred taxes 49,000 (95,000)
Loss on disposal of property and equipment 239,899 198,368
Increase (decrease) in deferred rent 71,454 (8,394)
Change in assets and liabilities:
(Increase) decrease in receivables, net (109,413) 277,786
Increase in inventories (715,319) (2,590,257)
Decrease in prepaids and other assets 545,496 37,591
Increase in accounts payable 544,029 230,851
Increase in accrued liabilities 672,325 621,571
----------------- ---------------
Total adjustments 2,895,581 51,112
----------------- ---------------
Net cash provided by operating activities 5,821,125 2,728,442
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 34,500 -
Purchase of land, buildings and equipment (1,703,896) (2,170,089)
----------------- ---------------
Net cash used in investing activities (1,669,396) (2,170,089)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 50,607 459,164
Credit line payments (284,919) (255,816)
Principal payments on debt (259,450) (358,259)
Deferred finance costs (100,000) (152,536)
----------------- ---------------
Net cash used in financing activities (593,762) (307,447)
----------------- ---------------
Net increase in cash and cash equivalents 3,557,967 250,906
CASH AND CASH EQUIVALENTS - Beginning of Period 832,176 544,366
----------------- ---------------
CASH AND CASH EQUIVALENTS - End of Period $ 4,390,143 $ 795,272
================= ===============
</TABLE>
Page 5
See Accompanying Notes
<PAGE> 6
CHICO'S FAS, INC.
Notes to Condensed Financial Statements
November 1, 1997
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying unaudited condensed financial statements of Chico's
FAS, Inc. (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information
and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the financial statements and notes thereto for
the year ended February 1, 1997, included in the Company's Annual
Report on Form 10-K filed on April 30, 1997. The February 1, 1997
balance sheet amounts included in this report were derived from
audited financial statements included in the Company's Annual Report.
Operating results for the thirty-nine weeks ended November 1, 1997 are
not necessarily indicative of the results that may be expected for the
entire fiscal year.
Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the periods, adjusted to include
the number of additional shares (314,789 and 232,534 for the
thirty-nine weeks ended November 1, 1997 and October 27, 1996,
respectively and 243,887 and 237,233 for the thirteen weeks ended
November 1, 1997 and October 27, 1996, respectively) that would have
been outstanding if the stock options granted had been exercised, with
the proceeds being used to buy shares from the market (i.e., the
treasury stock method). Net income per common and common equivalent
share represents both primary and fully diluted per share information.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" which establishes standards for
computing and presenting earnings per share. The statement replaces
the presentation of primary earnings per share on the income statement
and provides for certain disclosures. The Company will adopt Statement
No. 128 in the fourth quarter of fiscal 1998 and does not believe the
effect of adoption will be material.
2. RENEWED CREDIT FACILITIES
In December 1997 the Company renewed its $6 million letter and line of
credit facilities such that the facilities now expire in May 1999 and
the mortgage note is no longer cross collateralized with the letter and
line of credit facilities. In addition, the interest rate provisions
of the letter and line of credit facilities were modified to permit
reductions of the interest rate from prime plus 1% to prime, based on
the Company's financial performance. As of the date of the renewal,
the Company's financial performance allows for the interest rate to be
set at prime. Certain of the financial covenants were modified to
reflect the Company's improved financial performance.
Page 6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE
THIRTEEN WEEKS ENDED OCTOBER 27, 1996.
NET SALES. Net sales by Company-owned stores for the thirteen weeks ended
November 1, 1997 increased by $3.2 million, or 21.4%, over net sales by
Company-owned stores for the comparable thirteen weeks ended November 1, 1996.
The increase was the result of $1.5 million additional sales from the new (or
reacquired) stores not yet included in the Company's comparable store base (net
of sales of approximately $532,000 from six stores closed in 1996 and 1997),
and a comparable Company-owned store net sales increase of $1.7 million.
Net sales to franchisees for the thirteen weeks ended November 1, 1997
decreased by approximately $33,000, or 5.3% compared to net sales to
franchisees for the thirteen weeks ended October 27, 1996. The Company
believes that the decrease in net sales to franchisees was primarily caused by
the reacquisition of two franchised stores in fiscal 1998 and fiscal 1997.
GROSS PROFIT. Gross profit for the thirteen weeks ended November 1, 1997, was
$10.9 million, or 57.5% of net sales, compared with $9.4 million, or 59.6% of
net sales for the thirteen weeks ended October 27, 1996. The decrease in the
gross profit percentage primarily resulted from a revised merchandising
strategy as the Company reduced price points to more effectively meet
competitive price points and increased sales promotions and other markdowns at
both front line and outlet stores in an effort to carry out a strategy of
maintaining lower levels of inventories held at the Company's warehouse for
future clearance. To a lesser degree, the decrease in gross margins resulted
from increased freight costs due to an increased use of air shipments as the
Company attempted to rapidly increase its in-store inventory levels of newer
merchandise.
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative
and store operating expenses increased to $9.2 million, or 48.7% of net sales,
in the thirteen weeks ended November 1, 1997 from $8.2 million, or 52.0% of net
sales, in the thirteen weeks ended October 27, 1996. The increase in general,
administrative and store operating expenses was, for the most part, the result
of increases in store operating expenses, including store compensation,
occupancy and other costs associated with new store openings. The decrease in
these expenses as a percentage of net sales was principally due to direct store
costs, including store compensation, which decreased by 3.6% of net sales due
to leverage associated with the Company's 12.0% comparable store sales increase
for the quarter, net of an increase in marketing and promotion costs as a
percent of sales.
INTEREST EXPENSE, NET. Net interest expense decreased to approximately $71,000
in the thirteen weeks ended November 1, 1997 from approximately $98,000 in the
thirteen weeks ended October 27, 1996. Although the net expense remained
relatively level, the amount included a small increase in gross interest
expense attributable to an increase in the variable rate of the Company's
mortgage note, offset by increased interest earnings from the Company's
increased cash position.
NET INCOME. As a result of the factors discussed above, net income reflects an
increase of 45.6% to $1.0 million in the thirteen weeks ended November 1, 1997
from net income of approximately $656,000 in the thirteen weeks ended October
27, 1996. The provision for income taxes represented an effective rate of
40.0% for the thirteen weeks ended November 1, 1997 and October 27, 1996.
Page 7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO THE
THIRTEEN WEEKS ENDED OCTOBER 27, 1996. (CONTINUED)
COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales
increased by 12.0% in the thirteen weeks ended November 1, 1997 when compared
to the comparable period in the thirteen weeks ended October 27, 1996.
Comparable Company store net sales data is calculated based on the change in
net sales of currently open Company-owned stores that have been operated as a
Company store for at least thirteen months. The Company believes that the
increase in comparable Company store net sales resulted primarily from the
Company's return in June 1997 to its traditional Chico's look, fit and pricing
policies. The Company also believes that the increase in comparable Company
store net sales was fueled by an increase in direct mail promotions during
September and October 1997.
RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO
THE THIRTY-NINE WEEKS ENDED OCTOBER 27, 1996.
NET SALES. Net sales by Company-owned stores for the thirty-nine weeks ended
November 1, 1997 increased by $8.6 million, or 17.6%, over net sales by
Company-owned stores for the comparable thirty-nine weeks ended October 27,
1996. The increase was the result of $4.6 million additional sales from the
new (or reacquired) stores not yet included in the Company's comparable store
base (net of sales of $1.7 million from seven stores closed in 1996 and 1997),
a comparable Company-owned store net sales increase of $3.5 million, and
approximately $464,000 in additional sales resulting from the liquidation of
inventory through an independent liquidator.
Net sales to franchisees for the thirty-nine weeks ended November 1, 1997
increased by approximately $20,000, or 1.4% compared to net sales to
franchisees for the thirty-nine weeks ended October 27, 1996. The Company
believes that the increase in net sales to franchisees was primarily caused by
a decrease in the volume of returned merchandise under the Company's new return
policy implemented in mid 1996, offset by the reacquisition of two franchises
in fiscal 1998 and fiscal 1997 and a decrease in purchases from the Company's
largest franchisee.
GROSS PROFIT. Gross profit for the thirty-nine weeks ended November 1, 1997,
was $32.5 million, or 56.1% of net sales, compared with $29.3 million, or 59.7%
of net sales for the thirty-nine weeks ended October 27, 1996. The decrease in
the gross profit percentage primarily resulted from a revised merchandising
strategy as the Company reduced price points to more effectively meet
competitive price points and increased sales promotions and other markdowns at
both front line and outlet stores in an effort to reduce the Company's levels
of inventories, particularly older inventory that was being held at the
Company's warehouse for future clearance. To a lesser degree, the decrease in
gross margins resulted from (1) increased freight costs due to an increased
use of air shipments as the Company attempted to rapidly increase its in-store
inventory levels of newer merchandise, (2) a sale, at cost, of approximately
$464,000 of inventory to an independent liquidator, and (3) additional
inventory charges associated with certain of the Company's older designs and
styles.
Page 8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS - THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 COMPARED TO
THE THIRTY-NINE WEEKS ENDED OCTOBER 27, 1996. (CONTINUED)
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative
and store operating expenses increased to $27.3 million, or 47.2% of net sales,
in the thirty-nine weeks ended November 1, 1997 from $24.6 million, or 50.0% of
net sales, in the thirty-nine weeks ended October 27, 1996. The increase in
general, administrative and store operating expenses was, for the most part,
the result of increases in store operating expenses, including store
compensation, occupancy and other costs associated with new store openings.
The decrease in these expenses as a percentage of net sales was principally due
to direct store costs which decreased by 2.1% of net sales due to leverage
associated with the Company's 8.0% comparable store sales increase. To a
lesser degree, the decrease is also attributable to net business interruption
insurance proceeds related to the temporary closing of one of the Company's
stores, net of an increase in marketing expenses.
INTEREST EXPENSE, NET. Net interest expense decreased to approximately
$273,000 in the thirty-nine weeks ended November 1, 1997 from approximately
$290,000 in the thirty-nine weeks ended October 27, 1996. This decrease was
primarily a result of an increase in earnings associated with the Company's
improved cash position.
NET INCOME. As a result of the factors discussed above, net income reflects an
increase of 9.3% to $2.9 million in the thirty-nine weeks ended November 1,
1997 from net income of $2.7 million in the thirty-nine weeks ended October 27,
1996. The provision for income taxes represented an effective rate of 40.0%
for the thirty-nine weeks ended November 1, 1997 and October 27, 1996.
COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales
increased by 8.0% in the thirty-nine weeks ended November 1, 1997 when compared
to the comparable period in the thirty-nine weeks ended October 27, 1996.
Comparable Company store net sales data is calculated based on the change in
net sales of currently open Company-owned stores that have been operated as a
Company store for at least thirteen months. The Company believes that the
increase in comparable Company store net sales resulted primarily from the
Company's return in June 1997 to its traditional Chico's look, fit and pricing
policies. The Company also believes that the increase in comparable store
sales was fueled by increased direct mail and other promotions, sales and
markdowns of previous styles and designs as well as the Company's national
sidewalk sale held in July 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are for funding capital
expenditures related to new store openings and merchandise inventory purchases.
During the thirty-nine weeks ended November 1, 1997 (fiscal 1998) and the
thirty-nine weeks ended October 27,1996 (fiscal 1997), the Company's primary
source of working capital was cash flow from operations of $5.8 million and
$2.7 million, respectively. The increase in cash flow from operations was
primarily due to the reduction in the inventory growth as reflected in the
increase in inventories of approximately $715,000 in the first thirty-nine
weeks of fiscal 1998, as compared to an increase of $2.6 million in the first
thirty-nine weeks of fiscal 1997. The smaller increase in inventories was
primarily due to the Company's ongoing effort to reduce the balance of goods
held at the Company's distribution center offset by a planned increase in the
level of newer merchandise at the Company's stores. This increase in cash flow
provided by operations was also due to a decrease in other assets in fiscal
1998 of approximately $500,000, principally due to a reclassification of assets
reflected in an amendment to the Company's credit facilities which reduced a
required certificate of deposit from $1.6 million to $1.0 million and to an
increase in accounts payable of approximately $545,000 in fiscal 1998 versus an
increase in accounts payable of approximately $231,000 in fiscal 1997. These
increases in cash flow from operations were offset in part by an increase in
receivables of approximately $109,000 in fiscal 1998, versus a decrease in
receivables of approximately $278,000 in fiscal 1997.
Page 9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company invested $1.7 million during the first thirty-nine weeks of fiscal
1998 for capital expenditures primarily associated with the opening of ten new
(or reacquired) stores, the relocating of three existing stores and the
remodeling of several existing stores. In addition, the Company invested
$100,000 in intangible assets associated with the reacquisition of one
franchised store. The Company also sold a small piece of land it originally
acquired for its headquarters (with a cost of approximately $60,000) for
approximately $35,000. The Company also closed during this period four
stores, and intends to close one more store this fiscal year. During the first
thirty-nine weeks of fiscal 1997, the Company invested $2.2 million for capital
expenditures associated with the opening of eleven new stores, the remodeling
of several existing stores and a companywide refixturing program which
continued throughout fiscal 1997.
The Company repaid under its then available credit lines approximately $285,000
and $256,000 in the first thirty-nine weeks of fiscal 1998 and 1997,
respectively. In addition, the Company repaid other indebtedness of
approximately $259,000 and $358,000 in the same periods.
As more fully described in "Item 1-Business" appearing on pages 13 through 16
of the Company's Annual Report on Form 10-K for the fiscal year ended February
1, 1997, the Company is subject to ongoing risks associated with imports. The
Company's reliance on sourcing from foreign countries causes the Company to be
exposed to certain unique business and political risks. Import restrictions,
including tariffs and quotas, and changes in such tariffs or quotas could
affect the importation of apparel generally and, in that event, could increase
the cost or reduce the supply of apparel available to the Company and have an
adverse effect on the Company's business, financial condition and/or results of
operations. The Company's merchandise flow could also be adversely affected by
political instability in any of the countries in which its goods are
manufactured, by significant fluctuations in the value of the U.S. dollar
against applicable foreign currencies and by restrictions on the transfer of
funds.
During the first thirty-nine weeks of fiscal 1998, the Company sold 14,934
shares at a price of $2.44 under its Employee Stock Purchase Plan and two
employees exercised an aggregate of 2,732 stock options at prices ranging from
$5.50 to $7.35. The proceeds from these issuances of stock amounted to
approximately $51,000. During the first thirty-nine weeks of fiscal 1997, one
of the former officers exercised 71,540 stock options at a price of $4.08,
several other employees exercised an aggregate of 7,046 options at prices
ranging from $5.50 to $8.75 and the Company sold 21,037 shares at a price of
$3.83 under its Employee Stock Purchase Plan. The proceeds from these
issuances of stock amounted to approximately $459,000.
The Company plans to open approximately 14 to 15 new stores in fiscal 1998, 11
of which were open as of November 30, 1997 and the Company plans to open 16 to
20 new stores in fiscal 1999. The Company believes that the liquidity needed
for its planned new store growth, remodel program and maintenance of proper
inventory levels associated with this growth will be funded primarily from cash
flow from operations. The Company further believes that this liquidity will be
sufficient, based on currently planned new store openings, to fund anticipated
capital needs over the near-term, including scheduled debt repayments. If cash
flow from operations should prove to be less than anticipated or if there
should arise a need for additional letter of credit capacity due to
establishing new and expanded sources of supply, or if the Company were to
increase the number of new Company stores planned to be opened in future
periods, the Company might need to seek other sources of financing to conduct
its operations or pursue its expansion plans and there can be no assurance that
such other sources of financing would be available.
SEASONALITY AND INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation has had a material
effect on the results of operations during the first thirty-nine weeks of
fiscal 1998 or during the first thirty-nine weeks of fiscal 1997.
Although sales have recently been somewhat higher in the Company's first and
second fiscal quarters (February through July), the company does not consider
its business to be seasonal.
Page 10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This 10-Q may contain forward looking statements which reflect the current views
of the Company with respect to certain events that could have an effect on the
Company's future financial performance. These statements include the words
"expects," "believes," and similar expressions. These forward-looking
statements are subject to various risks and uncertainties that could cause
actual results to differ materially from historical results or those currently
anticipated. These potential risks and uncertainties include ability to secure
customer acceptance of Chico's styles, propriety of inventory mix and sizing,
quality of merchandise received from vendors, timeliness of vendor production
and deliveries, increased competition, extent of the market demand by women for
private label clothing and related accessories, adequacy and perception of
customer service, ability to coordinate product development along with buying
and planning, rate of new store openings, performance of management information
systems, ability to hire, train, energize and retain qualified sales associates
and other employees, availability of quality store sites, ability to hire and
retain qualified managerial employees and other risks. In addition, there are
potential risks and uncertainties that are peculiar to the Company's heavy
reliance on sourcing from foreign vendors including the impact of work
stoppages, transportation delays and other interruptions, political instability,
foreign currency fluctuations, imposition of and changes in tariffs and import
and export controls such as import quotas, changes in governmental policies in
or towards such foreign countries and other similar factors.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27 Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the thirty-nine weeks
ended November 1, 1997
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 12, 1996 By: /s/ Marvin Gralnick
---------------------------
Marvin Gralnick Chief
Executive Officer (Principal
Executive Officer)
Date: December 12, 1996 By: /s/ Charles J. Kleman
---------------------------
Charles J. Kleman
Chief Financial
Officer (Principal Financial
and Accounting Officer)
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF CHICO'S FAS, INC. FOR THE
THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> NOV-01-1997
<CASH> 4,390,143
<SECURITIES> 0
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0
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