This weekend, I circled back to some names that were on my mind months ago, partially driven by a visit to an outlet center in Western Pennsylvania. Back in December, my wife and I had an interesting experience at the women's fashion retailer Chico's FAS (CHS) .
I'd been taking a look at the name, which at the time was coming off of a worse-than-expected quarter that sent shares to 2009 levels. At the time, the balance sheet was in decent shape, the company had some cash, and not all that much debt. I was trying to determine whether markets were overly punishing CHS, a common occurrence suffered by many retailers.
A visit to a Chico's store with my wife was meant to provide me with some comfort that the brand was still relevant, and perhaps some anecdotal evidence that recent negative same-store sales trends might reverse. It ended up being a brief visit, as my wife found the store's line unappealing.
After the column ran in RealMoney in December, I received an email from Chico's public relations department concerning the company's efforts and commitments toward appealing to their demographic. It went on to offer my wife a "personal style appointment," so that she could learn more about the brand; a nice gesture, or one that could have been taken in a negative manner, depending on your perspective. I took it as a positive, but we did not follow up.
Fortunately, the decision to pass on CHS at the time, was a wise one. Shares have given back another 40% since early December, which has pushed the dividend yield above 10%. That means the market is likely expecting a dividend cut.
Fourth-quarter earnings in March -- the latest reported quarter -- were better than expected both on the top ($524.7 million vs. $516.4 million) and bottom line (loss of 7 cents vs. 9 cent-loss consensus), while same-store sales dropped 3.8%. The company reiterated plans to close 250 stores over the next 3 years. CHS ended the quarter with $186 million, or $1.57 per share in cash and short-term investments, and $57.5 million in debt. Interestingly, the company repurchased 8.6 million shares during the quarter, unfortunately though, for an average of $5.81 per share.
Despite the rough ride CHS continues to suffer through, there was an interesting twist early last month, when private equity firm Sycamore Partners put forth an unsolicited offer to acquire the company for $3.50 a share in cash, which the company rejected. That came on the heels of an earlier rejected offer from Sycamore for $4.30 per share. Put all of this in the category of "things that make you go hmmm..."
CHS is expected to report fiscal first-quarter earnings later this week. Maybe it's time for me and the Mrs. to take another walk through a local CHS.
