e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
January 29, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number:
001-16435
Chicos FAS,
Inc.
(Exact name of registrant as
specified in its charter)
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Florida
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59-2389435
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(State or other jurisdiction
of incorporation)
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(IRS Employer
Identification No.)
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11215 Metro Parkway,
Fort Myers, Florida 33966
(Address of principal executive
offices) (Zip code)
(239) 277-6200
(Registrants telephone
number)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Class
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Name of Exchange on Which Registered
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Common Stock, Par Value $.01 Per Share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No
þ
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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K o.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller Reporting company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant:
Approximately $1,655,000,000 as of July 31, 2010 (based
upon the closing sales price reported by the NYSE and published
in the Wall Street Journal on July 30, 2010).
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date: Common Stock, par value $.01 per
share 176,928,893 shares as of March 14,
2011.
Documents incorporated by reference:
Part III Definitive Proxy Statement for the Companys
Annual Meeting of Stockholders presently scheduled for
June 23, 2011.
CHICOS
FAS, INC.
ANNUAL REPORT ON
FORM 10-K
FOR THE
YEAR ENDED JANUARY 29, 2011
TABLE OF
CONTENTS
1
PART I
General
Chicos FAS, Inc., a Florida corporation, is a national
specialty retailer of private branded, sophisticated,
casual-to-dressy
clothing, intimates, complementary accessories, and other
non-clothing gift items under the Chicos, White House |
Black Market (WH|BM) and Soma Intimates
(Soma) brand names. As of January 29, 2011, we
operated 1,151 stores across 48 states, the District of
Columbia, Puerto Rico and the U.S. Virgin Islands and
e-commerce
websites for each of our brands.
As used in this report, all references to we,
us, our, and the Company,
refer to Chicos FAS, Inc. and all of its wholly-owned
subsidiaries.
Our fiscal years end on the Saturday closest to January 31 and
are designated by the calendar year in which the fiscal year
commences. The periods presented in these financial statements
are the fiscal years ended January 29, 2011 (fiscal
2010, 2010, or current period),
January 30, 2010 (fiscal 2009,
2009, or prior period), January 31,
2009 (fiscal 2008 or 2008),
February 2, 2008 (fiscal 2007 or
2007), and February 3, 2007 (fiscal 2006
or 2006). Each of these periods had 52 weeks,
except for fiscal 2006, which consisted of 53 weeks.
Our
Brands
Chicos
The Chicos brand, which began operations in 1983,
primarily sells exclusively designed, private branded clothing
focusing on women 35 and over with a moderate to high income
level. The styling is chic, unique, and charismatic with
on-trend, expressive, one of a kind designs created to
illuminate the women wearing them. Using generally easy-care
fabrics and frequent deliveries of new and distinctive designs,
Chicos emphasizes a comfortable relaxed fit in a modern
style. Accessories, such as handbags, belts, scarves, earrings,
necklaces and bracelets, are designed to coordinate with the
assortment of the clothing, allowing customers to easily
individualize their wardrobe selections. Chicos controls
almost all aspects of the design process, including choices of
pattern, prints, construction, design specifications, fabric,
finishes and color through in-house designers, purchased
designs, and independent suppliers.
The distinctive nature of Chicos clothing is carried
through to its sizing. Chicos uses international sizing,
comprising of sizes 000, 00 (size 0-2), 0 (size 4-6), 1 (size
8-10), 2 (size
12-14), 3
(size
16-18), and
4 (size
20-22) and
will occasionally offer, half-sizes (up to 4.5),
one-size-fits-all and small, medium and large sizing for some
items. The relaxed nature of the clothing allows the stores to
utilize this kind of sizing and thus offer a wide selection of
clothing without having to invest in a large number of different
sizes within a single style.
White
House|Black Market
The WH|BM brand, which began operations in 1985 and we acquired
in September 2003, sells fashionable clothing, bridal
merchandise, swimwear, and accessory items, primarily in black
and white and related shades, and more recently, seasonal color
splashes, focusing on women who are 25 years old and over
with a moderate to high income level. WH|BM offers a uniquely
feminine and affordable alternative to designer fashion selling
sophisticated apparel and accessories from everyday basics to
elegant fashion. The accessories at WH|BM, such as handbags,
shoes, belts, earrings, necklaces and bracelets, are
specifically designed to coordinate with the colors and patterns
of the clothing, allowing customers to easily individualize
their wardrobe selections. WH|BM controls almost all aspects of
the design process, including choices of pattern, construction,
specifications, fabric, finishes and color utilizing an in-house
design team and also works closely with independent suppliers
and agents to select, modify, and create the brands
product offerings.
WH|BM uses American sizes in the
00-14 range
(with online sizes up to size 16), which we believe is more
appropriate than the Chicos sizing for the target WH|BM
customer. As a result, the fit of the WH|BM clothing tends to be
more styled to complement the figure of a body-conscious woman,
while still remaining comfortable.
2
Soma
Intimates
The Soma brand, which began operations in 2004, primarily sells
exclusively designed private branded sensual and luxurious
lingerie, loungewear and beauty products. Soma offers
trend-right, innovative and expertly fitted lingerie and
loungewear apparel, with designer quality at affordable prices.
Soma offerings are broken into three broad categories: lingerie,
loungewear and beauty. The lingerie category includes bras,
panties, shapewear and sleepwear while the loungewear category
includes relaxed tops, bottoms and dresses. The sleepwear and
loungewear offerings utilize extra small, small, medium, large
and extra large sizing, while bras are sized using traditional
American band and cup sizes. In fiscal 2010, Soma Intimates
introduced an Oh My Gorgeous line of fine fragrance perfumes and
lotions. The Soma brand product offerings are developed by
working closely with a small number of its independent suppliers
to design proprietary products in-house and, in some cases,
include designs provided by its independent suppliers and under
labels other than the Soma label.
Our
Business Strategy
Our overall growth strategy is focused on a multi-faceted
approach to retailing. This approach includes building our store
base, improving store productivity levels, and growing our
direct-to-consumer
(DTC) channels. We build our store base primarily
through the opening of new stores, the expansion of existing
stores, acquisitions, and organic growth across each of our
brands. We seek to improve store productivity with our product
offerings and our Most Amazing Personal Service and
we grow our DTC business through investments in the people,
products, and infrastructure necessary to support our DTC
channel.
To support these strategies and the associated increase in
revenues and expenses, we have continued to invest in our
infrastructure. This increase in infrastructure included
additions of senior and middle management level associates,
including our merchandising and marketing teams, increases in
DTC staffing, the roll out of the SAP and JDA software to all
brands (see page 6), expansion of our distribution center
facilities, and other infrastructure initiatives. During fiscal
2010, we focused our infrastructure investments on opening new
stores, primarily outlet stores for the Chicos brand and
new Soma stores, while continuing to improve the functionality
and appeal of our DTC channel.
We will continue to consider the acquisition or organic
development of other specialty retail concepts when our research
indicates that the opportunity is appropriate and in the best
interest of the shareholders. We will also continue to explore a
number of potential new merchandise opportunities and brand
extensions that would both complement the current brands and
provide future growth. Our primary focus, however, remains on
the core Chicos, WH|BM and Soma brands and we believe we
do not need an acquisition to achieve our long-term operational
objectives.
In fiscal 2011, we will continue to focus on 1) building
the Chicos brand into a high performance brand,
2) growing the number of WH|BM and Soma boutiques,
3) accelerating the growth of our DTC sales, and
4) leveraging our cost structure and enhancing our systems.
In early 2009, we had announced a stretch goal of reaching $1.00
in earnings per share for fiscal 2011. Although this goal will
be somewhat challenging to achieve, especially due to the slow
economic recovery, we believe it is attainable if we
successfully execute to all of our strategic initiatives.
Our
Customers
We believe that our customers deserve outstanding and
personalized customer service and we strive to achieve this
through our trademark Most Amazing Personal Service
standard. We provide store associates with specialized training
in providing customer assistance and advice on their
customers fashion and wardrobe needs, including clothing
and accessory style and color selection, coordination of
complete outfits, and suggestions on different ways in which to
wear the clothing and accessories. Our sales associates are
encouraged to know their regular customers preferences and
to assist those customers in selecting merchandise best suited
to their tastes and wardrobe needs.
We take pride in empowering our associates to make decisions
that best serve our customer. We believe this sense of
empowerment enables our associates to exceed customer
expectations. Our associates are expected to keep
3
individual stores open until the last customer in the store has
been served. If an item is not available at a particular store,
sales associates can locate the item at our distribution center
or another store and arrange for it to be shipped directly to
the customer.
Another key success strategy is building customer loyalty
through preferred customer programs. The data we gather from
these programs allows us to more sharply focus our design,
merchandising and marketing efforts to better address and define
the desires of our target customer.
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Chicos and Soma. Chicos and
Somas preferred customer program is known as the
Passport Club and is designed to encourage repeat
sales and customer loyalty for both brands. Features of the club
include discounts, special promotions, invitations to private
sales, and advance notice regarding new Chicos and Soma
merchandise. A Chicos or Soma customer signs up to join
the Passport Club at no cost, initially as a
preliminary member. Once the customer spends a total
of $500 over any time frame collectively across the two brands,
the customer becomes a permanent member and is
entitled to a 5% discount on all apparel and accessory
purchases, advance sale notices and other benefits, subject to
certain restrictions. In 2010, we issued Soma-branded cards to
those customers that had entered the program with a Soma
purchase (or had qualified for Passport status based on 100%
Soma purchases). We are currently evaluating our Passport Club
in conjunction with our overall customer relationship management
and marketing activities to ensure that it remains a compelling
reason for customers to shop at the Chicos and Soma brands.
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WH|BM. WH|BMs preferred
customer program is called The Black Book. The
purposes, prerequisites, and benefits of The Black Book are
identical to the Passport Club except that a customer need only
spend $300 at WH|BM over any time frame to become a
permanent member. We are currently evaluating The
Black Book in conjunction with our overall customer relationship
management and marketing activities to ensure that it remains a
compelling reason for customers to shop at WH|BM.
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Our
Boutiques
Our boutiques are located in upscale outdoor destination
shopping areas, lifestyle specialty centers, shopping malls, and
some standalone street front locations. Store locations are
determined on the basis of various factors, including but not
limited to: geographic and demographic characteristics of the
market, the location of the shopping venue including the site
within the shopping center, proposed lease terms, anchor tenants
in a mall location and convenience.
In response to business conditions over the last few years, we
have become more innovative in the way we execute our real
estate strategy. For example, in fiscal 2009 and 2010, we began
testing
pop-up
stores. These stores are designed to take advantage of vacancies
in high profile shopping locations. They require minimal
investment and have short or flexible lease terms facilitating
our ability to test a brands potential for success in a
particular location. The results of the
pop-up store
strategy have generally been successful as many of these
locations have been or we anticipate will be converted to
permanent locations.
In fiscal 2011, we expect an increase in net new stores of
approximately 9%, reflecting
24-28 net
openings of Chicos stores,
23-26 net
openings of WH|BM stores, and
53-56 net
openings of Soma stores. We also expect to complete
25-30
relocations or expansions.
Historically, our outlet stores have primarily acted as a
channel for selling marked-down merchandise from our front-line
stores. However, during fiscal 2009 and 2010, we increased the
penetration of
made-for-outlet
product, primarily within the Chicos brand outlets, which
carries a higher margin than the clearance items from our
front-line stores. In addition, much of the clearance is now
done through our DTC channel. We believe that this approach has
allowed us to increase outlet store margins and improve
profitability. We expect to continue this strategy in fiscal
2011, and will direct more focus on the WH|BM brand.
4
As of January 29, 2011, we operated 1,151 retail stores in
48 states, the District of Columbia, the U.S. Virgin
Islands and Puerto Rico. The following tables set forth
information concerning our retail stores during the past five
fiscal years:
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Fiscal Year
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2006
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2007
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2008
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2009
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2010
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Company-Owned Stores
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Stores at beginning of year
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749
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907
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1,038
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1,076
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1,080
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Opened
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157
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143
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62
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40
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79
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Acquired from franchisees
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1
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13
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Acquired pursuant to Fitigues transaction
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12
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Closed
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(12
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(25
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)
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(24
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)
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(36
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)
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(8
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Stores at end of year
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907
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1,038
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1,076
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1,080
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1,151
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Franchise Stores
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Stores at beginning of year
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14
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13
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Opened
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Acquired by Company
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(1
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)
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(13
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Stores at end of year
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13
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Total Stores
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920
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1,038
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1,076
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1,080
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1,151
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Fiscal Year End
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2006
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2007
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2008
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2009
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2010
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Stores by Brand
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Chicos front-line
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541
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604
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619
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599
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597
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Chicos outlet
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34
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37
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41
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44
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63
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|
Chicos franchise
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13
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Chicos total
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|
588
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|
641
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660
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643
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660
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WH|BM front-line
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254
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309
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328
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333
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|
342
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|
WH|BM outlet
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16
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19
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17
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17
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21
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|
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|
WH|BM total
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|
270
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|
|
328
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|
|
345
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|
350
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|
363
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|
|
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|
|
|
|
|
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|
|
|
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|
|
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Soma Intimates front-line
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52
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68
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|
70
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83
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|
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|
120
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|
Soma Intimates outlet
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1
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1
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4
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8
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Soma Intimates total
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|
52
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|
|
69
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|
|
71
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|
87
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|
|
128
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Fitigues front-line
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9
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Fitigues outlet
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1
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Fitigues total
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10
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Total Stores
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|
920
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|
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|
1,038
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|
|
|
1,076
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|
|
|
1,080
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|
|
|
1,151
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Direct-to-Consumer
We currently mail a Chicos, WH|BM and Soma catalog to
current and prospective customers approximately every month.
These catalogs are designed to educate our customers about our
products and drive customers into the stores and promote website
and catalog sales. We also utilize Soma catalog inserts in
selected Chicos mailings, where applicable, as efficient
customer prospecting tools.
In addition to our stores, we offer two additional ways for our
customers to shop with us. Each of our brands has its own
dedicated website, www.chicos.com, www.whbm.com
and www.soma.com, providing customers the
5
ability to order merchandise online. Some items are only
available online, such as extended size offerings and some
clearance items. We also sell merchandise for each of our brands
through our call centers.
Sales through the three websites, together with sales from our
call centers toll free telephone numbers, amounted to
$137.4 million in 2010 compared to $98.3 million in
2009, and are included in each respective brands total
sales.
During fiscal 2010, we believe our DTC sales growth of
approximately 40% was a result of our strategy to invest in this
previously underserved revenue channel. For fiscal 2011, we
expect to continue to focus on this channel in order to increase
our DTC sales penetration and look for further expansion.
Advertising
and Promotion
Our marketing program currently consists of the following
integrated components:
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Loyalty programs: the Passport Club and The Black Book (see
page 4);
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Direct marketing activities: direct mail,
e-mail, and
localized calling campaigns;
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E-marketing
efforts: paid search, banner marketing, affiliates and search
engine optimization;
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National print and broadcast advertising;
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Social media; and
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Public relations and community outreach programs
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During fiscal 2010, we continued to actively market our brands
through each of these components. We believe that these
marketing campaigns helped acquire new customers, reactivated
lapsed customers and were a key factor in our financial
performance in fiscal 2010.
Our direct marketing efforts have been successful in driving
traffic into our stores and to the DTC channel. During 2010, we
continued our extensive prospecting efforts across all three
brands to identify and motivate new customers to shop with us.
In addition, we focused the circulation of our marketing
materials on the more profitable or potentially profitable
customers, which dramatically improved incremental sales and
profitability. Also, we successfully tested a number of new
sources for prospects, and as a result, were able to activate a
large number of new customers at a positive return on the
investment of our marketing dollars. Lastly, we successfully
implemented a personalized Lapsed Buyer program that
resulted in a considerable number of lapsed customers shopping
with us again.
Also in fiscal 2010, we expanded our
e-marketing
efforts for all brands. We made significant investments in paid
search with well-known internet search sites and appeared on
banner ads on various highly trafficked websites. Moreover, we
tested mobile marketing in a limited number of markets as we
attempt to leverage technology to optimize communications with
our customers. We also use social media websites such as
Facebook and Twitter to connect with our customers. Social media
marketing is another strategy by which we can actively engage
with customers to provide them targeted brand messages or news
concerning our brands.
Lastly, we place great value on our outreach programs. These
outreach programs include editors events, VIP parties,
fashion shows and wardrobing parties. As part of these outreach
programs, we encourage our managers and sales associates to
become involved in community projects. We believe that these
programs, in addition to helping build and support community and
charitable activities, are also effective marketing vehicles in
providing introductions to new customers.
Information
Technology
We are committed to having information systems that enable us to
obtain, analyze and act upon information on a timely basis and
to maintain effective financial and operational controls. This
effort includes testing of new products and applications to
assure that we are able to take advantage of technological
developments.
6
We have worked with SAP, a third party vendor, to implement an
enterprise resource planning system (ERP) to manage
all selling channels. This fully integrated system is expected
to support and coordinate most aspects of product development,
merchandising, finance and accounting and to be fully scalable
to accommodate rapid growth.
In fiscal 2007, we completed the first major phase of our
multi-year, planned implementation of the new ERP system by
converting Soma to the new merchandising system as well as
rolling out the new financial systems at the same time. The
second major phase was completed in early 2010 and we are
currently utilizing this system in all of our brands. The third
major phase includes ongoing enhancements and optimization of
the new ERP across all three brands, as well as the deployment
of additional functionality across various other functions.
In fiscal 2009, we purchased JDA Enterprise Planning, JDA
Assortment Planning and JDA Allocation software applications and
curtailed previously planned implementations of related SAP
applications and revised our roll out plan accordingly. We
completed the implementation of the allocation functionality
during fiscal 2009, installed enterprise planning in 2010, and
currently are working on implementing additional JDA planning
applications over the next
12-18 months.
Additionally, we are developing a product lifecycle management
solution supporting the design and development process.
Merchandise
Distribution
Distribution for all brands is handled by our distribution
center (DC) in Winder, Georgia. New merchandise is
generally received daily at the DC. Merchandise from United
States based suppliers arrives in Georgia by truck, rail, or
air, as the circumstances require. A majority of the merchandise
from foreign suppliers arrives in this country at various points
of entry by air or sea and is transported via truck or rail to
the DC; however, we have recently increased our transports by
sea to better manage shipping costs. After arrival, merchandise
is sorted and packaged for shipment to individual stores or for
transfer to our DTC fulfillment center. Merchandise is generally
pre-ticketed with price and related informational tags at the
point of manufacture.
During fiscal 2009, we purchased an additional 39 acres of
property, including a 300,000 square foot building close to
our existing DC, for $10.4 million. This facility primarily
ships orders directly to our DTC customers. We believe that as a
result of this acquisition together with additional
infrastructure enhancements, our DC can now support over
$3 billion in aggregate sales.
Product
Development/Sourcing
Chicos, WH|BM, and Soma private branded merchandise is
developed through the coordinated efforts of their respective
merchandising, creative and production teams working with their
independent suppliers. Style, pattern, color and fabric for
individual items of our private branded clothing are developed
based upon perceived current and future fashion trends that will
appeal to each brands target customer, anticipated future
sales and historical sales data.
All of our brands purchase a significant percentage of their
clothing and accessories from companies that manufacture
merchandise in foreign countries. We may take ownership in the
foreign country or at our DC depending on the specific terms of
the sale. We conduct business with all of our foreign suppliers
and importers in United States currency. Approximately 18% of
total purchases in fiscal 2010 were made from one supplier,
compared to 13% in fiscal 2009.
During fiscal 2009, we entered into a non-exclusive relationship
with a sourcing service company. Acting as an agent for all
three brands, this third party provides us with a number of
different merchandise sourcing services. Aside from identifying
key suppliers of apparel and other consumer goods, they are also
involved with product development, quality assurance,
negotiation of prices, and product flow tracking within the
supply chain. During fiscal 2010, this relationship continued to
grow, specifically as it related to the sourcing of
made-for-outlet
merchandise and we expect to expand this arrangement into other
categories during fiscal 2011.
In late fiscal 2009, in order to leverage the purchasing power
and talent of the Chicos and WH|BM brands, we consolidated
our sourcing activities previously residing within these brands
into one service group to support the Chicos and WH|BM
brands. The purpose of this consolidation was that this single
group working in concert with
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our key supply chain partners, would deliver higher quality,
lower price piece goods and finished merchandise costs while
providing the opportunity to lessen freight costs through
consolidation and perform more of the quality assurance function
at the point of manufacture. In addition to these benefits, we
believe that the decision to centralize our sourcing operations
has helped us mitigate the impact of higher sourcing costs
during fiscal 2010.
Because of our initiatives to lower sourcing and merchandise
costs, we regularly evaluate where best to have our goods
manufactured and may continue to pursue new supplier
relationships throughout the world. During fiscal 2010, in
response to decreased capacity and cost of labor increases in
China, we began transitioning to suppliers located in other
countries. In fact, for fiscal 2010, China sources accounted for
approximately 63% of our merchandise cost compared to
approximately 66% in the prior fiscal year. During fiscal 2011,
we anticipate this trend to continue as we shift more production
to other Southeast Asian countries and we have set a goal that
by the end of fiscal 2012, sourcing from China will have
decreased to approximately 40% of our merchandise cost.
Competition
The womens retail apparel business is highly competitive
and includes department stores, specialty stores, local or
regional boutique stores, catalog companies, and online
retailers. We believe that our distinctively designed
merchandise offerings and emphasis on customer service
distinguish us from other retailers. Nevertheless, certain of
these competitors may have greater name recognition as well as
greater financial, marketing and other resources compared to us.
Trademarks
and Service Marks
We are the owner of certain registered and common law trademarks
and service marks (collectively referred to as
Marks).
Marks registered in the United States include, but are not
limited to: CHICOS, NO TUMMY, PASSPORT, ZENERGY, WHITE
HOUSE|BLACK MARKET, and SOMA INTIMATES. We have registered or
are seeking to register a number of these Marks in certain
foreign countries as well.
In the opinion of management, our rights in the Marks are
important to our business. Accordingly, we intend to maintain
our Marks and the related registrations and applications. We are
not aware of any claims of infringement or other challenges to
our rights to use any registered Marks in the United States or
any other jurisdiction in which the Marks have been registered.
Available
Information
Our investor relations website is located at
www.chicosfas.com. Through this website, we make
available free of charge our Securities and Exchange Commission
(SEC) filings including our Annual Report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports, as soon as reasonably
practicable after those reports are electronically filed with
the SEC. This website also includes recent press releases,
corporate governance information, beneficial ownership reports,
institutional presentations, quarterly and institutional
conference calls and other quarterly financial data such as
historical store square footage.
Our Code of Ethics, which is applicable to all of our
associates, including the principal executive officer, the
principal financial officer and the Board of Directors, is
posted on our investor relations website. We intend to post
amendments to or waivers from our Code of Ethics on this
website. Copies of the charters of each of the Audit Committee,
Compensation and Benefits Committee, Corporate Governance and
Nominating Committee and Executive Committee as well as the
Corporate Governance Guidelines, Code of Ethics, Terms of
Commitment to Ethical Sourcing, and Stock Ownership Guidelines
are available on this website or in print upon written request
by any shareholder.
Employees
As of January 29, 2011, we employed approximately
18,900 people, approximately 25% of whom were full-time
associates and approximately 75% of whom were part-time
associates. The number of part-time associates fluctuates during
peak selling periods. As of the above date, approximately 90% of
our associates worked in our front-line and outlet stores. We
have no collective bargaining agreements covering any of our
associates, have never
8
experienced any material labor disruption and are unaware of any
efforts or plans to organize our associates. We currently
contribute a significant portion of the cost of medical, dental
and vision coverage for eligible associates and also maintain a
401(k) accompanied by an employer matching contribution, stock
incentive and stock purchase plans. All associates are also
eligible to receive substantial discounts on our merchandise. We
consider relations with our associates to be good.
Executive
Officers of the Registrant
Set forth below is certain information regarding our executive
officers:
David F. Dyer, 61, is our President and Chief Executive Officer
and joined us in January 2009. He is also a member of our Board
of Directors having joined the Board in March 2007.
Donna M. Colaco, 52, is our Brand President White
House | Black Market and joined us in August 2007.
Cynthia S. Murray, 53, is our Brand President
Chicos and joined us in February 2009.
Laurie Van Brunt, 53, is our Brand President Soma
Intimates and joined us in May 2010.
Lee Eisenberg, 64, is our Executive Vice President
Chief Creative Officer and joined us in February 2009.
Gary A. King, 53, is our Executive Vice President
Chief Information Officer and joined us in October 2004.
Kent A. Kleeberger, 58, is our Executive Vice
President Chief Operating Officer and Chief
Financial Officer and joined us in November 2007.
Mori C. MacKenzie, 60, is our Executive Vice
President Chief Stores Officer and joined us in
October 1995.
A. Alexander Rhodes, 52, is our Executive Vice
President General Counsel, Chief Compliance Officer
and Secretary and joined us in January 2003.
Sara K. Stensrud, 43, is our Executive Vice
President Chief Human Resources Officer and joined
us in July 2010.
All of the above officers serve at the discretion of our Board
of Directors.
We make forward-looking statements in our filings with the SEC
and in other oral or written communications. Forward-looking
statements involve risks and uncertainties that could cause
actual results to be materially different from those indicated
(both favorably and unfavorably). These risks and uncertainties
include, but are not limited to, the risks described below. We
undertake no obligation to update any forward-looking
statements, whether as a result of new information, future
events or otherwise.
There can be no assurance that we have correctly identified,
assessed and appropriately addressed all risks affecting our
business operations or that the publicly available and other
information with respect to these matters is complete and
correct. Thus, these and other risks may occur adversely
impacting our business.
There can also be no assurance that the actual future
results, performance, benefits, or achievements that we expect
from our strategies, systems, initiatives, or products will
occur.
Our results of operations depend on the effective management
of our growth strategies.
Our growth strategies are dependent upon a number of factors,
including: testing of new products, locating suitable store
sites, negotiating favorable lease terms, having the
infrastructure to address the increased number of stores and the
increased demands of a DTC business, sourcing sufficient levels
of inventory, hiring and training qualified management level and
other associates, generating sufficient operating cash flows to
fund expansion plans, and integrating new stores and a larger
DTC business into existing operations. The inability to properly
manage our growth strategies could place increased demands on
operational, managerial and administrative
9
resources and may result in us operating the business less
effectively, which in turn could cause deterioration in the
financial performance of individual stores
and/or our
DTC business as well as our overall operating performance.
Effective management of the performance of our stores is a
key factor in the success of our business.
We cannot be assured that any new store that opens will have
similar operating results to those of prior stores. New stores
may take up to two or three years to reach planned operating
levels due to inefficiencies typically associated with new
stores, including demands on operational, managerial and
administrative resources. The failure of existing or new stores
to perform as predicted could negatively impact our net sales
and results of operations and may result in impairment of
long-lived assets at our stores.
Our ability to develop new concepts and brand extensions is a
significant component of our long-term business strategy.
Our longer term business strategy involves the strategic
acquisition or organic development and growth of new concepts
and brand extensions. Each of these may require significant
capital expenditures and management attention. Additionally, any
new concept is subject to certain risks including customer
acceptance, competition, product differentiation, challenges to
economies of scale in merchandise sourcing, and the ability to
attract and retain qualified personnel.
For example, we continue to expand our Soma target customer
audience and continue to invest in development of the brand
through marketing, new product launches and the opening of new
Soma stores in order to create and maintain brand awareness and
create economies of scale, which are integral factors in the
success of the brand.
If we cannot successfully execute our growth strategies, our
financial condition and results of operations may be adversely
impacted.
Our results of operations are sensitive to, and may be
adversely affected by, general economic conditions and overall
consumer confidence.
Certain economic conditions affect the level of consumer
spending on the merchandise that we offer, including, among
others, unemployment levels, availability of consumer credit,
inflation, interest rates, recessionary pressures, gas and other
energy costs, taxation, and consumer confidence in future
economic conditions. Disruptions in the overall economy and
financial markets tend to reduce consumer confidence in the
economy and negatively affect consumers spending patterns,
which could be harmful to our financial position and results of
operations, and may lead us to decelerate the number and timing
of new store openings, relocations, or expansions. Furthermore,
declines in consumer spending patterns due to economic downturns
may have a more negative effect on apparel retailers than other
retailers, particularly in our competitive space, and can
negatively affect net sales and profitability.
Our comparable store sales and operating results may
fluctuate.
Our comparable store sales and overall operating results have
fluctuated in the past and are expected to continue to fluctuate
in the future. A variety of factors affect comparable store
sales and operating results, including changes in fashion
trends, changes in our merchandise mix, customer acceptance of
merchandise offerings, timing of catalog mailings, expansion of
our DTC business, calendar shifts of holiday periods, actions by
competitors, new store openings, weather conditions, and general
economic conditions. Past comparable store sales or operating
results are not an indicator of future results.
Our gross margin and profitability may be impacted by the
sales mix between our brands or within product categories.
Gross margins are impacted by the sales mix from both
merchandise sales mix within a particular brand and relative
sales volumes of the different brands. Certain categories of
apparel, accessories and lingerie tend to generate somewhat
higher margins than others within each brand. Thus, a shift in
sales mix within a brand can create a significant impact on our
overall gross margins and consolidated earnings.
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Our business may be adversely affected by pricing pressures
including fluctuations in energy
and/or
commodity costs.
Fluctuations in the price, availability and quality of fabrics
and other raw materials used to manufacture our products, as
well as the price for labor and transportation have contributed
to, and may continue to contribute to, ongoing pricing pressures
throughout our supply chain. The price and availability of such
inputs to the manufacturing process may fluctuate significantly,
depending on several factors, including commodity costs, such as
higher cotton prices, energy costs, such as fuel, inflationary
pressures from emerging markets, increased labor costs, weather
conditions and currency fluctuations. Any or all of these
impacts could have a material adverse impact on our business,
financial condition and results of operations. In addition, the
increase in energy and commodity costs could adversely affect
consumer spending and demand for our products.
Our DTC operations include risks that could have a material
adverse effect on our financial condition or results of
operations.
Our DTC operations are subject to numerous risks, including
unanticipated operating problems, reliance on third party
computer hardware and software providers, system failures,
natural disasters, call center disruptions, and the need to
invest in additional infrastructure. The DTC operations also
involve other risks including increased postage or printing
costs, rapid technological change, liability for online content,
credit card fraud, risks related to the possible failure of the
systems that operate the website and its related support
systems, including computer viruses, telecommunication failures
and electronic break-ins and similar disruptions. Given our
business strategy to target sustained growth and increased sales
penetration in the DTC area, the risks associated with DTC
operations are likely to be of greater significance in fiscal
2011 and future years than in prior years.
We significantly rely on our ability to implement and
maintain our information technology systems.
We rely on various information technology systems to manage our
operations and regularly make investments to upgrade, enhance or
replace such systems. Any delays or difficulties in
transitioning or in integrating new systems with our current
systems, or any other disruptions affecting our information
technology systems could have a material adverse impact on the
business. We also use information technology systems for
individually identifiable data, which is regulated at the
international, federal and state levels. Privacy and information
security laws and regulation changes, and compliance with them,
may result in cost increases due to system changes and the
development of new administrative processes. If we or our
associates fail to comply with these laws and regulations or
experience a data security breach, our reputation could be
damaged, possibly resulting in lost future business, and we
could be subjected to fines, penalties, administrative orders
and other legal risks as a result of non-compliance.
We also expect to continue making modifications and upgrades to
our information technology systems to support our business
strategies and provide business continuity. Modifications
include replacing legacy systems with successor systems, making
changes to existing systems or acquiring new systems with new
functionality. There are inherent risks associated with
replacing these systems, including accurately capturing data and
system disruptions and we believe we are taking appropriate
action to mitigate these risks through testing, training and
staging implementation. Information technology system
disruptions, if not anticipated and appropriately mitigated,
could have a material adverse effect on our operations.
We rely on one location to distribute goods to our stores and
fulfill DTC orders.
The distribution functions for all of our stores and for our DTC
sales are handled from our DC in Winder, Georgia. Any
significant interruption in the operation of the facilities at
the DC due to natural disasters, accidents, system failures or
other unforeseen causes could delay or impair our ability to
distribute merchandise to our stores
and/or
fulfill DTC orders, which could cause sales to decline. We
regularly review our options to mitigate these risks including
contingency plans and
back-up
relationships with outside providers of distribution services.
Our success depends on a high volume of traffic to our stores
and the availability of suitable store locations.
In order to generate customer traffic, we locate many of our
stores in prominent locations within shopping centers that have
been or are expected to be successful. We cannot control the
development of new shopping centers, the availability or cost of
appropriate locations within existing or new shopping centers,
or the success of individual
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shopping centers. Furthermore, factors beyond our control impact
shopping center traffic, such as general economic conditions,
weather conditions, consumer acceptance of new or existing
shopping centers, regional demographic shifts, and consumer
spending levels. Our sales are partly dependent on a high volume
of shopping center traffic and any decline in such shopping
center traffic, whether because of the slowdown in the economy,
a falloff in the popularity of shopping centers among our target
customers, or otherwise, could have a material adverse effect on
our business.
Our business fluctuates on a seasonal basis.
Our business is comprised of two distinct selling seasons:
spring and fall. During the peaks of these seasons, higher
inventory levels, increased marketing costs, availability of
temporary personnel, and other factors may impact our results.
Lower than expected sales or profit margins during these periods
could materially affect our financial condition or results of
operations.
Our inability to remain current with fashion trends and
introduce new products successfully could negatively impact our
financial results.
Our success is principally dependent upon our ability to gauge
the fashion tastes of our customers and to provide merchandise
that is on-trend and satisfies customer demand in a timely
manner. Misjudgments or unanticipated fashion changes could have
a material adverse impact on our business, results of operations
and financial condition. The failure to anticipate, identify or
react appropriately and in a timely manner to changes in fashion
trends or demands, could lead to lower sales, excess inventories
and more frequent markdowns or inventory write-downs, which
could have a material adverse impact on our financial results.
Our inability to maintain proper inventory levels could have
a negative effect on our results of operations.
We maintain inventory levels in our stores and distribution
center that we anticipate will be in line with projected demand.
Inventory levels in excess of customer demand may result in
inventory write-downs or the sale of excess inventory at
discounted or closeout prices. These events could significantly
harm our operating results and impair the image of one or more
of our brands. Conversely, if we underestimate consumer demand
for our merchandise, particularly higher volume styles, or if
our suppliers fail to supply quality products in a timely
manner, we may experience inventory shortages, which might
result in missed sales, negatively impact customer
relationships, diminish brand loyalty and result in lost
revenues, any of which could harm our business.
Our suppliers may not be able to provide goods in a timely
manner and meet quality standards.
A key supplier may become unable to address our merchandising
needs due to payment terms, cost of manufacturing, adequacy of
manufacturing capacity, quality control, or timeliness of
delivery. If we were unexpectedly required to change suppliers
or if a key supplier was unable to supply acceptable merchandise
in sufficient quantities on acceptable terms, we could
experience a significant disruption in the supply of
merchandise. We could also experience operational difficulties
with our suppliers, such as reductions in the availability of
production capacity, supply chain disruptions, errors in
complying with merchandise specifications, insufficient quality
control, shortages of fabrics or other raw materials, failures
to meet production deadlines or increases in manufacturing costs.
Furthermore, many of our suppliers rely on working capital
financing to finance their operations. Although the credit
market has improved since 2008, lenders have still maintained
tightened credit standards and terms. To the extent any of our
suppliers are unable to obtain adequate credit or their
borrowing costs increase, we may experience delays in obtaining
merchandise, the suppliers increasing their prices or the
suppliers modifying payment terms in a manner that is
unfavorable to us.
A significant portion of our merchandise is received from one
supplier.
We have no material long-term or exclusive contract with any
apparel or accessory manufacturer or supplier. Our business
depends on our network of suppliers and our continued good
relations with them. However, approximately 18% of total
purchases in fiscal 2010 and 13% of total purchases in 2009 were
made from one supplier. We cannot guarantee that this
relationship will be maintained in the future or that the
supplier will continue
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to be available to supply merchandise. A significant disruption
in the supply of merchandise from this, or any other key
supplier, could have a material adverse impact on our operations.
Competition could negatively impact our results.
We compete with national, international and local department
stores, specialty and discount store chains, independent retail
stores, and catalog and online businesses that market and sell
similar lines of merchandise. Many competitors are significantly
larger and have greater financial, marketing and other resources
and enjoy greater national, regional and local name recognition.
In addition to competing for sales, we compete for favorable
store locations, lease terms and qualified associates. Increased
competition could result in price reductions, increased
marketing expenditures and loss of market share, any of which
could have a material adverse effect on our financial condition
and results of operations. The recent recessionary conditions
have resulted in more significant competition as our competitors
have lowered prices and engaged in more promotional activity.
We rely significantly on foreign sources of production.
The majority of our clothing and accessories is produced outside
the United States, the percentage has been growing, and this
trend may continue. As a result, our business remains subject to
the various risks of doing business in foreign markets and
importing merchandise from abroad, such as:
(i) geo-political instability; (ii) imposition of new
legislation relating to import quotas that may limit the
quantity of goods that may be imported into the
United States from countries in which we do business;
(iii) imposition of new or increased duties, taxes, and
other charges on imports; (iv) foreign exchange rate
challenges and pressures presented by implementation of
U.S. monetary policy; (v) local business practice and
political issues, including issues relating to compliance with
our Terms of Commitment to Ethical Sourcing and domestic or
international labor standards; (vi) transportation
disruptions; (vii) natural disasters; (viii) delays in
the delivery of cargo due to port security considerations; and
(ix) seizure or detention of goods by U.S. Customs
authorities. In particular, we continue to source a substantial
portion of our merchandise from China. A change in the Chinese
currency, other policies affecting labor laws or the costs of
goods in China could negatively impact our merchandise costs.
Additionally, due to recent inflationary pressures we have
needed to reserve fabric with our suppliers further in advance
of our normal production process. This results in additional
risks, including forecasting of anticipated demand over a longer
period, which could adversely impact our results of operations.
We cannot predict whether or not any of the foreign countries in
which our clothing and accessories are currently, or in the
future may be produced, will be subject to import restrictions
by the United States government, including the likelihood, type
or effect of any trade retaliation. Trade restrictions,
including increased tariffs, or more restrictive quotas,
including safeguard quotas, or anything similar, applicable to
apparel items could affect the importation of apparel generally
and, in that event, could increase the cost, or reduce the
supply, of apparel available to us and adversely affect our
business, financial condition and results of operations.
In addition, the laws and customs protecting intellectual
property rights in many foreign countries can be substantially
different and potentially less protective of intellectual
property than those in the United States. We have taken numerous
steps to protect our intellectual property overseas, but cannot
guarantee that such rights are not infringed. The intentional or
unintentional infringement on our intellectual property rights
by one of our suppliers or any other person or entity, could
diminish the uniqueness of our products, tarnish our trademarks,
or damage our reputation.
Our business could be negatively impacted if a supplier fails
to implement acceptable labor practices.
Although we have adopted our Terms of Commitment to Ethical
Sourcing and use the services of third party audit firms to be
diligent in our monitoring of compliance with these terms, we do
not have absolute control over the ultimate actions or labor
practices of our independent suppliers. Furthermore, we are
attempting to lower our reliance on suppliers located in China.
As a result, we may do business with suppliers that are not as
familiar with our supplier guidelines which may result in
temporary noncompliance.
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The violation of labor or other laws by any of our key
independent suppliers or the divergence of an independent
suppliers labor practices from those generally accepted by
us as ethical could interrupt or otherwise disrupt the shipment
of finished merchandise or damage our reputation.
Failure to comply with applicable laws and regulations could
adversely impact our business.
Our policies and procedures are designed to comply with all
applicable laws, accounting and reporting requirements,
regulations and tax requirements, including those imposed by the
Sarbanes-Oxley Act of 2002, the SEC and the New York Stock
Exchange (NYSE). Failure to comply with the various
laws and regulations as well as changes in laws and regulations
could have an adverse impact on our reputation, financial
condition or results of operations.
We may be subject to adverse outcomes of litigation
matters.
We are involved from time to time in litigation and other claims
against our business. These matters arise primarily in the
ordinary course of business but could raise complex, factual and
legal issues, which are subject to multiple risks and
uncertainties and could require significant management time. We
believe that our current litigation matters will not have a
material adverse effect on the results of operations or
financial condition. However, our assessment of current
litigation could change in light of the discovery of facts with
respect to legal actions pending against us, not presently known
to us, or determinations by judges, juries or other finders of
fact which do not accord with our evaluation of the possible
liability or outcome of such litigation and additional
litigation that is not currently pending could have a more
significant impact on our business and operations.
We may be unable to retain or recruit key personnel.
Our success and ability to properly manage our growth depends to
a significant extent both upon the performance of our current
executive and senior management team and our ability to attract,
hire, motivate, and retain additional qualified personnel in the
future. If we cannot recruit and retain such additional
personnel or we lose the services of any of our executive
officers without appropriate succession planning, it could have
a material adverse impact on our business, financial condition
and results of operations.
In addition, our success also depends in part upon our ability
to attract, develop and retain a sufficient number of qualified
employees, including store associates and talented merchants. If
we are unable to identify, hire, develop, retain and motivate
associates sufficiently in order to maintain our current
business and support our growth strategies, our business could
be adversely impacted.
War, terrorism or other catastrophes may negatively impact
our results.
In the event of war, acts of terrorism or the threat of
terrorist attacks, customer traffic in shopping centers and
consumer spending could significantly decrease. In addition,
local authorities or shopping center management could close in
response to any immediate security concern or weather
catastrophe such as hurricanes, earthquakes, or tornadoes.
Similarly, war, acts of terrorism, threats of terrorist attacks,
or a weather catastrophe could severely and adversely affect our
National Store Support Center (NSSC) campus or
distribution center which, in turn, could have a material
adverse impact on our business.
Impairment charges could have a material impact on our
results of operations and financial condition.
Periodically, we review our long-lived assets for impairment
whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. We also test
our goodwill and intangible assets for impairment at least
annually or more frequently if impairment indicators arise.
Significant negative industry or economic trends, disruptions to
our business and unexpected significant changes or planned
changes in use of the assets may result in impairments to
goodwill and other long-lived assets. Future impairment charges
could significantly affect our results of operations in the
periods recognized.
Our failure to protect our brands reputation
and/or
intellectual property could have an adverse effect on our brand
images.
Our ability to protect our brands reputation is an
integral part of our general success strategy and is critical to
the overall value of the brands. Maintaining and positioning
these brands is an ongoing investment for us and our
14
continued investment in customer research and promotional venues
will be essential. Additionally, if we fail to maintain high
standards for merchandise quality and integrity, such failures
could jeopardize the brands reputation and have a negative
effect on our business. Damage to our reputation as a whole
could also cause a loss of consumer and investor confidence and
could have a material effect on our business.
In addition, our trademarks, copyrights, and other intellectual
and proprietary rights are important to our success. Even though
we take action to protect all of our intellectual property and
other proprietary rights, others may attempt to imitate our
products or obtain or infringe upon our intellectual property
rights. Other parties may also claim that some of our products
infringe on their trademarks, copyrights, or other intellectual
property rights. To the extent such claims are successful, sales
could decline and our business and results of operations could
be adversely affected.
Our stock price may be volatile.
The market price of our common stock has fluctuated
substantially in the past and may continue to do so in the
future. Future announcements or management discussions
concerning us or our competitors, sales and profitability
results, quarterly variations in operating results or comparable
store net sales, or changes in earnings estimates by analysts,
among other factors, could cause the market price of the common
stock to fluctuate substantially. In addition, stock markets, in
general, have experienced extreme price and volume volatility in
recent years. This volatility has had a substantial effect on
the market prices of securities of many public companies for
reasons frequently unrelated to the operating performance of the
specific companies.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
Stores
As a matter of policy, all of our stores are currently leased.
As of January 29, 2011, our 1,151 stores were located in
48 states, the District of Columbia, the U.S. Virgin
Islands and Puerto Rico, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alabama
|
|
|
17
|
|
|
Louisiana
|
|
|
17
|
|
|
Ohio
|
|
|
31
|
|
Arizona
|
|
|
27
|
|
|
Maine
|
|
|
1
|
|
|
Oklahoma
|
|
|
9
|
|
Arkansas
|
|
|
8
|
|
|
Maryland
|
|
|
33
|
|
|
Oregon
|
|
|
17
|
|
California
|
|
|
138
|
|
|
Massachusetts
|
|
|
32
|
|
|
Pennsylvania
|
|
|
48
|
|
Colorado
|
|
|
23
|
|
|
Michigan
|
|
|
27
|
|
|
Rhode Island
|
|
|
6
|
|
Connecticut
|
|
|
20
|
|
|
Minnesota
|
|
|
20
|
|
|
South Carolina
|
|
|
20
|
|
Delaware
|
|
|
7
|
|
|
Mississippi
|
|
|
4
|
|
|
South Dakota
|
|
|
1
|
|
District of Columbia
|
|
|
2
|
|
|
Missouri
|
|
|
22
|
|
|
Tennessee
|
|
|
23
|
|
Florida
|
|
|
109
|
|
|
Montana
|
|
|
2
|
|
|
Texas
|
|
|
106
|
|
Georgia
|
|
|
40
|
|
|
Nebraska
|
|
|
6
|
|
|
Utah
|
|
|
9
|
|
Hawaii
|
|
|
6
|
|
|
Nevada
|
|
|
16
|
|
|
Vermont
|
|
|
1
|
|
Idaho
|
|
|
2
|
|
|
New Hampshire
|
|
|
3
|
|
|
Virginia
|
|
|
30
|
|
Illinois
|
|
|
47
|
|
|
New Jersey
|
|
|
49
|
|
|
Washington
|
|
|
23
|
|
Indiana
|
|
|
18
|
|
|
New Mexico
|
|
|
9
|
|
|
West Virginia
|
|
|
2
|
|
Iowa
|
|
|
6
|
|
|
New York
|
|
|
41
|
|
|
Wisconsin
|
|
|
13
|
|
Kansas
|
|
|
9
|
|
|
North Carolina
|
|
|
33
|
|
|
U.S. Virgin Islands
|
|
|
1
|
|
Kentucky
|
|
|
13
|
|
|
North Dakota
|
|
|
1
|
|
|
Puerto Rico
|
|
|
3
|
|
15
NSSC and
Distribution Center
Our NSSC is located on approximately 58 acres in
Fort Myers, Florida and consists of approximately
364,000 square feet of office space. In fiscal 2009, we
completed the purchase of 39 acres of property in close
proximity to our existing DC in Winder, Georgia including an
approximately 300,000 square foot building for
approximately $10.4 million. This acquisition, combined
with our existing 233,000 square foot retail distribution
center and 50,000 square foot call and data center, results
in a total of 583,000 square feet on a combined
110 acres in Winder, Georgia for our distribution and
fulfillment operations.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
The Company was named as a defendant in a putative class action
filed in February 2011 in the Superior Court of the State of
California for the County of Orange, Lorraine V.
Garcia v. Chicos FAS, Inc. The Complaint alleges
that the Company, in violation of California law, requested or
required customers to provide personal information as a
condition of accepting payment by credit card. The Company
denies the material allegations of the Complaint and will file
its response by the required deadline. The Company believes that
the case is wholly without merit and, thus, does not believe
that the case should have any material adverse effect on the
Companys financial condition or results of operations.
The Company was named as a defendant in a putative class action
filed in March 2011 in the Superior Court of the State of
California for the County of Los Angeles, Eileen Schlim v.
Chicos FAS, Inc. The Complaint attempts to allege
numerous violations of California law related to wages, meal
periods, rest periods, and vacation pay, among other things. The
Company denies the material allegations of the Complaint and
will file its response by the required deadline. The Company
believes that its policies and procedures for paying its
associates comply with all applicable California laws. As a
result, the Company does not believe that the case should have a
material adverse effect on the Companys financial
condition or results of operations.
Other than as noted above, we are not currently a party to any
legal proceedings, other than various claims and lawsuits
arising in the normal course of business, none of which we
believe should have a material adverse effect on our financial
condition or results of operations.
|
|
ITEM 4.
|
(REMOVED
AND RESERVED)
|
16
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our Common Stock trades on the NYSE under the symbol
CHS. On March 14, 2011, the last reported sale
price of the Common Stock on the NYSE was $13.51 per share. The
number of holders of record of common stock on March 14,
2011 was 1,848.
The following table sets forth, for the periods indicated, the
range of high and low sale prices for the Common Stock, as
reported on the NYSE:
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended January 29, 2011
|
|
High
|
|
Low
|
|
Fourth Quarter (October 31, 2010 - January 29,
2011)
|
|
$
|
12.91
|
|
|
$
|
9.60
|
|
Third Quarter (August 1, 2010 - October 30, 2010)
|
|
|
11.50
|
|
|
|
8.22
|
|
Second Quarter (May 2, 2010 - July 31, 2010)
|
|
|
15.62
|
|
|
|
8.91
|
|
First Quarter (January 31, 2010 - May 1, 2010)
|
|
|
16.57
|
|
|
|
12.78
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended January 30, 2010
|
|
High
|
|
Low
|
|
Fourth Quarter (November 1, 2009 - January 30,
2010)
|
|
$
|
15.43
|
|
|
$
|
11.95
|
|
Third Quarter (August 2, 2009 - October 31, 2009)
|
|
|
14.14
|
|
|
|
11.03
|
|
Second Quarter (May 3, 2009 - August 1, 2009)
|
|
|
11.69
|
|
|
|
7.17
|
|
First Quarter (February 1, 2009 - May 2, 2009)
|
|
|
8.05
|
|
|
|
3.40
|
|
In fiscal 2010, we declared four cash dividends of $0.04 per
share resulting in an annual dividend of
$0.16 per share. There were no cash dividends declared
in fiscal 2009.
On February 23, 2011, we announced that the Board of
Directors approved an increase in the quarterly dividend to
$0.05 per common share (previously $0.04) and will be payable on
March 28, 2011 to Chicos FAS shareholders of record
at the close of business on March 14, 2011.
In fiscal 2010, we repurchased 70,642 restricted shares in
connection with employee tax withholding obligations under
employee compensation plans, of which 45,859 were repurchased in
the fourth quarter as set forth in the following chart:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Dollar Value
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
of Shares that
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
May Yet Be
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Part of
|
|
|
Under the
|
|
|
|
Total Number
|
|
|
Average
|
|
|
Publicly
|
|
|
Publicly
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Announced
|
|
|
Announced
|
|
Period
|
|
Purchased
|
|
|
per Share
|
|
|
Plans
|
|
|
Plans
|
|
|
October 31, 2010 - November 27, 2010
|
|
|
38,130
|
|
|
$
|
12.05
|
|
|
|
|
|
|
$
|
181,661,748
|
|
November 28, 2010 - January 1, 2011
|
|
|
7,729
|
|
|
$
|
12.31
|
|
|
|
|
|
|
|
181,661,748
|
|
January 2, 2011 - January 29, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,661,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
45,859
|
|
|
$
|
12.09
|
|
|
|
|
|
|
$
|
181,661,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Five Year
Performance Graph
The following graph compares the cumulative total return on our
common stock with the cumulative total return of the companies
in the Standard & Poors (S&P)
500 Index and the Standard & Poors 500 Apparel
Retail Index. Cumulative total return for each of the periods
shown in the Performance Graph is measured assuming an initial
investment of $100 on January 28, 2006 and the reinvestment
of dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/06
|
|
|
2/3/07
|
|
|
2/2/08
|
|
|
1/31/09
|
|
|
1/30/10
|
|
|
1/29/11
|
Chicos FAS, Inc.
|
|
|
$
|
100
|
|
|
|
$
|
52
|
|
|
|
$
|
25
|
|
|
|
$
|
9
|
|
|
|
$
|
30
|
|
|
|
$
|
27
|
|
S&P 500 Index
|
|
|
$
|
100
|
|
|
|
$
|
115
|
|
|
|
$
|
113
|
|
|
|
$
|
68
|
|
|
|
$
|
91
|
|
|
|
$
|
111
|
|
S&P 500 Apparel Retail Index
|
|
|
$
|
100
|
|
|
|
$
|
119
|
|
|
|
$
|
115
|
|
|
|
$
|
58
|
|
|
|
$
|
114
|
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Selected Financial Data at the dates and for the periods
indicated should be read in conjunction with, and is qualified
in its entirety by reference to the financial statements and the
notes thereto referenced in this Annual Report on
Form 10-K.
Amounts in the following tables are in thousands, except per
share data, number of stores data, net sales and inventory per
square foot, and number of associates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Summary of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,904,954
|
|
|
$
|
1,713,150
|
|
|
$
|
1,582,405
|
|
|
$
|
1,714,326
|
|
|
$
|
1,640,927
|
|
Gross margin
|
|
$
|
1,068,575
|
|
|
$
|
959,741
|
|
|
$
|
819,492
|
|
|
$
|
969,061
|
|
|
$
|
967,185
|
|
Gross margin as a percent of net sales
|
|
|
56.1
|
%
|
|
|
56.0
|
%
|
|
|
51.8
|
%
|
|
|
56.5
|
%
|
|
|
58.9
|
%
|
Income (loss) from operations
|
|
$
|
177,082
|
|
|
$
|
108,153
|
|
|
$
|
(39,594
|
)
|
|
$
|
121,458
|
|
|
$
|
263,700
|
|
Income (loss) from operations as a percent of net sales
|
|
|
9.3
|
%
|
|
|
6.3
|
%
|
|
|
(2.5
|
)%
|
|
|
7.1
|
%
|
|
|
16.1
|
%
|
Net income (loss)
|
|
$
|
115,394
|
|
|
$
|
69,646
|
|
|
$
|
(19,137
|
)
|
|
$
|
88,875
|
|
|
$
|
166,636
|
|
Net income (loss) as a percent of net sales
|
|
|
6.1
|
%
|
|
|
4.1
|
%
|
|
|
(1.2
|
)%
|
|
|
5.2
|
%
|
|
|
10.2
|
%
|
Per share results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.65
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.51
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.50
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic
|
|
|
176,778
|
|
|
|
177,499
|
|
|
|
176,606
|
|
|
|
176,082
|
|
|
|
177,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-diluted
|
|
|
178,034
|
|
|
|
178,858
|
|
|
|
176,606
|
|
|
|
176,735
|
|
|
|
178,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data (at year end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities
|
|
$
|
548,714
|
|
|
$
|
423,543
|
|
|
$
|
268,702
|
|
|
$
|
274,270
|
|
|
$
|
275,539
|
|
Total assets
|
|
|
1,416,021
|
|
|
|
1,318,803
|
|
|
|
1,226,183
|
|
|
|
1,250,126
|
|
|
|
1,060,627
|
|
Working capital
|
|
|
535,488
|
|
|
|
405,274
|
|
|
|
322,728
|
|
|
|
305,540
|
|
|
|
334,513
|
|
Stockholders equity
|
|
|
1,064,907
|
|
|
|
981,918
|
|
|
|
902,196
|
|
|
|
912,516
|
|
|
|
803,931
|
|
Other selected operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage increase (decrease) in comparable store net sales
|
|
|
6.3
|
%
|
|
|
6.1
|
%
|
|
|
(15.1
|
)%
|
|
|
(8.1
|
)%
|
|
|
2.1
|
%
|
Percentage increase (decrease) in comparable sales including DTC
|
|
|
8.3
|
%
|
|
|
7.6
|
%
|
|
|
(14.5
|
)%
|
|
|
(6.5
|
)%
|
|
|
3.1
|
%
|
Capital expenditures
|
|
$
|
73,045
|
|
|
$
|
67,920
|
|
|
$
|
104,615
|
|
|
$
|
202,223
|
|
|
$
|
218,311
|
|
Total depreciation and amortization
|
|
$
|
94,113
|
|
|
$
|
96,372
|
|
|
$
|
97,572
|
|
|
$
|
91,979
|
|
|
$
|
69,404
|
|
Total inventory per selling square foot
|
|
$
|
57
|
|
|
$
|
53
|
|
|
$
|
51
|
|
|
$
|
60
|
|
|
$
|
57
|
|
Total stores at period end
|
|
|
1,151
|
|
|
|
1,080
|
|
|
|
1,076
|
|
|
|
1,038
|
|
|
|
920
|
|
Total selling square feet
|
|
|
2,785
|
|
|
|
2,619
|
|
|
|
2,596
|
|
|
|
2,405
|
|
|
|
1,954
|
|
Average net sales per selling square foot at stores: *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicos
|
|
$
|
634
|
|
|
$
|
606
|
|
|
$
|
598
|
|
|
$
|
792
|
|
|
$
|
961
|
|
WH|BM
|
|
|
739
|
|
|
|
682
|
|
|
|
656
|
|
|
|
804
|
|
|
|
1,040
|
|
Total number of associates (rounded)
|
|
|
18,900
|
|
|
|
16,200
|
|
|
|
14,500
|
|
|
|
14,300
|
|
|
|
12,500
|
|
|
|
|
*
|
|
Average net sales per selling
square foot at our stores are based on net sales of stores that
have been operated by us for the full year. For fiscal 2006,
average net sales per selling square foot at our stores have
been adjusted to exclude the effect of the fifty-third week.
|
19
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
thereto.
Executive
Overview
We are a national specialty retailer of private branded,
sophisticated,
casual-to-dressy
clothing, intimates, complementary accessories, and other
non-clothing gift items operating under the Chicos, White
House | Black Market, and Soma Intimates brand names. We earn
revenues and generate cash through the sale of merchandise in
our retail stores, on our various websites and through our call
centers, which take orders for all brands.
Results
of 2010 Initiatives
Fiscal 2010s results are a reflection of our continued
progress in executing the goals that we have established as
being vital to the performance of our company. These goals were
and continue to be:
|
|
|
|
|
Improving the performance of the Chicos brand
|
|
|
|
Investing in the growth potential of the WH|BM and Soma brands
|
|
|
|
Accelerating the investment in and growth of the
direct-to-consumer
(DTC) channel
|
|
|
|
Controlling expenses and rationalizing the expense structure
|
|
|
|
Improving inventory control
|
Chicos The performance of the
Chicos brand during fiscal 2010 was a clear indication
that we have made significant progress in our turnaround
efforts. Chicos had its best comparable store sales
performance since fiscal 2005. We believe this is attributable
to our ability to provide customers with fresh and trend-right
merchandise offerings supported by novel and timely marketing
campaigns as well as personalized customer service. In fiscal
2010, the Chicos brand also focused on increasing the
penetration of its
made-for-outlet
product which resulted in improved profitability for our stores
in the outlet channel.
WH|BM The WH|BM brand had another
successful year in fiscal 2010 with total sales reaching
$590 million, an increase of 14.3% over last year. WH|BM
added touches of bright and vibrant color accents to its fashion
selection at various times, which proved to be a big hit with
our customer and a significant driver behind the brands
improved results over fiscal 2009.
Soma We continue to believe in the
growth potential of the Soma brand and are encouraged by its
progress in fiscal 2010. During 2010, Soma introduced its first
television advertising campaign since 2007, which served to
attract new customers and reactivate lapsed customers.
Direct-to-consumer
In fiscal 2010, net sales for the DTC channel increased 39.7% to
$137.4 million. This 39.7% increase in fiscal 2010 follows
a similar 39.3% increase in 2009.
Expense Structure Selling, general and
administrative (SG&A) expenses during fiscal
2010 increased over fiscal 2009 mostly as a result of costs
associated with operating 71 net, new stores opened since the
end of fiscal 2009 and planned increases in marketing expenses.
However, as a percentage of net sales, SG&A for fiscal 2010
decreased by over 200 basis points compared to fiscal 2009.
Inventory Management Effective
inventory management is essential in enabling us to offer our
customers an appropriate selection of current merchandise.
During fiscal 2010, we believe that we improved our in-stock
levels and inventory turnover in an effort to limit the
markdowns needed to clear merchandise. Furthermore, we believe
our inventory balance at year end is in line with our current
sales trend.
20
Financial
Highlights for Fiscal 2010
|
|
|
|
|
Net sales increased 11.2% to $1.905 billion, the highest in
our history, compared to $1.713 billion in 2009, and
consolidated comparable store sales increased 6.3% following a
6.1% increase last year. Including DTC sales, consolidated
comparable sales increased 8.3% in 2010 on top of a 7.6%
increase last year.
|
|
|
|
Income from operations, as a percentage of net sales, was 9.3%
compared to 6.3% in 2009, or an increase of 300 basis
points over last year.
|
|
|
|
Net income was $115.4 million compared to
$69.6 million in 2009, and earnings per diluted share
increased 64% to $0.64 compared to $0.39 last year. Net income
for 2010 and 2009 included $1.9 million and
$15.0 million of pre-tax non-cash impairment charges,
respectively.
|
|
|
|
Cash and marketable securities ended the year at
$548.7 million, an increase of 29.6% over last year, after
considering that we paid $28.5 million of dividends and
repurchased and retired $18.3 million of our common stock
through our share repurchase program announced in August 2010.
|
|
|
|
Cash flows from operations for 2010 were $239.6 million
compared with $215.4 million in 2009, an increase of 11.2%.
|
Key
Performance Indicators
In order to monitor our success, we review certain key
performance indicators, including:
|
|
|
|
|
Comparable sales growth In 2010, our
comparable store sales (sales from stores open for at least
twelve full months, including stores that have been expanded or
relocated within the same general market) improved across all
three brands. Beginning in fiscal 2011, we will report
comparable sales inclusive of DTC. We are channel-agnostic when
it comes to sales and it has become increasingly apparent that
store sales and DTC sales are intertwined. Since we have moved
to a pooled inventory effort to support stores and DTC
accompanied by cross-channel marketing initiatives, it is
difficult to discern a portion of our sales that should be
credited to the appropriate channel. We believe that our ability
to deliver consistent increases in comparable sales will be a
key factor in determining our future levels of success.
|
|
|
|
Positive operating cash flow and capital expenditures
Historically, a key strength of the business has
been the ability to consistently generate cash flow from
operations. We believe the consistent generation of cash flows
sufficient to fund operations and capital expenditures is and
will be a key performance indicator for us.
|
|
|
|
Store productivity We consistently monitor
various key performance indicators of store productivity
including sales per square foot, store operating contribution
margin and store cash flow in order to assess our performance.
|
|
|
|
Inventory management We actively manage our
inventories based on seasonal trends, store productivity results
and anticipated sales volumes, which may lead to increased or
decreased inventory levels. We believe that constant monitoring
of our inventories on a per square foot basis assists us in
planning future sales, determining markdowns and assessing our
customers response to the merchandise.
|
Future
Outlook
For fiscal 2011, we are currently forecasting a
low-to-mid
single digit increase in comparable sales inclusive of DTC with
slight improvement expected in our gross margin rate as a
percentage of net sales. Although we expect our SG&A
expenses as a percentage of net sales to decrease reflecting
leverage based on the forecasted comparable sales increase, we
anticipate approximately $8.0 million of incremental
marketing costs over last year as well as the costs associated
with opening 100 to 110 net, new stores.
Capital expenditures for fiscal 2011 are expected to range
between $110 million to $120 million, which
contemplates the opening of approximately 100 to 110 net
new stores as well as continued enhancements of our information
technology systems and other infrastructure costs including DTC
automation projects.
21
Results
of Operations
Net
Sales
The following table depicts net sales by Chicos/Soma and
WH|BM in dollars and as a percentage of total net sales for
fiscal 2010 (current period), fiscal 2009
(prior period), and fiscal 2008 (dollar amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
Fiscal 2010
|
|
|
%
|
|
|
Fiscal 2009
|
|
|
%
|
|
|
Fiscal 2008
|
|
|
%
|
|
|
Chicos/Soma
|
|
$
|
1,314,649
|
|
|
|
69.0
|
%
|
|
$
|
1,196,729
|
|
|
|
69.9
|
%
|
|
$
|
1,127,988
|
|
|
|
71.3
|
%
|
WH|BM
|
|
|
590,305
|
|
|
|
31.0
|
|
|
|
516,421
|
|
|
|
30.1
|
|
|
|
454,417
|
|
|
|
28.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,904,954
|
|
|
|
100.0
|
%
|
|
$
|
1,713,150
|
|
|
|
100.0
|
%
|
|
$
|
1,582,405
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by Chicos/Soma and WH|BM increased from the
prior period primarily due to positive comparable sales
(including DTC sales) for all three brands as well as new store
openings. A summary of the factors impacting
year-over-year
sales increases is provided in the table below (dollar amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Comparable store sales increases (decreases)
|
|
$
|
100,504
|
|
|
$
|
89,698
|
|
|
$
|
(242,407
|
)
|
Comparable store sales %
|
|
|
6.3
|
%
|
|
|
6.1
|
%
|
|
|
(15.1
|
)%
|
Comparable sales % (including DTC)
|
|
|
8.3
|
%
|
|
|
7.6
|
%
|
|
|
(14.5
|
)%
|
Net non-comp store sales increase
|
|
$
|
52,260
|
|
|
$
|
13,311
|
|
|
$
|
112,103
|
|
Direct-to-consumer
sales increases (decreases)
|
|
$
|
39,040
|
|
|
$
|
27,736
|
|
|
$
|
(1,502
|
)
|
Consolidated comparable sales increased in fiscal 2010 and were
driven by an approximate 7% increase in transactions at
Chicos front-line stores, which was partially offset by a
slight decrease in units per transaction. In addition, WH|BM
stores experienced an increase in both transactions and units
per transaction in fiscal 2010. The increase in consolidated
comparable sales is also attributable to a 39.7% increase in net
DTC sales in fiscal 2010 over fiscal 2009 due to enhanced
website functionality, increased DTC promotions and expanded
online product offerings, including clearance items. Comparable
store sales excluding DTC sales for the Chicos/Soma
brands increased by 5.4% while the WH|BM brands
comparable store sales increased by 8.4% over last year.
The consolidated comparable store sales increase of 6.1% in
fiscal 2009 was driven primarily by an approximate 8% increase
in the Chicos average unit retail price, which was
partially offset by a slight decrease in units per transaction
at Chicos front-line stores. Comparable store sales
results also benefited from an increase in both the average unit
retail price as well as total transactions at the WH|BM brand
compared to the like period in fiscal 2008. The
Chicos/Soma brands comparable store sales increased
by approximately 4% and the WH|BM brands comparable store
sales increased by approximately 11% compared to the like period
in fiscal 2008. Net sales by the DTC for fiscal 2009 increased
by $27.7 million, or 39.3%, compared to fiscal 2008 due to
enhanced functionality on our websites and improved online
assortments. Consolidated comparable sales, which include DTC
sales, increased in fiscal 2009 by 7.6% over fiscal 2008.
Cost
of Goods Sold/Gross Margin
The following table depicts cost of goods sold and gross margin
in dollars and gross margin as a percentage of net sales for
fiscal 2010, 2009 and 2008 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Cost of goods sold
|
|
$
|
836,379
|
|
|
$
|
753,409
|
|
|
$
|
762,913
|
|
Gross margin
|
|
$
|
1,068,575
|
|
|
$
|
959,741
|
|
|
$
|
819,492
|
|
Gross margin percentage
|
|
|
56.1
|
%
|
|
|
56.0
|
%
|
|
|
51.8
|
%
|
As a percentage of net sales, gross margin increased by only
10 basis points in fiscal 2010 compared to fiscal 2009.
This increase was mainly attributable to improved merchandise
margins at outlet stores due to increased penetration of
made-for-outlet
product but offset, for the most part, by a slight decrease in
merchandise margins at Chicos front-line stores. This
decrease in merchandise margins was primarily driven by
increases in markdowns for fiscal 2010, partially offset by
slightly higher initial markups for the Chicos brand.
22
Gross margin percentage increased by 420 basis points in
fiscal 2009 compared to fiscal 2008. The gross margin increase
was attributable to significant improvements in the merchandise
margins at both the Chicos and WH|BM brands. Both brands
benefited from substantially lower markdowns and, to a lesser
extent, higher initial markups. These improvements in gross
margin were slightly offset by continued investment in
merchandise and product development including technology
initiatives.
Store
and Direct Operating Expenses
The following table depicts store and direct operating expenses
in dollars and as a percentage of total net sales for fiscal
2010, 2009 and 2008 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Store and direct operating expenses
|
|
$
|
673,142
|
|
|
$
|
647,040
|
|
|
$
|
645,352
|
|
Percentage of total net sales
|
|
|
35.3
|
%
|
|
|
37.8
|
%
|
|
|
40.8
|
%
|
Store and direct operating expenses include store and DTC
operational expenses, and reflect such items as personnel,
occupancy, credit card fees, depreciation and supplies, incurred
to operate each of our stores and the DTC channel. In addition,
store and direct operating expenses include support expenditures
for district and regional management expenses and other store
support functions. Store and direct operating expenses increased
by $26.1 million over fiscal 2009 primarily due to
increased store labor costs and occupancy expense associated
with 71 net new stores over last year, accompanied by
increased in-store promotions and higher credit card fees due to
higher sales volume compared to last year. Store operating
expenses as a percentage of net sales decreased by
250 basis points in fiscal 2010 due to the leverage
associated with positive comparable store sales.
In fiscal 2009, store operating expenses increased slightly in
dollars due to higher occupancy costs but, as a percentage of
net sales, decreased by 300 basis points due to the
leverage from positive comparable store sales as well as
effective implementation of ongoing cost saving initiatives at
the store level.
Marketing
The following table depicts marketing expenses in dollars and as
a percentage of total net sales for fiscal 2010, 2009 and 2008
(dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Marketing
|
|
$
|
102,481
|
|
|
$
|
78,075
|
|
|
$
|
80,326
|
|
Percentage of total net sales
|
|
|
5.4
|
%
|
|
|
4.6
|
%
|
|
|
5.1
|
%
|
Marketing expenses include marketing programs such as direct
marketing efforts, national advertising expenses via various
media and related support costs. Marketing expenses increased in
fiscal 2010 by $24.4 million compared to fiscal 2009 mainly
due to planned increases in marketing initiatives across all
three brands, particularly with television advertising and
e-marketing
initiatives. As a percentage of net sales, marketing expenses
increased 80 basis points in fiscal 2010 compared to fiscal
2009.
Marketing expenses decreased as a percentage of net sales by
approximately 50 basis points in fiscal 2009 compared to
fiscal 2008 mainly due to the leverage from positive comparable
store sales. In addition, marketing expenses in dollars
decreased due to savings in direct mailing costs attributable to
both decreased materials costs and circulations, partially
offset by an increase in broadcast and print advertisement.
23
National
Store Support Center
The following table depicts NSSC expenses in dollars and as a
percentage of total net sales for fiscal 2010, 2009 and 2008
(dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
NSSC
|
|
$
|
114,002
|
|
|
$
|
111,447
|
|
|
$
|
109,744
|
|
Percentage of total net sales
|
|
|
6.0
|
%
|
|
|
6.5
|
%
|
|
|
6.9
|
%
|
NSSC expenses consist of corporate level functions including
executive management, human resources, management information
systems and finance, among others. In fiscal 2010, NSSC expenses
increased slightly mainly due to increased recruiting and
relocation costs. However, as a percentage of net sales, NSSC
expenses decreased by 50 basis points due to the leverage
associated with positive comparable store sales for the year.
NSSC expenses in fiscal 2009 increased slightly in dollars
mainly due to increased incentive compensation costs, offset by
back office cost reduction initiatives. However, as a percentage
of net sales, NSSC expenses decreased by 40 basis points
due to the leverage associated with the positive comparable
store sales.
Impairment
and Restructuring Charges
The following table depicts impairment and restructuring charges
in dollars and as a percentage of total net sales for fiscal
2010, 2009 and 2008 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Impairment and restructuring charges
|
|
$
|
1,868
|
|
|
$
|
15,026
|
|
|
$
|
23,664
|
|
Percentage of total net sales
|
|
|
0.1
|
%
|
|
|
0.9
|
%
|
|
|
1.5
|
%
|
The impairment charges recognized in fiscal 2010 include
non-cash impairment charges incurred in the first and fourth
quarters of the year. An evaluation of long-lived assets at
certain underperforming stores for indicators of impairment was
performed and, as a result, we determined that the carrying
values of certain assets exceeded their future undiscounted cash
flows. The fair value of these assets was determined by
discounting their future cash flows using a rate approximating
our cost of capital, which resulted in an impairment charge of
approximately $0.8 million and $1.1 million in the
first and fourth quarters, respectively.
The impairment charges recognized in fiscal 2009 include
non-cash impairment charges incurred in the first, second and
fourth quarters of the year. During the first quarter of fiscal
2009, an impairment charge totaling $8.1 million was
recorded related to the write-off of development costs for
software applications. During the second quarter of fiscal 2009,
a non-cash charge totaling $3.8 million was incurred
related to the partial write-off of a note receivable and
$1.1 million in non-cash impairment charges related to the
write-off of fixed assets at certain underperforming stores.
During the fourth quarter, an additional non-cash impairment
charge of $2.0 million was taken on the aforementioned note
receivable based on a further evaluation of the underlying
collateral.
The impairment and restructuring charges recognized in fiscal
2008 consisted of non-cash impairment charges totaling
$13.7 million related to the write-off of fixed assets at
certain underperforming stores, and severance and workforce
reduction costs totaling $10.0 million related to the
elimination of approximately 11% of the NSSC employee base and
charges associated with the separation agreement with our former
Chief Executive Officer. Virtually all payments related to the
severance and workforce reduction action were completed in
fiscal 2009.
Interest
Income, net
The following table depicts interest income, net in dollars and
as a percentage of total net sales for fiscal 2010, 2009 and
2008 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Interest income, net
|
|
$
|
1,712
|
|
|
$
|
1,693
|
|
|
$
|
7,757
|
|
Percentage of total net sales
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
0.5
|
%
|
24
In fiscal 2010, interest income, net, was flat in total dollars
and as a percentage of net sales compared to fiscal 2009.
In fiscal 2009, interest income, net, decreased in total dollars
and as a percentage of net sales compared to fiscal 2008
primarily due to lower interest rates on our investments and, to
a lesser extent, due to the reversal and non-accrual of interest
income in fiscal 2009 on a note receivable for which interest
was deemed uncollectible.
Provision
for Income Taxes
Our effective tax rate was 35.5%, 36.6% and 39.9%, for fiscal
2010, 2009 and 2008, respectively. The decrease in the effective
tax rate for fiscal 2010 from fiscal 2009 was primarily due to
the favorable settlement of certain state tax examinations. The
decrease in the effective tax rate for fiscal 2009 from fiscal
2008 was primarily due to the favorable settlement of certain
state tax examinations and the expiration of various statutes of
limitation relating to certain state tax accruals.
Liquidity
and Capital Resources
Overview
Our ongoing capital requirements have been and are for funding
capital expenditures for new, expanded, relocated and remodeled
stores, the continued improvement in information technology
tools, and our distribution center and other central support
facilities.
The following table depicts our capital resources at the end of
fiscal year 2010 and 2009 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
|
Cash and cash equivalents
|
|
$
|
14,695
|
|
|
$
|
37,043
|
|
Marketable securities
|
|
|
534,019
|
|
|
|
386,500
|
|
Working capital
|
|
|
535,488
|
|
|
|
405,274
|
|
Working capital increased from fiscal 2009 to fiscal 2010
primarily due to an increase in marketable securities resulting
from a higher cash flow from operations. The significant
components of working capital are cash and cash equivalents,
marketable securities and inventories, reduced by accounts
payable and accrued liabilities.
Based on past performance and current expectations, we believe
that our cash and cash equivalents, marketable securities and
cash generated from operations will satisfy working capital
needs, future capital expenditures (see New Store Openings
and Infrastructure Investments), commitments, dividend
payments, potential share repurchases and other liquidity
requirements associated with our operations through at least the
next 12 months. Furthermore, while it is our intention to
pay a quarterly cash dividend for fiscal 2011 and beyond, any
determination to pay future dividends will be made by the Board
of Directors and will depend on future earnings, financial
conditions and other factors.
Operating
Activities
Net cash provided by operating activities in fiscal 2010 was
$239.6 million, an increase of approximately
$24.2 million from fiscal 2009 primarily due to higher net
income, mainly as a result of increased sales, and accounts
payable leverage partially offset by an increase in inventory
investment.
Net cash provided by operating activities in fiscal 2009 was
$215.4 million, an increase of approximately
$116.0 million from fiscal 2008, and resulted primarily
from higher net income and increases in accounts payable.
In fiscal 2008, net cash from operating activities was
$99.4 million, and was due primarily to non-cash
adjustments which served to offset the net loss from operations.
These adjustments included depreciation and amortization
expense, deferred tax benefits, stock-based compensation, and an
impairment of long-lived assets, as well as changes in accounts
receivables, payables and inventory.
25
Investing
Activities
Net cash used in investing activities was $220.6 million
and $212.0 million for fiscal 2010 and 2009, respectively.
We had net purchases of $147.5 million of marketable
securities in the current year compared to $144.1 million
of net purchases in fiscal 2009.
Our approximate $5.1 million increased investment in
capital expenditures when compared to the prior year was
primarily related to costs associated with new, relocated,
remodeled and expanded Chicos, Soma and WH|BM stores
offset slightly by a decrease in distribution center investments.
Financing
Activities
Net cash used in financing activities was $41.4 million in
fiscal 2010 compared to net cash provided by financing
activities of $7.1 million in fiscal 2009. In fiscal 2010,
we declared and paid four quarterly $0.04 per share cash
dividends on our common stock totaling $28.5 million and
repurchased $18.3 million of our common stock through the
share repurchase program announced in August 2010. In the
current and prior fiscal years, we received proceeds from both
the issuance of common stock related to option exercises and
employee participation in our employee stock purchase plan.
During fiscal 2010, 2009 and 2008, we repurchased 70,642, 76,479
and 60,168 shares, respectively, of restricted stock in
connection with employee tax withholding obligations under
employee compensation plans, which are not purchases under any
publicly announced plan.
New
Store Openings and Infrastructure Investments
We expect our new stores in fiscal 2011 to increase
approximately 9%, reflecting
24-28 net
openings of Chicos stores,
23-26 net
openings of WH|BM stores, and
53-56 net
openings of Soma stores. We also expect to complete
25-30
relocations or expansions. We continuously evaluate the
appropriate new store growth rate in light of economic
conditions and may adjust the growth rate as conditions require
or as opportunities arise.
We believe that the liquidity needed for new stores, including
the continued investment associated with the Soma brand, our
continuing store remodel/expansion program, the investments
required for our distribution center, our continued installation
and upgrading of new and existing software packages, and
investment in inventory levels associated with this growth will
be funded primarily from cash flow from operations and our
existing cash and marketable securities balances, and, if
necessary, the capacity included in our bank credit facility.
At the beginning of fiscal 2010, we completed the second major
phase of our multi-year, planned implementation of our
enterprise resource planning (ERP) system and we are
currently utilizing this system in all of our brands. The third
major phase includes ongoing enhancements and optimization of
the new ERP across all three brands, as well as the deployment
of additional functionality across various other functions.
In fiscal 2009, we purchased JDA Enterprise Planning, JDA
Assortment Planning and JDA Allocation software applications and
curtailed the previously planned implementations of related SAP
applications and revised our roll out plan accordingly. We
completed the implementation of the allocation functionality
during fiscal 2009, installed enterprise planning in 2010, and
are currently working on implementing the additional JDA
planning applications over the next
12-18 months.
Additionally, we are developing a product lifecycle management
solution supporting the design and development process.
Given our existing cash and marketable securities balances and
the capacity included in our bank credit facility, we do not
believe that we will need to seek other sources of financing to
conduct our operations, pay future dividends or pursue our
expansion plans even 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 we were to increase the number
of new stores planned to be opened in future periods.
26
Contractual
Obligations
The following table summarizes our contractual obligations at
January 29, 2011 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
After
|
|
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
4-5 years
|
|
|
5 years
|
|
|
Operating leases
|
|
$
|
685,400
|
|
|
|
133,195
|
|
|
|
222,745
|
|
|
|
179,492
|
|
|
|
149,968
|
|
Non-cancelable purchase commitments
|
|
|
326,651
|
|
|
|
326,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,012,051
|
|
|
$
|
459,846
|
|
|
$
|
222,745
|
|
|
$
|
179,492
|
|
|
$
|
149,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 29, 2011, our contractual obligations
consisted of amounts outstanding under operating leases and
non-cancelable purchase commitments. Amounts due under
non-cancelable purchase commitments consist of amounts to be
paid under agreements to purchase inventory.
Until formal resolutions are reached between us and the relevant
taxing authorities, we are unable to estimate a final
determination related to our uncertain tax positions and
therefore, we have excluded the uncertain tax positions,
totaling $3.6 million at January 29, 2011 from the
above table.
On November 24, 2008, we entered into a $55 million
Senior Secured Revolving Credit Facility (the Credit
Facility) with SunTrust Bank, as administrative agent and
lender and SunTrust Robinson Humphrey, Inc. as lead arranger.
The Credit Facility provides a $55 million revolving credit
facility that matures on November 24, 2011. The Credit
Facility provides for swing advances of up to $5 million
and issuance of letters of credit up to $10 million. The
Credit Facility also contains a feature that provides us the
ability, subject to satisfaction of certain conditions, to
increase the commitments available under the Credit Facility
from $55 million up to $100 million through additional
syndication. The proceeds of any borrowings under the Credit
Facility may be used to fund future permitted acquisitions, to
provide for working capital and for other general corporate
purposes.
Off-Balance
Sheet Arrangements
At January 29, 2011 and January 30, 2010, we did not
have any relationship with unconsolidated entities or financial
partnerships for the purpose of facilitating off-balance sheet
arrangements or for other contractually narrow or limited
purposes. Therefore, we are not materially exposed to any
financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.
Critical
Accounting Policies and Estimates
The discussion and analysis of our financial condition and
results of operations are based upon the consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.
The preparation of consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. We base our
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions. Management has discussed the development and
selection of these critical accounting policies and estimates
with the Audit Committee of our Board of Directors, and believes
the following assumptions and estimates are significant to
reporting our results of operations and financial position.
Inventory
Valuation and Shrinkage
We identify potentially excess and slow-moving inventories by
evaluating turn rates and inventory levels in conjunction with
our overall sales trend. Excess quantities of inventory are
identified through evaluation of inventory aging, review of
inventory turns and historical sales experiences, as well as
specific identification based
27
on fashion trends. Further, exposure to inadequate realization
of carrying value is identified through analysis of gross
margins and markdowns in combination with changes in current
business trends. We provide lower of cost or market adjustments
for such identified excess and slow-moving inventories.
Historically, the variation of those estimates to observed
results has been insignificant and, although possible,
significant variation is not expected in the future. If,
however, our markdown rate and cost percentage estimates varied
by 10% of their values, the carrying amount of inventory would
have changed by approximately $0.2 million.
We estimate our expected shrinkage of inventories between our
physical inventory counts by applying the most recent average
store shrinkage experience. These rates are updated to reflect
the most recent physical inventory shrinkage experience.
Historically, the variation of those estimates to observed
results has been insignificant and, although possible,
significant variation is not expected in the future. If,
however, our estimated shrinkage percentages increased by 10%,
we would have incurred approximately $0.9 million in
additional expense and the carrying amount of inventory would
have changed by approximately $0.5 million.
Revenue
Recognition
Although our recognition of revenue does not involve significant
judgment, revenue recognition represents an important accounting
policy. Retail sales at our stores are recorded at the point of
sale and are net of estimated customer returns, sales discounts
under the Passport Club and The Black
Book loyalty programs and company issued coupons,
promotional discounts and associate discounts. We record DTC
revenue based on the estimated receipt date of the product by
our customers.
Under our current program, gift cards do not have expiration
dates. We account for gift cards by recognizing a liability at
the time the gift card is sold. The liability is relieved and
revenue is recognized for gift cards upon redemption. In
addition, we recognize revenue on unredeemed gift cards based on
determining that the likelihood of the gift card being redeemed
is remote and that there is no legal obligation to remit the
unredeemed gift cards to relevant jurisdictions (commonly
referred to as gift card breakage). We recognize gift card
breakage under the redemption recognition method. This method
records gift card breakage as revenue on a proportional basis
over the redemption period based on our historical gift card
breakage rate. We determine the gift card breakage rate based on
our historical redemption patterns.
As part of the normal sales cycle, we receive customer
merchandise returns related to store and DTC sales. To account
for the financial impact of this process, we estimate future
returns on previously sold merchandise. Reductions in sales and
gross margin are recorded for estimated merchandise returns
based on return history, current sales levels and projected
future return levels.
Evaluation
of Long-Lived Assets
Long-lived assets are reviewed periodically for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. If future undiscounted cash flows
expected to be generated by the asset are less than its carrying
amount, an asset is determined to be impaired, and a loss is
recorded for the amount by which the carrying value of the asset
exceeds its fair value. The fair value of an asset is estimated
using estimated future cash flows of the asset discounted by a
rate commensurate with the risk involved with such asset while
incorporating marketplace assumptions. The estimate of future
cash flows requires management to make certain assumptions and
to apply judgment, including forecasting future sales and the
useful lives of the assets. We exercise our best judgment based
on the most current facts and circumstances surrounding our
business when applying these impairment rules. We establish our
assumptions and arrive at the estimates used in these
calculations based upon our historical experience, knowledge of
the retail industry and by incorporating third-party data, which
we believe results in a reasonably accurate approximation of
fair value. Nevertheless, changes in the assumptions used could
have an impact on our assessment of recoverability. For example,
as it relates to the $1.9 million write-off of fixed assets
for certain underperforming stores in fiscal 2010, if we had
decreased our forecast of future sales by 1% throughout the
forecast period or increased our discount rate by 1%, our
write-off would have increased by less than $0.1 million.
28
We evaluate the recoverability of goodwill at least annually
based on a two-step impairment test. The first step compares the
fair value of our reporting units with their carrying amounts,
including goodwill. If the carrying amount exceeds fair value,
then the second step of the impairment test is performed to
measure the amount of any impairment loss. Fair value is
determined based on estimated future cash flows, discounted at a
rate that approximates our cost of capital.
There are several significant assumptions and estimates used in
the discounted cash flow model. Included among these are the
estimates used to forecast cash flows over a
10-year
forecast period, including an estimate for overall sales growth
based on assumptions with respect to future comparable store
sales growth, changes in store counts and square footage growth
rates. We also estimate future gross margin and operating margin
percentages. The discount rate is estimated based on an
approximation of our weighted average cost of capital formulated
by reviewing assumptions used by marketplace participants, in
order to calculate the present value of forecasted future cash
flows. Lastly, our discounted cash flow model estimates future
cash flows where appropriate beyond the
10-year
forecast period for purposes of the present value computation by
applying a long-term growth rate commensurate with an estimate
of overall U.S. economic growth.
With regard to the goodwill impairment test completed during the
fourth quarter of fiscal 2010, if we had assumed a weighted
average cost of capital 1% higher than the rate used in the
goodwill impairment test, the estimated fair value of the
Chicos and WH|BM reporting units would have decreased by
approximately $173.2 million and $59.1 million,
respectively. Nevertheless, even such reduced fair value amounts
still would be greater than the respective carrying values of
the respective reporting units and thus the second step of the
goodwill impairment test still would not have been triggered.
Conversely, if we had assumed a sales growth estimate 1% lower
throughout the forecast period than the rate used in our
goodwill impairment test, the fair value of the Chicos and
WH|BM reporting units would have decreased by approximately
$227.5 million and $122.8 million, respectively.
Again, however, even such reduced fair value amounts still would
be greater than the respective carrying values of the respective
reporting units and thus the second step of the goodwill
impairment test still would not have been triggered. Currently,
we believe that neither of our reporting units is at risk of
failing the first step of goodwill impairment testing.
We evaluate our other intangible assets for impairment on an
annual basis by comparing the fair value of the asset with its
carrying value. Such estimates are subject to change and we may
be required to recognize impairment losses in the future. For
example, with regard to our annual impairment test of the WH|BM
trademark intangible asset, if we had assumed a sales growth
estimate 1% lower throughout the forecast period than the rate
used in its trademark impairment test, the fair value of the
WH|BM trademark would have decreased by approximately
$7.8 million. Conversely, an increase of 1% in the discount
rate would have decreased the fair value by approximately
$9.4 million. In either case, the fair value of the WH|BM
trademark still would be greater than its carrying value and no
impairment charge would have been recognized.
Operating
Leases
Rent expense under store operating leases is recognized on a
straight-line basis over the term of the leases. Landlord
incentives, rent-free periods, rent escalation
clauses and other rental expenses are also amortized on a
straight-line basis over the terms of the leases, which includes
the construction period and which is generally 60
90 days prior to the store opening date when we generally
begin improvements in preparation for our intended use. Tenant
improvement allowances are recorded as a deferred lease credit
within deferred liabilities and amortized as a reduction of rent
expense over the term of the lease, which includes the
construction period and one renewal when there is a significant
economic penalty associated with non-renewal.
Income
Taxes
Income taxes are accounted for in accordance with authoritative
guidance, which requires the use of the asset and liability
method. Deferred tax assets and liabilities are recognized based
on the difference between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. Inherent in the measurement of deferred balances are
certain judgments and interpretations of existing tax law and
published
29
guidance as applicable to our operations. No valuation allowance
has been provided for deferred tax assets, since management
anticipates that the full amount of these assets should be
realized in the future. Our effective tax rate considers
managements judgment of expected tax liabilities within
the various taxing jurisdictions in which we are subject to tax.
Due to the substantial amounts involved and judgment necessary,
we deem this policy could be critical to our financial
statements.
We record amounts for uncertain tax positions that management
believes are supportable, but are potentially subject to
successful challenge by the applicable taxing authority.
Consequently, changes in our assumptions and judgments could
materially affect amounts recognized related to income tax
uncertainties and may affect our results of operations or
financial position. Historically, the variation of those
estimates to observed results has been insignificant and,
although possible, significant variation is not expected in the
future. We believe our assumptions for estimates continue to be
reasonable, although actual results may have a positive or
negative material impact on the balances of such tax positions.
At January 29, 2011 and January 30, 2010, we had
approximately $3.6 million and $6.9 million reserved
for uncertain tax positions, respectively. A 5% difference in
the ultimate settlement amount of our uncertain tax positions
versus our tax reserves recorded on January 29, 2011 would
have affected net income and the related reserves by
approximately $0.1 million. See Note 6 to the
consolidated financial statements for further discussion of our
uncertain tax positions.
Stock-Based
Compensation Expense
The calculation of stock-based employee compensation expense
involves estimates that require managements judgment.
These estimates include the fair value of each of the stock
option awards granted, which is estimated on the date of grant
using the Black-Scholes option pricing model. There are two
significant inputs into the Black-Scholes option pricing model:
expected volatility and expected term. We estimate expected
volatility based on the historical volatility of our stock over
a term equal to the expected term of the option granted. The
expected term of stock option awards granted is derived from
historical exercise experience under our stock option plans and
represents the period of time that stock option awards granted
are expected to be outstanding. The assumptions used in
calculating the fair value of stock-based payment awards
represent managements best estimates, but these estimates
involve inherent uncertainties and the application of
managements judgment. As a result, if factors change and
we use different assumptions, stock-based compensation expense
could be materially different in the future. However, a change
of 5% in the assumptions for expected volatility and expected
term used to calculate the fair value of stock options granted
during the fiscal year ended January 29, 2011 would have
affected net income by approximately $0.1 million for
fiscal 2010.
In addition, we are required to estimate the expected forfeiture
rate, and only recognize expense for those shares expected to
vest. In determining the portion of the stock-based payment
award that is ultimately expected to be earned, we derive
forfeiture rates based on historical data. In accordance with
the authoritative guidance, we revise our forfeiture rates, when
necessary, in subsequent periods if actual forfeitures differ
from those originally estimated. As a result, in the event that
a grants actual forfeiture rate is materially different
from its estimate at the completion of the vesting period, the
stock-based compensation expense could be significantly
different from what we record in the current and prior periods.
See Note 9 to the consolidated financial statements for
further discussion on stock-based compensation.
Recent
Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued
Accounting Standards Update
2010-06
(ASU
2010-06)
which amends Accounting Standards Codification (ASC)
Topic 820, Fair Value Measures and Disclosures. ASU
2010-06
amends the ASC to require disclosure of transfers into and out
of Level 1 and Level 2 fair value measurements, and
also require more detailed disclosure about the activity within
Level 3 fair value measurements. This guidance is effective
for annual and interim reporting periods beginning after
December 15, 2009, except for requirements related to
Level 3 disclosures, which are effective for annual and
interim periods beginning after December 15, 2010. We do
not expect that adoption of the remaining provisions of ASU
2010-06 will
have a material impact on our consolidated financial statements.
30
Quarterly
Results and Seasonality
Our quarterly results may fluctuate significantly depending on a
number of factors including timing of new store openings,
adverse weather conditions, the spring and fall fashion lines
and shifts in the timing of certain holidays. In addition, our
periodic results can be directly and significantly impacted by
the extent to which new merchandise offerings are accepted by
customers, the timing of the introduction of such merchandise
and the timing of marketing initiatives.
Certain
Factors That May Affect Future Results
This
Form 10-K
may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which reflect our current
views with respect to certain events that could have an effect
on our future financial performance, including but without
limitation, statements regarding future growth rates of our
store concepts. The statements may address items such as future
sales, gross margin expectations, operating margin expectations,
earnings per share expectations, planned store openings,
closings and expansions, future comparable store sales, future
product sourcing plans, inventory levels, planned marketing
expenditures, planned capital expenditures and future cash
needs. In addition, from time to time, we may issue press
releases and other written communications, and our
representatives may make oral statements, which contain
forward-looking information.
These statements, including those in this
Form 10-K
and those in press releases or made orally, may include the
words expects, believes, and similar
expressions. Except for historical information, matters
discussed in such oral and written statements, including this
Form 10-K,
are forward-looking statements. 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. Factors that could cause or
contribute to such differences include, but are not limited to,
those discussed below and in Item 1A, Risk
Factors of this
Form 10-K.
These potential risks and uncertainties include the financial
strength of retailing in particular and the economy in general,
the extent of financial difficulties that may be experienced by
customers, our ability to secure and maintain customer
acceptance of styles and store concepts, the propriety of
inventory mix and sizing, the quality of merchandise received
from suppliers, the extent and nature of competition in the
markets in which we operate, the extent of the market demand and
overall level of spending for womens private branded
clothing and related accessories, the adequacy and perception of
customer service, the ability to coordinate product development
with buying and planning, the ability to efficiently, timely and
successfully execute significant shifts in the countries from
which merchandise is supplied, the ability of our suppliers to
timely produce and deliver clothing and accessories, the changes
in the costs of manufacturing, labor and advertising, the rate
of new store openings, the buying publics acceptance of
any of our new store concepts, the performance, implementation
and integration of management information systems, the ability
to hire, train, energize and retain qualified sales associates
and other employees, the availability of quality store sites,
the ability to expand our distribution center and other support
facilities in an efficient and effective manner, the ability to
hire and train qualified managerial employees, the ability to
effectively and efficiently establish and operate DTC sales, the
ability to secure and protect trademarks and other intellectual
property rights, the ability to effectively and efficiently
operate the Chicos, WH|BM, and Soma merchandise brands,
risks associated with terrorist activities, risks associated
with natural disasters such as hurricanes and other risks. In
addition, there are potential risks and uncertainties that are
peculiar to our reliance on sourcing from foreign suppliers,
including the impact of work stoppages, transportation delays
and other interruptions, political or civil instability,
imposition of and changes in tariffs and import and export
controls such as import quotas, changes in governmental policies
in or towards foreign countries, currency exchange rates and
other similar factors.
The forward-looking statements included herein are only made as
of the date of this Annual Report on
Form 10-K.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise.
31
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The market risk of our financial instruments as of
January 29, 2011 has not significantly changed since
January 30, 2010. We are exposed to market risk from
changes in interest rates on any future indebtedness and our
marketable securities.
Our exposure to interest rate risk relates in part to our
revolving line of credit with our bank; however, as of
January 29, 2011, we did not have any outstanding
borrowings on our line of credit and, given our current
liquidity position, do not expect to utilize our line of credit
in the foreseeable future except for the continuing use of the
letter of credit facility portion thereof.
Our investment portfolio is maintained in accordance with our
investment policy which identifies allowable investments,
specifies credit quality standards and limits the credit
exposure of any single issuer. Our investment portfolio consists
of cash equivalents and marketable securities, including
variable rate demand notes, which are considered highly liquid,
variable rate municipal debt securities, municipal bonds,
asset-backed securities, corporate bonds, and U.S. treasury
securities. Although the variable rate demand notes, totaling
$319.2 million, have long-term maturity dates ranging from
2011 to 2049, the interest rates generally reset weekly. Despite
the long-term nature of the underlying securities of the
variable rate demand notes, we have the ability to quickly
liquidate or put back these securities. The remainder of the
portfolio, as of January 29, 2011 consisted of
$117.7 million of securities with maturity dates less than
one year and $97.1 million with maturity dates over one
year and less than two years. We consider all
available-for-sale
securities, including those with maturity dates beyond
12 months, as available to support current operational
liquidity needs and therefore classify these securities as
short-term investments within current assets on the consolidated
balance sheets. As of January 29, 2011, an increase of
100 basis points in interest rates would reduce the fair
value of our marketable securities portfolio by approximately
$1.9 million. Conversely, a reduction of 100 basis
points in interest rates would increase the fair value of our
marketable securities portfolio by approximately
$1.0 million.
32
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
REPORT OF
INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
FIRM
The Board of Directors and Shareholders of Chicos FAS,
Inc.
We have audited the accompanying consolidated balance sheets of
Chicos FAS, Inc. and subsidiaries (the Company) as of
January 29, 2011 and January 30, 2010, and the related
consolidated statements of operations, stockholders equity
and comprehensive income, and cash flows for each of the three
fiscal years in the period ended January 29, 2011. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Chicos FAS, Inc. and subsidiaries at
January 29, 2011 and January 30, 2010, and the
consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended
January 29, 2011, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Chicos FAS, Inc. and subsidiaries internal control
over financial reporting as of January 29, 2011, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
March 22, 2011 expressed an unqualified opinion thereon.
Tampa, Florida
March 22, 2011
33
CHICOS
FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicos/Soma Intimates
|
|
$
|
1,314,649
|
|
|
$
|
1,196,729
|
|
|
$
|
1,127,988
|
|
White House | Black Market
|
|
|
590,305
|
|
|
|
516,421
|
|
|
|
454,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
1,904,954
|
|
|
|
1,713,150
|
|
|
|
1,582,405
|
|
Cost of goods sold
|
|
|
836,379
|
|
|
|
753,409
|
|
|
|
762,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
1,068,575
|
|
|
|
959,741
|
|
|
|
819,492
|
|
Selling, general and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Store and direct operating expenses
|
|
|
673,142
|
|
|
|
647,040
|
|
|
|
645,352
|
|
Marketing
|
|
|
102,481
|
|
|
|
78,075
|
|
|
|
80,326
|
|
National Store Support Center
|
|
|
114,002
|
|
|
|
111,447
|
|
|
|
109,744
|
|
Impairment and restructuring charges
|
|
|
1,868
|
|
|
|
15,026
|
|
|
|
23,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses
|
|
|
891,493
|
|
|
|
851,588
|
|
|
|
859,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
177,082
|
|
|
|
108,153
|
|
|
|
(39,594
|
)
|
Interest income, net
|
|
|
1,712
|
|
|
|
1,693
|
|
|
|
7,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
178,794
|
|
|
|
109,846
|
|
|
|
(31,837
|
)
|
Income tax provision (benefit)
|
|
|
63,400
|
|
|
|
40,200
|
|
|
|
(12,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
115,394
|
|
|
$
|
69,646
|
|
|
$
|
(19,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share basic
|
|
$
|
0.65
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common & common equivalent
share diluted
|
|
$
|
0.64
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
176,778
|
|
|
|
177,499
|
|
|
|
176,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common & common equivalent shares
outstanding diluted
|
|
|
178,034
|
|
|
|
178,858
|
|
|
|
176,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid per share
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
34
CHICOS
FAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,695
|
|
|
$
|
37,043
|
|
Marketable securities, at fair value
|
|
|
534,019
|
|
|
|
386,500
|
|
Receivables
|
|
|
3,845
|
|
|
|
3,922
|
|
Income tax receivable
|
|
|
6,565
|
|
|
|
312
|
|
Inventories
|
|
|
159,814
|
|
|
|
138,516
|
|
Prepaid expenses
|
|
|
26,851
|
|
|
|
24,023
|
|
Deferred taxes
|
|
|
10,976
|
|
|
|
9,664
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
756,765
|
|
|
|
599,980
|
|
Property and Equipment:
|
|
|
|
|
|
|
|
|
Land and land improvements
|
|
|
42,468
|
|
|
|
21,978
|
|
Building and building improvements
|
|
|
89,328
|
|
|
|
82,169
|
|
Equipment, furniture and fixtures
|
|
|
428,217
|
|
|
|
388,392
|
|
Leasehold improvements
|
|
|
426,141
|
|
|
|
412,834
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
986,154
|
|
|
|
905,373
|
|
Less accumulated depreciation and amortization
|
|
|
(468,777
|
)
|
|
|
(383,844
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
517,377
|
|
|
|
521,529
|
|
Goodwill
|
|
|
96,774
|
|
|
|
96,774
|
|
Other Intangible Assets
|
|
|
38,930
|
|
|
|
38,930
|
|
Deferred Taxes
|
|
|
964
|
|
|
|
36,321
|
|
Other Assets, Net
|
|
|
5,211
|
|
|
|
25,269
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,416,021
|
|
|
$
|
1,318,803
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
106,665
|
|
|
$
|
79,219
|
|
Accrued liabilities
|
|
|
94,852
|
|
|
|
95,862
|
|
Current portion of deferred liabilities
|
|
|
19,760
|
|
|
|
19,625
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
221,277
|
|
|
|
194,706
|
|
Noncurrent Liabilities:
|
|
|
|
|
|
|
|
|
Deferred liabilities
|
|
|
129,837
|
|
|
|
142,179
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities
|
|
|
129,837
|
|
|
|
142,179
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; 2,500 shares
authorized; no shares issued and outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 400,000 shares
authorized with 177,899 and 178,126 shares issued and
outstanding, respectively
|
|
|
1,779
|
|
|
|
1,781
|
|
Additional paid-in capital
|
|
|
282,528
|
|
|
|
268,109
|
|
Retained earnings
|
|
|
780,212
|
|
|
|
711,624
|
|
Accumulated other comprehensive income
|
|
|
388
|
|
|
|
404
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,064,907
|
|
|
|
981,918
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,416,021
|
|
|
$
|
1,318,803
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
35
CHICOS
FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE INCOME
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Par
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Total
|
|
|
BALANCE, February 2, 2008
|
|
|
176,245
|
|
|
$
|
1,762
|
|
|
$
|
249,639
|
|
|
$
|
661,115
|
|
|
$
|
|
|
|
$
|
912,516
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,137
|
)
|
|
|
|
|
|
|
(19,137
|
)
|
Unrealized gain on marketable securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,002
|
)
|
Issuance of common stock
|
|
|
945
|
|
|
|
9
|
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
306
|
|
Repurchase of common stock
|
|
|
(60
|
)
|
|
|
|
|
|
|
(311
|
)
|
|
|
|
|
|
|
|
|
|
|
(311
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
12,590
|
|
|
|
|
|
|
|
|
|
|
|
12,590
|
|
Adjustment to excess tax benefit
from stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
(3,903
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 31, 2009
|
|
|
177,130
|
|
|
$
|
1,771
|
|
|
$
|
258,312
|
|
|
$
|
641,978
|
|
|
$
|
135
|
|
|
$
|
902,196
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,646
|
|
|
|
|
|
|
|
69,646
|
|
Unrealized gain on marketable securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,915
|
|
Issuance of common stock
|
|
|
1,072
|
|
|
|
11
|
|
|
|
4,846
|
|
|
|
|
|
|
|
|
|
|
|
4,857
|
|
Repurchase of common stock
|
|
|
(76
|
)
|
|
|
(1
|
)
|
|
|
(929
|
)
|
|
|
|
|
|
|
|
|
|
|
(930
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
7,402
|
|
|
|
|
|
|
|
|
|
|
|
7,402
|
|
Adjustment to excess tax benefit from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(1,522
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 30, 2010
|
|
|
178,126
|
|
|
$
|
1,781
|
|
|
$
|
268,109
|
|
|
$
|
711,624
|
|
|
$
|
404
|
|
|
$
|
981,918
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,394
|
|
|
|
|
|
|
|
115,394
|
|
Unrealized loss on marketable securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,378
|
|
Issuance of common stock
|
|
|
1,940
|
|
|
|
20
|
|
|
|
3,628
|
|
|
|
|
|
|
|
|
|
|
|
3,648
|
|
Dividends paid on common stock ($0.16 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,489
|
)
|
|
|
|
|
|
|
(28,489
|
)
|
Repurchase of common stock
|
|
|
(2,167
|
)
|
|
|
(22
|
)
|
|
|
(869
|
)
|
|
|
(18,317
|
)
|
|
|
|
|
|
|
(19,208
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
10,548
|
|
|
|
|
|
|
|
|
|
|
|
10,548
|
|
Adjustment to excess tax benefit from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 29, 2011
|
|
|
177,899
|
|
|
$
|
1,779
|
|
|
$
|
282,528
|
|
|
$
|
780,212
|
|
|
$
|
388
|
|
|
$
|
1,064,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated statements.
36
CHICOS
FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
115,394
|
|
|
$
|
69,646
|
|
|
$
|
(19,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
94,113
|
|
|
|
96,372
|
|
|
|
97,572
|
|
Deferred tax expense (benefit)
|
|
|
32,501
|
|
|
|
5,647
|
|
|
|
(20,507
|
)
|
Stock-based compensation expense
|
|
|
10,548
|
|
|
|
7,402
|
|
|
|
12,590
|
|
Excess tax benefit from stock-based compensation
|
|
|
(2,655
|
)
|
|
|
(3,194
|
)
|
|
|
(100
|
)
|
Deferred rent and lease credits
|
|
|
(16,624
|
)
|
|
|
(17,961
|
)
|
|
|
(12,877
|
)
|
Impairment charges
|
|
|
1,868
|
|
|
|
15,026
|
|
|
|
13,691
|
|
Loss on disposal of property and equipment
|
|
|
1,217
|
|
|
|
1,372
|
|
|
|
761
|
|
Decrease (increase) in assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
77
|
|
|
|
4,237
|
|
|
|
3,766
|
|
Income tax receivable
|
|
|
(6,253
|
)
|
|
|
11,394
|
|
|
|
12,267
|
|
Inventories
|
|
|
(21,298
|
)
|
|
|
(6,103
|
)
|
|
|
11,847
|
|
Prepaid expenses and other
|
|
|
(2,770
|
)
|
|
|
(2,489
|
)
|
|
|
4,224
|
|
Increase (decrease) in liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
27,446
|
|
|
|
22,677
|
|
|
|
(22,488
|
)
|
Accrued and other deferred liabilities
|
|
|
6,062
|
|
|
|
11,344
|
|
|
|
17,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
124,232
|
|
|
|
145,724
|
|
|
|
118,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
239,626
|
|
|
|
215,370
|
|
|
|
99,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(579,488
|
)
|
|
|
(590,223
|
)
|
|
|
(569,358
|
)
|
Proceeds from sale of marketable securities
|
|
|
431,953
|
|
|
|
446,146
|
|
|
|
587,809
|
|
Purchases of property and equipment
|
|
|
(73,045
|
)
|
|
|
(67,920
|
)
|
|
|
(104,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(220,580
|
)
|
|
|
(211,997
|
)
|
|
|
(86,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
3,648
|
|
|
|
4,857
|
|
|
|
306
|
|
Excess tax benefit from stock-based compensation
|
|
|
2,655
|
|
|
|
3,194
|
|
|
|
100
|
|
Dividends paid
|
|
|
(28,489
|
)
|
|
|
−
|
|
|
|
−
|
|
Cash paid for deferred financing costs
|
|
|
−
|
|
|
|
−
|
|
|
|
(629
|
)
|
Repurchase of common stock
|
|
|
(19,208
|
)
|
|
|
(930
|
)
|
|
|
(311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(41,394
|
)
|
|
|
7,121
|
|
|
|
(534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(22,348
|
)
|
|
|
10,494
|
|
|
|
12,748
|
|
CASH AND CASH EQUIVALENTS, Beginning of period
|
|
|
37,043
|
|
|
|
26,549
|
|
|
|
13,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period
|
|
$
|
14,695
|
|
|
$
|
37,043
|
|
|
$
|
26,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
322
|
|
|
$
|
304
|
|
|
$
|
159
|
|
Cash paid for income taxes, net
|
|
$
|
41,317
|
|
|
$
|
29,530
|
|
|
$
|
13,591
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossession of land in satisfaction of note receivable
|
|
$
|
20,000
|
|
|
|
−
|
|
|
|
−
|
|
The accompanying notes are an integral part of these
consolidated statements.
37
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and where
otherwise indicated)
|
|
1.
|
Business
Organization and Significant Accounting Policies:
|
Description
of Business
The accompanying consolidated financial statements include the
accounts of Chicos FAS, Inc., a Florida corporation, and
its wholly-owned subsidiaries (the Company,
we, us, and our). We operate
as a national specialty retailer of private branded,
sophisticated,
casual-to-dressy
clothing, intimates, complimentary accessories, and other
non-clothing gift items. We currently sell our products through
retail stores, catalog, and via the Internet at
www.chicos.com, www.whbm.com, and
www.soma.com. As of January 29, 2011, we had 1,151
stores located throughout the United States, the
U.S. Virgin Islands and Puerto Rico.
Fiscal
Year
Our fiscal years end on the Saturday closest to January 31 and
are designated by the calendar year in which the fiscal year
commences. The periods presented in these financial statements
are the fiscal years ended January 29, 2011 (fiscal
2010 or current period), January 30, 2010
(fiscal 2009 or prior period) and
January 31, 2009 (fiscal 2008). Fiscal 2010,
2009, and 2008 all contained 52 weeks.
Principles
of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Segment
Information
Our brands, Chicos, WH|BM, and Soma Intimates, have been
aggregated into one reportable segment due to the similarities
of the economic and operating characteristics of the operations
represented by the brands.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Reclassifications
Reclassifications of certain prior year balances were made in
order to conform to the current year presentation.
Cash and
Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and
short-term highly liquid investments with original maturities of
three months or less.
Marketable
Securities
Marketable securities are classified as
available-for-sale
and are carried at fair value, with the unrealized holding gains
and losses, net of income taxes, reflected as a separate
component of stockholders equity until realized. For the
purposes of computing realized and unrealized gains and losses,
cost is determined on a specific identification basis. We
consider all
available-for-sale
securities, including those with maturity dates beyond
12 months, as available to support current operational
liquidity needs and therefore, classify these securities within
current assets on the consolidated balance sheets.
38
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories
We use the weighted average cost method to determine the cost of
merchandise inventories. We identify potentially excess and
slow-moving inventories by evaluating inventory agings, turn
rates and inventory levels in conjunction with our overall sales
trend. Further, exposure to inadequate realization of carrying
value is identified through analysis of gross margins and
markdowns in combination with changes in current business
trends. We provide lower of cost or market adjustments for such
identified excess and slow-moving inventories. We estimate our
expected shrinkage of inventories between physical inventory
counts by using the most recent average store shrinkage
experience rates, which are updated on a regular basis.
Substantially all of our inventories consist of finished goods.
Purchasing, merchandising, distribution, and product development
costs are expensed as incurred, and are included in the
accompanying consolidated statements of operations as a
component of cost of goods sold.
Property
and Equipment
Property and equipment is stated at cost. Depreciation of
property and equipment is provided on a straight-line basis over
the estimated useful lives of the assets. Leasehold improvements
are amortized over the shorter of their estimated useful lives
(generally 10 years or less) or the related lease term plus
one anticipated renewal when there is an economic penalty
associated with non-renewal. Our property and equipment is
depreciated using the following estimated useful lives:
|
|
|
|
|
Estimated Useful Lives
|
|
Land improvements
|
|
35 years
|
Building and building improvements
|
|
20 - 35 years
|
Equipment, furniture and fixtures
|
|
2 - 10 years
|
Leasehold improvements
|
|
5 - 10 years or term of lease, if shorter
|
Maintenance and repairs of property and equipment are expensed
as incurred, and major improvements are capitalized. Upon
retirement, sale or other disposition of property and equipment,
the cost and accumulated depreciation or amortization are
eliminated from the accounts, and any gain or loss is charged to
operations.
Operating
Leases
We lease retail stores and office space under operating leases.
The majority of our lease agreements provide for tenant
improvement allowances, rent escalation clauses
and/or
contingent rent provisions. Tenant improvement allowances are
recorded as a deferred lease credit within deferred liabilities
and amortized as a reduction of rent expense over the term of
the lease, which includes the construction period and one
renewal when there is a significant economic penalty associated
with non-renewal. Landlord incentives, rent-free
periods, rent escalation clauses, and other rental expenses are
amortized on a straight-line basis over the terms of the leases,
which includes the construction period, typically
60-90 days
prior to the store opening date, during which we generally begin
improvements in preparation for our intended use.
Certain leases provide for contingent rents, in addition to a
basic fixed rent, which are determined as a percentage of gross
sales in excess of specified levels. We record a contingent rent
liability in accrued liabilities on the consolidated balance
sheets and the corresponding rent expense when specified levels
have been achieved or when management determines that achieving
the specified levels during the fiscal year is probable.
Goodwill
and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are not
amortized, but instead are tested for impairment at least
annually. We perform our annual impairment test during the
fourth quarter, or more frequently should events or
circumstances change that would indicate that an impairment may
have occurred. In fiscal 2007, we completed the
39
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
acquisition of all outstanding franchise rights and recorded
goodwill and territorial franchise rights as an indefinite-lived
intangible asset. During fiscal 2003, in connection with the
acquisition of The White House, Inc., we recorded goodwill and a
trademark indefinite-lived intangible asset.
Goodwill represents the excess of the purchase price over the
fair value of identifiable tangible and intangible assets
acquired and liabilities assumed in a business combination.
Impairment testing for goodwill is done at a reporting unit
level. Under the guidance, reporting units are defined as an
operating segment or one level below an operating segment,
called a component. Using these criteria, we identified our
reporting units and concluded that the goodwill related to the
territorial franchise rights for the state of Minnesota should
be allocated to the Chicos reporting unit and that the
goodwill associated with the WH|BM acquisition should be
assigned to the WH|BM reporting unit.
In the fourth quarter of fiscal 2010 and fiscal 2009, we
performed our annual impairment test and concluded that the
implied fair value of the Chicos and WH|BM reporting units
exceeded their respective carrying amounts. Therefore, we did
not recognize an impairment loss.
As of January 29, 2011, the total carrying value of other
intangible assets was $38.9 million of which
$34.0 million related to the acquired WH|BM trademark and
$4.9 million related to the acquired territorial franchise
rights for Minnesota. The value of the trademark asset was
determined using a discounted cash flow method, based on the
estimated future benefit to be received from the trademark. The
value of the acquired territorial franchise rights was
determined using a discounted cash flow method, based on a
relief from royalty concept. We are not amortizing our
intangible assets, as each has an indefinite useful life. In the
fourth quarter of fiscal 2010 and 2009, we performed an analysis
to compare the fair values of each of our intangible assets,
using a discounted cash flow method, to each of their respective
carrying values and concluded that the intangible assets were
not impaired.
Other
Assets, Net
At January 29, 2011, other assets, net, consist mainly of
our deferred compensation plan assets. At January 30, 2010,
other assets, net, included a note receivable valued at
$20.0 million. The value of the note receivable was based
on the estimated fair value of the underlying collateral, a
parcel of land located in Fort Myers, Florida, less
estimated costs to sell. In fiscal 2009, we determined the note
receivable was impaired, and therefore, wrote the value of the
note down to $20.0 million in accordance with generally
accepted accounting principles. Additionally, upon determining
the note was impaired during the second quarter of fiscal 2009,
we ceased recognizing any further interest income and also
reversed the then
year-to-date
interest income of approximately $0.8 million. During
fiscal 2010, we took possession of the land in satisfaction of
the note receivable and classified the land within property,
plant and equipment on our consolidated balance sheet.
Accounting
for the Impairment of Long-lived Assets
Long-lived assets are reviewed periodically for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. If future undiscounted cash flows
expected to be generated by the asset are less than its carrying
amount, an asset is determined to be impaired, and a loss is
recorded for the amount by which the carrying value of the asset
exceeds its fair value. See Note 2 for a discussion of
impairment charges for long-lived assets recorded in fiscal
2010, 2009 and 2008.
Income
Taxes
Income taxes are accounted for in accordance with authoritative
guidance, which requires the use of the asset and liability
method. Deferred tax assets and liabilities are recognized based
on the difference between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases. Additionally, we follow a comprehensive model to
recognize, measure, present, and disclose in our financial
statements the estimated
40
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
aggregate tax liability of uncertain tax positions that we have
taken or expect to take on a tax return. This model states that
a tax benefit from an uncertain tax position may be recognized
if it is more likely than not that the position is
sustainable, based upon its technical merits.
The tax benefit of a qualifying position is the largest amount
of tax benefit that has greater than a 50% likelihood of being
realized upon the ultimate settlement with a taxing authority
having full knowledge of all relevant information.
Fair
Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents,
marketable securities, trade receivables and payables. The
carrying values of these assets and liabilities approximate
their fair value due to the short-term nature of the instruments.
Self-Insurance
We are self-insured for certain losses relating to workers
compensation, medical and general liability claims.
Self-insurance claims filed and claims incurred but not reported
are accrued based upon managements estimates of the
aggregate liability for uninsured claims incurred based on
historical experience. Although management believes it has the
ability to adequately accrue for estimated losses related to
claims, it is possible that actual results could significantly
differ from recorded self-insurance liabilities.
Revenue
Recognition
Retail sales by our stores are recorded at the point of sale and
are net of estimated customer returns, sales discounts under the
Passport Club and The Black Book loyalty programs and company
issued coupons, promotional discounts and associate discounts.
For DTC sales, revenue is recognized at the time we estimate the
customer receives the product, which is typically within a few
days of shipment.
Under our current program, gift cards do not have expiration
dates. We account for gift cards by recognizing a liability at
the time a gift card is sold. The liability is relieved and
revenue is recognized for gift cards upon redemption. In
addition, we recognize revenue on unredeemed gift cards when it
can be determined that the likelihood of the gift card being
redeemed is remote and there is no legal obligation to remit the
unredeemed gift cards to relevant jurisdictions (commonly
referred to as gift card breakage). We recognize gift card
breakage under the redemption recognition method. This method
records gift card breakage as revenue on a proportional basis
over the redemption period based on the historical gift card
breakage rate. We determine the gift card breakage rate based on
our historical redemption patterns.
Our policy towards taxes assessed by a government authority
directly imposed on revenue producing transactions between a
seller and a customer is, and has been, to exclude all such
taxes from revenue.
Supplier
Allowances
From time to time, we receive allowances
and/or
credits from certain of our suppliers. The aggregate amount of
such allowances and credits is immaterial to our results of
operations.
Shipping
and Handling Costs
Shipping and handling costs to transport goods between stores or
directly to customers, net of amounts paid to us by customers,
amounted to $11.2 million, $9.6 million, and
$11.0 million in fiscal 2010, 2009 and 2008, respectively,
and are included in store and direct operating expenses in the
accompanying consolidated statements of operations. Amounts paid
by customers to cover shipping and handling costs are considered
insignificant.
41
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Store
Pre-opening Costs
Operating costs (including store
set-up, rent
and training expenses) incurred prior to the opening of new
stores are expensed as incurred and are included in store and
direct operating expenses in the accompanying consolidated
statements of operations.
Advertising
Costs
Costs associated with the production of advertising, such as
writing, copy, printing, and other costs are expensed as
incurred. Costs associated with communicating advertising that
has been produced, such as television and magazine, are expensed
when the advertising event takes place. For fiscal 2010, 2009
and 2008, advertising expense was approximately
$86.8 million, $65.0 million, and $67.5 million,
respectively, and is reflected as marketing expenses in the
accompanying consolidated statements of operations.
Catalog expenses consist of the cost to create, print, and
distribute catalogs. Such costs are amortized over their
expected period of future benefit, which is typically less than
six weeks.
Stock-Based
Compensation
Stock-based compensation for all awards is based on the grant
date fair value of the award. The fair value of stock option
grants is estimated on the date of grant using the Black-Scholes
option pricing model. The fair value of restricted stock awards
is determined by using the closing price of the Companys
common stock on the date of the grant. We recognize expense
related to stock options and restricted stock grants over the
requisite service period on a straight-line basis. The total
compensation expense is reduced by estimated forfeitures
expected to occur over the vesting period of the award.
Compensation expense for performance-based awards is recorded
based on the amount of the award ultimately expected to vest
and, depending on the level and likelihood of the performance
condition to be met, on a straight-line basis over the vesting
period.
Earnings
Per Share
In June 2008, accounting guidance was issued related to
share-based awards that qualify as participating securities. In
accordance with this guidance, unvested share-based payment
awards that include non-forfeitable rights to dividends, whether
paid or unpaid, are considered participating securities. As a
result, such awards are required to be included in the
calculation of basic earnings per common share pursuant to the
two-class method. For us, participating securities
are comprised of unvested restricted stock awards.
Basic EPS is determined using the two-class method and is
computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding
during the period including the participating securities.
Diluted EPS reflects the dilutive effect of potential common
shares from securities such as stock options.
42
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the computation of basic and
diluted EPS shown on the face of the accompanying consolidated
statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
January 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
115,394
|
|
|
$
|
69,646
|
|
|
$
|
(19,137
|
)
|
Net income allocated to participating securities
|
|
|
(943
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
114,451
|
|
|
$
|
69,646
|
|
|
$
|
(19,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
176,777,953
|
|
|
|
177,498,862
|
|
|
|
176,606,274
|
|
Dilutive effect of stock options outstanding
|
|
|
1,255,676
|
|
|
|
1,358,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares
outstanding diluted
|
|
|
178,033,629
|
|
|
|
178,857,540
|
|
|
|
176,606,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.65
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
0.39
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2010, 2009 and 2008, 3,280,324, 3,132,586 and
5,893,557 potential shares of common stock, respectively, were
excluded from the diluted per share calculation relating to
stock option awards, because the effect of including these
potential shares was antidilutive.
Newly
Issued Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued
Accounting Standards Update
2010-06
(ASU
2010-06)
which amends Accounting Standards Codification (ASC)
Topic 820, Fair Value Measures and
Disclosures. ASU
2010-06
amends the ASC to require disclosure of transfers into and out
of Level 1 and Level 2 fair value measurements, and
also require more detailed disclosure about the activity within
Level 3 fair value measurements. This guidance is effective
for annual and interim reporting periods beginning after
December 15, 2009, except for requirements related to
Level 3 disclosures, which are effective for annual and
interim periods beginning after December 15, 2010. We do
not expect that adoption of the remaining provisions of ASU
2010-06 will
have a material impact on our consolidated financial statements.
|
|
2.
|
Impairment
and Restructuring Charges:
|
Fiscal
2010
Long-lived Asset Impairments: We periodically
review our long-lived assets for impairment if events or changes
in circumstances indicate that the carrying amount of such
assets may not be recoverable. In fiscal 2010, we completed an
evaluation of long-lived assets at certain underperforming
stores for indicators of impairment and, as a result, determined
that the carrying values of certain assets exceeded their future
undiscounted cash flows. In circumstances where future
undiscounted cash flows expected to be generated by an asset are
less than its carrying amount, the asset is determined to be
impaired, and a loss is recorded for the amount by which the
carrying value of the asset exceeds its fair value. With respect
to the assets identified, we determined the fair value of these
assets by discounting their estimated future cash flows using a
rate approximating our cost of capital, which resulted in an
impairment charge of approximately $1.9 million within
selling, general and administrative expenses in the consolidated
statements of operations.
43
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal
2009
In fiscal 2009, we incurred non-cash impairment charges totaling
approximately $15.0 million which are included in the
consolidated statements of operations within selling, general
and administrative expenses. A summary of the charges is
presented in the table below (amounts in thousands):
|
|
|
|
|
Impairment of long-lived assets related to underperforming stores
|
|
$
|
1,134
|
|
Impairment of software development costs
|
|
|
8,058
|
|
Impairment of note receivable
|
|
|
5,834
|
|
|
|
|
|
|
Total pre-tax impairment charges
|
|
$
|
15,026
|
|
|
|
|
|
|
Long-lived Asset Impairments: In fiscal 2009,
we decided to deploy alternative inventory planning and
allocation software. As a result, $8.1 million of
development costs already incurred related to this project were
determined to be impaired. Additionally, similar to 2010, we
completed an evaluation of long-lived assets at certain
underperforming stores for indicators of impairment and, as a
result, recorded an impairment charge of approximately
$1.1 million.
Note Receivable Impairment: During the second
quarter of fiscal 2009, we determined that a $25.8 million
note receivable was impaired, based on an independent evaluation
of the fair value of the underlying collateral coupled with the
debtors apparent inability to pay the note in full. As a
result, we recorded a non-cash impairment charge of
approximately $3.8 million, which was determined based on
the difference between the book value of the note and the
independent evaluation of the fair value of the land at that
time. During the fourth quarter of fiscal 2009, based on an
updated third-party valuation of the land, we determined that
the fair value of the land had declined further and an
additional $2.0 million impairment charge was necessary to
adjust the note to its current fair value, less estimated costs
to sell.
Fiscal
2008
In fiscal 2008, we incurred certain expense items that
materially affected earnings results for the year. These charges
were composed of non-cash impairment charges for certain
underperforming stores and severance and workforce reductions,
which are included in selling, general and administrative
expenses under impairment and restructuring charges in the
accompanying statement of operations. A summary of the charges
is presented in the table below (amounts in thousands):
|
|
|
|
|
Impairment of long-lived assets related to underperforming stores
|
|
$
|
13,691
|
|
Severance and workforce reduction charges
|
|
|
9,973
|
|
|
|
|
|
|
Total pre-tax impairment and restructuring charges
|
|
$
|
23,664
|
|
|
|
|
|
|
Long-lived Asset Impairment: As mentioned
above, it is our practice to review long-lived assets
periodically for impairment if events or changes in
circumstances, such as the worsening macroeconomic conditions
experienced in fiscal 2008, indicate that the carrying amount
may not be recoverable. Similar to 2010 and 2009, we conducted
an internal review of our long-lived assets at the store level
and determined that the carrying value of certain assets
exceeded their future undiscounted cash flows. We then
determined the fair value of the identified long-lived assets by
discounting their future cash flows using a rate approximating
our cost of capital, which resulted in an impairment charge of
$13.7 million.
Severance and Workforce Reduction: During the
fourth quarter of fiscal 2008, in an effort to reduce costs and
enhance efficiencies, we announced a workforce reduction that
included the elimination of approximately 180 positions, or
approximately 11% of the NSSC employee base. In addition, we
incurred charges related to the separation agreement with our
former CEO. In connection with these actions and in accordance
with the relevant accounting guidance, we recorded approximately
$10.0 million of personnel separation costs. The following
table
44
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
summarizes the severance and workforce reduction charges
incurred in fiscal 2008 as well as activity during fiscal 2009
and 2010 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
Non-Cash
|
|
|
|
|
|
Ending
|
|
|
|
Balance
|
|
|
Charges
|
|
|
Expense
|
|
|
Payments
|
|
|
Balance
|
|
|
Fiscal 2008
|
|
$
|
|
|
|
$
|
9,973
|
|
|
$
|
(1,275
|
)
|
|
$
|
|
|
|
$
|
8,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009
|
|
$
|
8,698
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,582
|
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
$
|
116
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(116
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
Marketable
Securities:
|
Marketable securities are classified as
available-for-sale
and generally consist of variable rate demand notes, which are
considered highly liquid, variable rate municipal debt
securities, municipal bonds, asset-backed securities, corporate
bonds, and U.S. treasury securities. Although the variable rate
demand notes, totaling $319.2 million, have long-term
maturity dates ranging from 2011 to 2049, the interest rates are
generally reset weekly. Despite the long-term nature of the
underlying securities of the variable rate demand notes, we have
the ability to quickly liquidate or put back these securities,
thereby creating a short-term instrument. The remainder of the
portfolio, as of January 29, 2011, consisted of
$117.7 million of securities with maturity dates less than
one year and $97.1 million with maturity dates over one
year and less than two years.
The following tables summarize our investments in marketable
securities at January 29, 2011 and January 30, 2010
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 29, 2011
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Total marketable securities
|
|
$
|
533,631
|
|
|
$
|
467
|
|
|
$
|
79
|
|
|
$
|
534,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 30, 2010
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Total marketable securities
|
|
$
|
386,096
|
|
|
$
|
451
|
|
|
$
|
47
|
|
|
$
|
386,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Fair
Value Measurements:
|
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in the principal
or most advantageous market in an orderly transaction between
market participants on the measurement date. Entities are
required to use a three-level hierarchy, which requires an
entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value.
The valuation hierarchy is based upon the transparency of inputs
to the valuation of an asset or liability on the measurement
date. The three levels are defined as follows:
Level 1 Unadjusted quoted prices in active
markets for identical assets or liabilities
Level 2 Unadjusted quoted prices in active
markets for similar assets or liabilities, or; Unadjusted quoted
prices for identical or similar assets or liabilities in markets
that are not active, or; Inputs other than quoted prices that
are observable for the asset or liability
Level 3 Unobservable inputs for the asset or
liability.
45
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We measure certain financial assets at fair value on a recurring
basis, including our marketable securities, which are classified
as
available-for-sale
securities, certain cash equivalents, specifically our money
market account, and assets held in our deferred compensation
plan. The money market accounts are valued based on quoted
market prices in active markets. Our marketable securities are
generally valued based on other observable inputs for those
securities (including market corroborated pricing or other
models that utilize observable inputs such as interest rates and
yield curves) based on information provided by independent third
party pricing entities, except for U.S. treasury holdings
which are valued based on quoted market prices in active
markets. The investments in our non-qualified deferred
compensation plan are valued using quoted market prices and are
included in other assets on our consolidated balance sheets.
From time to time, we measure certain assets at fair value on a
non-recurring basis, specifically long-lived assets evaluated
for impairment and, during fiscal 2009, a note receivable. We
estimate the fair value of our long-lived assets using
company-specific assumptions which would fall within
Level 3 of the fair value hierarchy. Last year, the note
receivables value was based on the value of the underlying
real estate collateral as determined by an independent third
party using observable market data, which resulted in a
Level 2 classification. During fiscal 2010, the underlying
real estate collateral was repossessed by us in full
satisfaction of the note receivable.
New guidance on financial instruments measured at fair value
requires additional disclosures regarding significant transfers
into and out of Level 1 and Level 2 as well as more
detailed discussions regarding Level 3 activity. We conduct
reviews on a quarterly basis to verify pricing, assess
liquidity, and determine if significant inputs have changed that
would impact the fair value hierarchy disclosure. During fiscal
2010, we did not make significant transfers between Level 1
and Level 2 assets. Furthermore, as of January 29,
2011 and January 30, 2010, we did not have any Level 3
financial assets.
In accordance with the provisions of the guidance, we
categorized our financial assets, whether valued on a recurring
or non-recurring basis, based on the priority of the inputs to
the valuation technique for the instruments, as follows (amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Balance as
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
of January 29, 2011
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market account
|
|
$
|
5,397
|
|
|
$
|
5,397
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate demand notes
|
|
|
319,220
|
|
|
|
|
|
|
|
319,220
|
|
|
|
|
|
Municipal securities
|
|
|
151,159
|
|
|
|
|
|
|
|
151,159
|
|
|
|
|
|
U.S. government securities
|
|
|
58,554
|
|
|
|
58,554
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
2,055
|
|
|
|
|
|
|
|
2,055
|
|
|
|
|
|
Asset-backed securities
|
|
|
3,031
|
|
|
|
|
|
|
|
3,031
|
|
|
|
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan
|
|
|
4,143
|
|
|
|
4,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
543,559
|
|
|
$
|
68,094
|
|
|
$
|
475,465
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Other
|
|
|
Significant
|
|
|
|
Balance as of
|
|
|
Markets for
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
January 30,
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market account
|
|
$
|
8,256
|
|
|
$
|
8,256
|
|
|
$
|
|
|
|
$
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate demand notes
|
|
|
207,895
|
|
|
|
|
|
|
|
207,895
|
|
|
|
|
|
Municipal securities
|
|
|
111,153
|
|
|
|
|
|
|
|
111,153
|
|
|
|
|
|
U.S. government securities
|
|
|
33,383
|
|
|
|
33,383
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
12,826
|
|
|
|
|
|
|
|
12,826
|
|
|
|
|
|
Asset-backed securities
|
|
|
21,243
|
|
|
|
|
|
|
|
21,243
|
|
|
|
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note receivable
|
|
|
20,000
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
Deferred compensation plan
|
|
|
4,050
|
|
|
|
4,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
418,806
|
|
|
$
|
45,689
|
|
|
$
|
373,117
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Allowance for estimated customer returns, gift cards and store
credits outstanding
|
|
$
|
41,781
|
|
|
$
|
40,669
|
|
Accrued payroll, benefits, bonuses and severance costs
|
|
|
31,547
|
|
|
|
34,038
|
|
Sales and income taxes
|
|
|
4,017
|
|
|
|
7,754
|
|
Other
|
|
|
17,507
|
|
|
|
13,401
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
94,852
|
|
|
$
|
95,862
|
|
|
|
|
|
|
|
|
|
|
The income tax provision (benefit) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
29,809
|
|
|
$
|
30,555
|
|
|
$
|
4,562
|
|
State
|
|
|
1,106
|
|
|
|
3,998
|
|
|
|
5,924
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
28,623
|
|
|
|
5,451
|
|
|
|
(18,992
|
)
|
State
|
|
|
3,862
|
|
|
|
196
|
|
|
|
(4,194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
63,400
|
|
|
$
|
40,200
|
|
|
$
|
(12,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation between the statutory federal income tax rate
and the effective income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
(35.0
|
)%
|
State income tax, net of federal tax benefit
|
|
|
1.8
|
|
|
|
2.5
|
|
|
|
5.6
|
|
Municipal interest income
|
|
|
(0.3
|
)
|
|
|
(0.6
|
)
|
|
|
(6.4
|
)
|
Enhanced charitable contribution
|
|
|
(1.1
|
)
|
|
|
(1.1
|
)
|
|
|
(6.8
|
)
|
Decrease in deferred compensation plan assets
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
Other items, net
|
|
|
0.1
|
|
|
|
0.8
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35.5
|
%
|
|
|
36.6
|
%
|
|
|
(39.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are recorded due to
different carrying amounts for financial and income tax
reporting purposes arising from cumulative temporary
differences. These differences consist of the following as of
January 29, 2011 and January 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued liabilities and allowances
|
|
$
|
11,161
|
|
|
$
|
12,287
|
|
Other, net
|
|
|
1,642
|
|
|
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,803
|
|
|
$
|
14,219
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax assets:
|
|
|
|
|
|
|
|
|
Property related, net
|
|
$
|
|
|
|
$
|
19,516
|
|
Accrued liabilities and allowances
|
|
|
2,105
|
|
|
|
3,480
|
|
Accrued straight-line rent
|
|
|
16,980
|
|
|
|
16,381
|
|
Stock-based compensation
|
|
|
10,915
|
|
|
|
9,851
|
|
Other, net
|
|
|
3,228
|
|
|
|
4,060
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,228
|
|
|
$
|
53,288
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
46,031
|
|
|
$
|
67,507
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
(1,827
|
)
|
|
$
|
(4,555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,827
|
)
|
|
$
|
(4,555
|
)
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property related, net
|
|
$
|
(14,160
|
)
|
|
$
|
|
|
Other intangible assets
|
|
|
(18,104
|
)
|
|
|
(16,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(32,264
|
)
|
|
$
|
(16,967
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
(34,091
|
)
|
|
$
|
(21,522
|
)
|
|
|
|
|
|
|
|
|
|
48
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the beginning and ending amounts of
uncertain tax positions for each of fiscal 2010 and fiscal 2009
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance at beginning of year
|
|
$
|
6,886
|
|
|
$
|
10,567
|
|
Additions for tax positions of prior years
|
|
|
278
|
|
|
|
411
|
|
Reductions for tax positions of prior years
|
|
|
(2,612
|
)
|
|
|
(937
|
)
|
Additions for tax positions for the current year
|
|
|
335
|
|
|
|
173
|
|
Reductions for tax positions for the current year
|
|
|
|
|
|
|
|
|
Settlements with tax authorities
|
|
|
(1,172
|
)
|
|
|
(2,708
|
)
|
Reductions due to lapse of applicable statutes of limitation
|
|
|
(87
|
)
|
|
|
(620
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
3,628
|
|
|
$
|
6,886
|
|
|
|
|
|
|
|
|
|
|
Included in the January 29, 2011 and January 30, 2010
balances are $2.4 million and $4.5 million,
respectively, of unrecognized tax benefits that, if recognized,
would favorably impact the effective tax rate in future periods.
Our continuing practice is to recognize potential accrued
interest and penalties relating to unrecognized tax benefits in
income tax expense. For fiscal 2010, 2009 and 2008, ,we accrued
$0.4 million, $0.9 million, and $2.2 million,
respectively, for interest and penalties. We had approximately
$2.1 million and $2.7 million for the payment of
interest and penalties accrued at January 29, 2011 and
January 30, 2010, respectively. The amounts included in the
reconciliation of uncertain tax positions do not include
accruals for interest and penalties.
In fiscal 2006, we began participating in the IRSs real
time audit program, Compliance Assurance Process
(CAP). Under the CAP program, material tax issues
and initiatives are disclosed to the IRS throughout the year
with the objective of reaching agreement as to the proper
reporting treatment when the federal return is filed. Our fiscal
2007 and fiscal 2008 years have been examined and a no
change letter issued. Our fiscal 2009 year has been
examined and a partial acceptance letter issued. The only
outstanding issue relates to a tax credit and is currently being
addressed in the post-file review process. Due to the filing of
a Telephone Excise Tax Refund (TETR) claim, our fiscal
2006 year return is potentially subject to survey (limited
review).
With few exceptions, we are no longer subject to state and local
examinations for years before fiscal 2007. Various state
examinations are currently underway for fiscal periods spanning
from 2003 through 2009; however, we do not expect any
significant change to our uncertain tax positions within the
next year.
Deferred liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
January 29,
|
|
|
January 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Deferred rent
|
|
$
|
42,929
|
|
|
$
|
41,614
|
|
Deferred lease credits
|
|
|
97,253
|
|
|
|
107,714
|
|
Other deferred liabilities
|
|
|
9,415
|
|
|
|
12,476
|
|
|
|
|
|
|
|
|
|
|
Total deferred liabilities
|
|
|
149,597
|
|
|
|
161,804
|
|
Less current portion
|
|
|
(19,760
|
)
|
|
|
(19,625
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred liabilities
|
|
$
|
129,837
|
|
|
$
|
142,179
|
|
|
|
|
|
|
|
|
|
|
Deferred rent represents the difference between operating lease
obligations currently due and operating lease expense, which is
recorded on a straight-line basis over the terms of our leases.
49
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred lease credits represent construction allowances
received from landlords and are amortized as a reduction of rent
expense over the appropriate respective terms of the related
leases.
|
|
8.
|
Commitments
and Contingencies:
|
Leases
We lease retail store space, office space and various office
equipment under operating leases expiring in various years
through the fiscal year ending 2020. Certain of the leases
provide that we may cancel the lease if our retail sales at that
location fall below an established level, and certain leases
provide for additional rent payments to be made when sales
exceed a base amount.
Certain operating leases provide for renewal options for periods
from three to five years at their fair rental value at the time
of renewal. In the normal course of business, operating leases
are generally renewed or replaced by other leases.
Minimum future rental payments under non-cancelable operating
leases (including leases with certain minimum sales cancellation
clauses described below and exclusive of common area maintenance
charges
and/or
contingent rental payments based on sales) as of
January 29, 2011, are approximately as follows:
|
|
|
|
|
FISCAL YEAR ENDING:
|
|
|
|
|
January 28, 2012
|
|
$
|
133,195
|
|
February 2, 2013
|
|
|
118,717
|
|
February 1, 2014
|
|
|
104,028
|
|
January 31, 2015
|
|
|
95,080
|
|
January 30, 2016
|
|
|
84,412
|
|
Thereafter
|
|
|
149,968
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
685,400
|
|
|
|
|
|
|
A majority of our store operating leases contain cancellation
clauses that allow the leases to be terminated at our
discretion, if certain minimum sales levels are not met within
the first few years of the lease term. We have not historically
exercised many or met these cancellation clauses and, therefore,
have included commitments for the full lease terms of such
leases in the above table. For fiscal 2010, 2009 and 2008, total
rent expense under operating leases was approximately
$172.1 million, $161.6 million, and
$154.8 million, respectively, including common area
maintenance charges of approximately $25.0 million,
$23.7 million, and $23.6 million, respectively, other
rental charges of approximately $24.5 million,
$23.6 million, and $21.4 million, respectively, and
contingent rental expense of approximately $8.2 million,
$6.5 million, and $5.1 million, respectively, based on
sales.
Credit
Facility
We have a $55 million senior secured revolving credit
facility (the Credit Facility) with SunTrust Bank, which
provides us the ability, subject to satisfaction of certain
conditions, to increase the commitments available under the
Credit Facility from $55 million up to $100 million
through additional syndication. The proceeds of any borrowings
under the Credit Facility may be used to fund future permitted
acquisitions, to provide for working capital, and to be used for
other general corporate purposes. The Credit Facility is
scheduled to expire in November 2011. At January 29, 2011,
no borrowings were outstanding under the Credit Facility.
The obligations under the Credit Facility are secured by
(i) all credit card accounts and receivables for goods sold
or services rendered and (ii) all inventory of any kind
wherever located of Chicos FAS, Inc. and its subsidiaries.
50
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The interest on revolving loans under the Credit Facility will
accrue, at our election, at either (i) a Base Rate plus the
Applicable Margin or (ii) a Eurodollar Rate tied to LIBOR
for the selected interest rate period plus the Applicable
Margin. Base Rate shall mean the highest of (i) the per
annum rate which SunTrust publicly announces as its prime
lending rate, (ii) the Federal Funds rate plus one-half of
one percent
(1/2%)
per annum or (iii) the Eurodollar Rate tied to the
one-month LIBOR rate determined on a daily basis. The Applicable
Margin is based upon a pricing grid depending on the total
unused availability under the Credit Facility and certain
financial ratios.
The Credit Facility contains customary terms and conditions for
credit facilities of this type, including certain restrictions
on our ability to incur additional indebtedness, create liens,
enter into transactions with affiliates, transfer assets, pay
dividends, repurchase stock or make distributions on junior
capital, consolidate or merge with other entities, or suffer a
change in control. The Credit Facility contains customary events
of default. If a default occurs and is not cured within any
applicable cure period or is not waived, our obligations under
the Credit Facility may be accelerated. The Credit Facility also
contains various financial covenants including a fixed charge
coverage ratio (as defined in the Credit Facility). The Credit
Facility also requires the payment of monthly fees based on the
average daily unused portion of the Credit Facility, in an
amount equal to 0.50% per annum.
Other
At January 29, 2011 and January 30, 2010, we had
approximately $326.7 million and $252.7 million,
respectively, due under non-cancelable purchase commitments
consisting of amounts to be paid under agreements to purchase
inventory.
The Company was named as a defendant in a putative class action
filed in February 2011 in the Superior Court of the State of
California for the County of Orange, Lorraine V.
Garcia v. Chicos FAS, Inc. The Complaint alleges
that the Company, in violation of California law, requested or
required customers to provide personal information as a
condition of accepting payment by credit card. The Company
denies the material allegations of the Complaint and will file
its response by the required deadline. The Company believes that
the case is wholly without merit and, thus, does not believe
that the case should have any material adverse effect on the
Companys financial condition or results of operations.
The Company was named as a defendant in a putative class action
filed in March 2011 in the Superior Court of the State of
California for the County of Los Angeles, Eileen Schlim v.
Chicos FAS, Inc. The Complaint attempts to allege
numerous violations of California law related to wages, meal
periods, rest periods, and vacation pay, among other things. The
Company denies the material allegations of the Complaint and
will file its response by the required deadline. The Company
believes that its policies and procedures for paying its
associates comply with all applicable California laws. As a
result, the Company does not believe that the case should have a
material adverse effect on the Companys financial
condition or results of operations.
Other than as noted above, we are not currently a party to any
legal proceedings, other than various claims and lawsuits
arising in the normal course of business, none of which we
believe should have a material adverse effect on our financial
condition or results of operations.
|
|
9.
|
Stock
Compensation Plans and Capital Stock Transactions:
|
General
At January 29, 2011, we had stock-based compensation plans
as described below. The total compensation expense related to
stock-based awards granted under these plans during fiscal 2010,
2009 and 2008 was $10.5 million, $7.4 million and
$12.6 million, respectively. The total tax benefit
associated with stock-based compensation for fiscal 2010, 2009
and 2008 was $4.0 million, $2.8 million and
$4.8 million, respectively. We recognize stock-based
compensation costs net of a forfeiture rate for only those
shares expected to vest and on a straight-line basis over the
requisite service period of the award. We estimated the
forfeiture rate for fiscal years 2010, 2009 and 2008 based on
historical experience during the preceding four fiscal years.
51
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition to stock options, we have historically issued
nonvested stock awards (restricted stock) under our stock-based
compensation plans, pursuant to restricted stock agreements.
Shares of nonvested restricted stock have the same voting rights
as common stock, are entitled to receive dividends and other
distributions thereon, and are considered to be currently issued
and outstanding. In general, restricted stock awards vest
pro-rata over a period of three years from the date of grant.
In both fiscal 2009 and 2010, we granted our President and Chief
Executive Officer a performance award grant under which he is
eligible to receive from 0 to 133,333 shares, with a target
of 100,000 shares, contingent upon the achievement of
certain Company-specific performance goals over the fiscal year.
At each fiscal year-end, it was determined that he had earned
133,333 shares based on our performance. For the 2009
grant, the award will vest 3 years from the date of grant.
For the 2010 grant, the award will vest 2 years from the
date of grant. We accounted for the grants by recording
compensation expense, based on the number of shares ultimately
expected to vest on a straight-line basis over the respective
service period.
In fiscal 2010, certain of our executive officers were also
granted Performance Stock Units (PSU). Each PSU
award has the ability to be converted into shares on the second
anniversary of the grant date upon the achievement of certain
Company-specific performance goals for fiscal 2011. Based on the
level of achievement of the performance goals, the participants
in this award may earn up to 100% of the units awarded. Similar
to the performance awards granted to our President and Chief
Executive Officer, compensation cost is recognized on a
straight-line basis over the vesting period, based on the number
of units ultimately expected to vest and depending on the level
and likelihood of the performance condition being met.
Additionally, we reevaluate the amount of compensation expected
to be earned at the end of each reporting period and record an
adjustment, if necessary.
Stock
Option Plans
1993
Stock Option Plan
During fiscal year 1993, the Board approved a stock option plan,
as amended in fiscal 1999 (the 1993 Plan) for
eligible employees. Options granted under the terms of the 1993
Plan generally vest evenly over three years and have a
10-year
term. As of January 29, 2011, approximately 56,000
nonqualified options remain outstanding under the 1993 Plan.
Independent
Directors Plan
In October 1998, the Board approved a stock option plan (the
Independent Directors Plan) for eligible
independent directors. Options granted under the terms of the
Independent Directors Plan vest after six months and have
a 10-year
term. From the date of the adoption of the Independent
Directors Plan and until the 2002 Omnibus Stock and
Incentive Plan was adopted, 507,500 options were granted under
the Independent Directors Plan. As of January 29,
2011, approximately 30,000 options under the Independent
Directors Plan remain outstanding.
Omnibus
Stock and Incentive Plan
In April 2002, the Board approved the Chicos FAS, Inc.
2002 Omnibus Stock and Incentive Plan, which initially reserved
9,710,280 shares of common stock for future issuance. In
fiscal 2008, our shareholders approved the Amended and Restated
Chicos FAS, Inc. 2002 Omnibus Stock and Incentive Plan
(the Omnibus Plan), effective as of June 26,
2008. In particular, the amendments included:
(i) increasing the total number of shares of our Common
Stock with respect to which awards may be granted under the plan
by an additional 10,000,000 shares, (ii) expanding the
permissible types of awards to include stock-based and
cash-based Stock Appreciation Rights (SARs) and performance
awards, and (iii) eliminating the automatic grants of stock
options for both new and continuing non-employee directors. Our
executive officers and directors are eligible to receive awards
under the Omnibus Plan, including stock options, restricted
stock, restricted stock units, SARs and performance awards, in
accordance with the terms and conditions of the Omnibus Plan. No
new grants can be made under our existing 1993
52
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Plan or Independent Directors Plan, and such existing
plans remain in effect only for purposes of administering
options that are outstanding.
Under the Omnibus Plan, options generally vest evenly over three
years and have a
10-year
term. In accordance with the terms of the Omnibus Plan, shares
of common stock that are represented by options granted under
our previously existing plans which are forfeited, expire or are
canceled without delivery of shares of common stock are added to
the amounts reserved for issuance under the Omnibus Plan. As of
January 29, 2011, approximately 5,947,000 nonqualified
stock options are outstanding under the Omnibus Plan.
Employee
Stock Purchase Plan
We sponsor an employee stock purchase plan (ESPP)
under which substantially all full-time employees are given the
right to purchase up to 400 shares of our common stock
during each of the two specified offering periods each fiscal
year, for a total of up to 800 shares in any given fiscal
year, at a price equal to 85 percent of the value of the
stock immediately prior to the beginning of each offering
period. During fiscal 2010, 2009 and 2008, approximately 85,000,
60,000, and 46,000 shares, respectively, were purchased
under the ESPP. In accordance with accounting provisions, we
recognize compensation expense based on the 15% discount at
purchase.
Methodology
Assumptions
We use the Black-Scholes option-pricing model to value our stock
options. Using this option-pricing model, the fair value of each
stock option award is estimated on the date of grant. The fair
value of the stock option awards, which are subject to pro-rata
vesting generally over 3 years, is expensed on a
straight-line basis over the vesting period of the stock
options. The expected volatility assumption is based on the
historical volatility of the stock over a term equal to the
expected term of the option granted. The expected term of stock
option awards granted is derived from historical exercise
experience under the stock option plans and represents the
period of time that stock option awards granted are expected to
be outstanding. The expected term assumption incorporates the
contractual term of an option grant, which is ten years, as well
as the vesting period of an award, which is generally pro-rata
vesting over three years. The risk-free interest rate is based
on the implied yield on a U.S. Treasury constant maturity
with a remaining term equal to the expected term of the option
granted. The expected dividend yield is based on the expected
annual dividend divided by the market price of our common stock
at the time of declaration.
The weighted average assumptions relating to the valuation of
our stock options for fiscal 2010, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
Fiscal 2009
|
|
Fiscal 2008
|
|
Weighted average fair value of grants
|
|
$
|
6.65
|
|
|
$
|
3.23
|
|
|
$
|
1.69
|
|
Expected volatility
|
|
|
66
|
%
|
|
|
63
|
%
|
|
|
54
|
%
|
Expected term (years)
|
|
|
4.5 years
|
|
|
|
4.5 years
|
|
|
|
4.5 years
|
|
Risk-free interest rate
|
|
|
2.0
|
%
|
|
|
1.9
|
%
|
|
|
2.0
|
%
|
Expected dividend yield
|
|
|
1.1
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Aggregate
Stock Option Activity
As of January 29, 2011, 6,033,101 nonqualified options are
outstanding at a weighted average exercise price of $12.87 per
share, and approximately 6.9 million shares remain
available for future grants of either stock options, restricted
stock, restricted stock units, SARs, or performance awards. Of
the options outstanding, 3,654,694 options are exercisable as of
January 29, 2011.
53
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock option activity for fiscal 2010 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Aggregate
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Intrinsic
|
|
|
|
Number of
|
|
|
Average
|
|
|
Remaining
|
|
|
Value
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
(in thousands)
|
|
|
Outstanding, beginning of period
|
|
|
6,288,358
|
|
|
$
|
12.54
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,170,800
|
|
|
|
13.26
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(642,830
|
)
|
|
|
4.53
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
(783,227
|
)
|
|
|
17.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of period
|
|
|
6,033,101
|
|
|
|
12.87
|
|
|
|
6.27
|
|
|
$
|
17,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at January 29, 2011
|
|
|
5,614,882
|
|
|
|
13.17
|
|
|
|
6.11
|
|
|
|
15,618
|
|
Exercisable at January 29, 2011
|
|
|
3,654,694
|
|
|
|
15.57
|
|
|
|
5.16
|
|
|
|
8,753
|
|
The aggregate intrinsic value in the table above represents the
total pretax intrinsic value (the excess, if any, of the closing
stock price on the last trading day of fiscal 2010 and the
exercise price, multiplied by the number of such
in-the-money
options) that would have been received by the option holders had
all option holders exercised their options on January 29,
2011. This amount changes based on the fair market value of our
common stock. Total intrinsic value of options exercised during
fiscal 2010, 2009 and 2008 (based on the difference between our
stock price on the respective exercise date and the respective
exercise price, multiplied by the number of respective options
exercised) was $4.9 million, $5.9 million and
$0.3 million, respectively.
As of January 29, 2011, there was $9.3 million of
total unrecognized compensation expense related to unvested
stock options granted under our share-based compensation plans.
That expense is expected to be recognized over a weighted
average period of 1.6 years.
Cash received from option exercises and purchases under the ESPP
for fiscal 2010 was an aggregate of $3.6 million. The
actual tax benefit realized for the tax deduction from option
exercises of stock option awards totaled $1.9 million for
fiscal 2010.
Restricted
Stock Activity
Restricted stock awards as of January 29, 2011 and changes
during fiscal 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested, beginning of period
|
|
|
816,677
|
|
|
$
|
6.76
|
|
Granted
|
|
|
1,192,993
|
|
|
|
10.46
|
|
Vested
|
|
|
(466,175
|
)
|
|
|
7.64
|
|
Canceled
|
|
|
(113,160
|
)
|
|
|
6.51
|
|
|
|
|
|
|
|
|
|
|
Nonvested, end of period
|
|
|
1,430,335
|
|
|
|
9.27
|
|
|
|
|
|
|
|
|
|
|
Total fair value of shares of restricted stock that vested
during fiscal 2010, 2009 and 2008 was $5.6 million,
$5.4 million and $1.0 million, respectively. As of
January 29, 2011, there was $22.5 million of
unrecognized stock-based compensation expense related to
nonvested restricted stock awards. That cost is expected to be
recognized over a weighted average period of 2.9 years.
54
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Share
Repurchase Program
In August 2010, our Board of Directors authorized the repurchase
of up to $200 million of our outstanding common stock
through January 2013. During the third quarter, we repurchased
2,096,300 shares, at a total cost of approximately
$18.3 million, under this program. However, we have no
continuing obligation to repurchase shares under this
authorization, and the timing, actual number and value of any
additional shares to be purchased will depend on the performance
of our stock price, market conditions and other considerations.
We have a 401(k) defined contribution employee benefit plan (the
Plan) covering substantially all employees.
Employees rights to Company-contributed benefits vest
fully upon completing five years of service, with incremental
vesting starting in service year two. Under the Plan, employees
may contribute up to 100 percent of their annual
compensation, subject to certain statutory limitations. We have
elected to match employee contributions at 50 percent on
the first 6 percent of the employees contributions
and can elect to make additional contributions over and above
the mandatory match. For fiscal 2010, 2009 and 2008, our costs
under the Plan were approximately $2.6 million,
$2.4 million, and $2.3 million, respectively.
In April 2002, we adopted the Chicos FAS, Inc. Deferred
Compensation Plan (the Deferred Plan) to provide
supplemental retirement income benefits for a select group of
management employees. Eligible participants may elect to defer
up to 80 percent of their salary and 100 percent of
their bonuses pursuant to the terms and conditions of the
Deferred Plan. The Deferred Plan generally provides for payments
upon retirement, death or termination of employment. In
addition, we may make employer contributions to participants
under the Deferred Plan. To date, no Company contributions have
been made under the Deferred Plan. The amount of the deferred
compensation liability payable to the participants is included
in deferred liabilities in the consolidated balance sheets.
These obligations are funded through the establishment of rabbi
trust accounts held by us on behalf of the management group
participating in the plan. The trust accounts are reflected in
other assets in the accompanying consolidated balance sheets.
|
|
11.
|
Quarterly
Results of Operations (Unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per
|
|
|
|
|
|
|
|
|
Net Income Per
|
|
Common and Common
|
|
|
Net
|
|
Gross
|
|
Net
|
|
Common Share
|
|
Equivalent Share
|
|
|
Sales
|
|
Margin
|
|
Income
|
|
Basic
|
|
Diluted
|
|
Fiscal year ended January 29, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
481,588
|
|
|
$
|
281,580
|
|
|
$
|
35,402
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Second quarter
|
|
|
465,371
|
|
|
|
259,207
|
|
|
|
30,455
|
|
|
|
0.17
|
|
|
|
0.17
|
|
Third quarter
|
|
|
483,022
|
|
|
|
275,067
|
|
|
|
28,844
|
|
|
|
0.16
|
|
|
|
0.16
|
|
Fourth quarter
|
|
|
474,974
|
|
|
|
252,723
|
|
|
|
20,694
|
|
|
|
0.12
|
|
|
|
0.12
|
|
Fiscal year ended January 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
410,643
|
|
|
$
|
233,388
|
|
|
$
|
14,489
|
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
Second quarter
|
|
|
419,915
|
|
|
|
231,041
|
|
|
|
14,905
|
|
|
|
0.08
|
|
|
|
0.08
|
|
Third quarter
|
|
|
446,863
|
|
|
|
257,278
|
|
|
|
22,745
|
|
|
|
0.13
|
|
|
|
0.13
|
|
Fourth quarter
|
|
|
435,730
|
|
|
|
238,033
|
|
|
|
17,508
|
|
|
|
0.10
|
|
|
|
0.10
|
|
55
CHICOS
FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Dividends
Declared
On February 23, 2011, we announced that our Board of
Directors declared a quarterly dividend of $0.05 per share on
our common stock. The dividend will be payable on March 28,
2011 to shareholders of record at the close of business on
March 14, 2011. Although it is our Companys intention
to continue to pay a quarterly cash dividend in the future, any
decision to pay future cash dividends will be made by the Board
of Directors and will depend on future earnings, financial
condition and other factors.
Share
Repurchase Program
In accordance with our previously announced share repurchase
program, since January 29, 2011, the Company repurchased
1,834,440 shares of stock for $25.0 million.
56
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Controls
and Procedures
Our disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed
in our reports under the Securities and Exchange Act of 1934, as
amended, is recorded, processed, summarized, and reported within
the time periods specified in the SECs rules and forms.
As of the end of the period covered by this report, an
evaluation was carried out under the supervision and with the
participation of management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
(as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities and Exchange Act of 1934, as amended).
Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that, as of the end of such
period, our disclosure controls and procedures were effective in
providing reasonable assurance in timely alerting them to
material information relating to us (including our consolidated
subsidiaries) and that information required to be disclosed in
our reports is recorded, processed, summarized, and reported as
required to be included in our periodic SEC filings.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Exchange Act
is accumulated and communicated to management, including the
principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. There were no
significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the
date of their evaluation. There was no change in our internal
control over financial reporting during the fourth fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Managements
Report on Internal Control over Financial
Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rule 13a-15(f)
of the Securities Exchange Act of 1934. Under the supervision
and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting as of January 29, 2011 as
required by the Securities Exchange Act of 1934
Rule 13a-15(c).
In making this assessment, we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on our evaluation, management concluded that internal
control over financial reporting was effective as of
January 29, 2011.
No system of controls, no matter how well designed and operated,
can provide absolute assurance that the objectives of the system
of controls are met, and no evaluation of controls can provide
absolute assurance that the system of controls has operated
effectively in all cases. Therefore, even those systems
determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and
presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and
procedures may deteriorate.
The effectiveness of our internal control over financial
reporting as of January 29, 2011 has been audited by
Ernst & Young LLP, an independent registered certified
public accounting firm, as stated in their report which follows.
57
Report of
Independent Registered Certified Public Accounting
Firm
The Board of Directors and Shareholders of Chicos FAS,
Inc.
We have audited Chicos FAS, Inc. and subsidiaries
internal control over financial reporting as of January 29,
2011, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Chicos FAS, Inc. and subsidiaries
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Managements Report on
Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Chicos FAS, Inc. and subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of January 29, 2011, based on
the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
fiscal 2010 consolidated financial statements of Chicos
FAS, Inc. and subsidiaries and our report dated March 22,
2011 expressed an unqualified opinion thereon.
Tampa, Florida
March 22, 2011
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
58
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Information about directors and nominees for director,
procedures by which security holders may recommend director
nominees, the code of ethics, the audit committee, audit
committee membership and our audit committee financial expert
and Section 16(a) beneficial ownership reporting compliance
in our 2011 Annual Meeting proxy statement is incorporated
herein by reference. Information about our executive officers is
included in Part I of this Annual Report on
Form 10-K.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Information about executive compensation and compensation
committee interlocks and the Compensation and Benefits Committee
report in our 2011 Annual Meeting proxy statement is
incorporated herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
The information required by this item is included in our 2011
Annual Meeting proxy statement and is incorporated herein by
reference.
Equity
Compensation Plan Information
The following table shows information concerning our equity
compensation plans as of the end of the fiscal year ended
January 29, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
Number of
|
|
|
|
|
|
Remaining Available
|
|
|
|
Securities to be
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Issued upon
|
|
|
Weighted-Average
|
|
|
Under Equity
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
(Excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Securities
|
|
Plan category
|
|
and Rights
|
|
|
and Rights ($)
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
6,033,101
|
|
|
$
|
12.87
|
|
|
|
6,906,471
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,033,101
|
|
|
$
|
12.87
|
|
|
|
6,906,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes shares authorized for issuance under the Companys
1993 Stock Option Plan, Independent Directors Plan, and
Amended and Restated 2002 Omnibus Stock and Incentive Plan. |
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information required by this item is included in our 2011
Annual Meeting proxy statement and is incorporated herein by
reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The information required by this item is included in our 2011
Annual Meeting proxy statement and is incorporated herein by
reference.
59
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) Documents filed as part of this Report.
(1) The following financial statements are contained in
Item 8:
|
|
|
|
|
Financial Statements
|
|
Page in this Report
|
|
|
Report of Ernst & Young LLP, independent registered
certified public accounting firm
|
|
|
33
|
|
Consolidated Statements of Operations for the fiscal years ended
January 29, 2011, January 30, 2010, and
January 31, 2009
|
|
|
34
|
|
Consolidated Balance Sheets as of January 29, 2011 and
January 30, 2010
|
|
|
35
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income for the fiscal years ended January 29,
2011, January 30, 2010, and January 31, 2009
|
|
|
36
|
|
Consolidated Statements of Cash Flows for the fiscal years ended
January 29, 2011, January 30, 2010, and
January 31, 2009
|
|
|
37
|
|
Notes to Consolidated Financial Statements
|
|
|
38
|
|
(2) The following Financial Statement Schedules are
included herein:
Schedules are not submitted because they are not applicable or
not required or because the required information is included in
the financial statements or the notes thereto.
|
|
|
|
(3)
|
The following exhibits are filed as part of this report
(exhibits marked with an asterisk have been previously filed
with the Commission as indicated and are incorporated herein by
this reference):
|
|
|
|
|
|
|
3
|
.1*
|
|
Composite Articles of Incorporation of Chicos FAS, Inc.
(Filed as Exhibit 3.1 to the Companys
Form 10-Q
as filed with the Commission on September 4, 2009)
|
|
3
|
.2*
|
|
Composite Amended and Restated By-laws of Chicos FAS, Inc.
(Filed as Exhibit 3.2 to the Companys
Form 10-K
as filed with the Commission on March 24, 2010)
|
|
4
|
.1*
|
|
Composite Articles of Incorporation of Chicos FAS, Inc.
(Filed as Exhibit 3.1 to the Companys
Form 10-Q
as filed with the Commission on September 4, 2009)
|
|
4
|
.2*
|
|
Composite Amended and Restated By-laws of Chicos FAS, Inc.
(Filed as Exhibit 3.2 to the Companys
Form 10-K
as filed with the Commission on March 24, 2010)
|
|
4
|
.3*
|
|
Form of specimen Common Stock Certificate (Filed as
Exhibit 4.9 to the Companys
Form 10-K
for the year ended January 29, 2005, as filed with the
Commission on April 8, 2005)
|
|
10
|
.1*
|
|
Employment Agreement between the Company and Scott A. Edmonds,
effective as of September 3, 2003 (Filed as
Exhibit 10.13 to the Companys
Form 10-K
for the year ended January 31, 2004, as filed with the
Commission on April 9, 2004)
|
|
10
|
.2*
|
|
Amendment No. 1 to Employment Agreement between the Company
and Scott A. Edmonds, effective as of June 22, 2004 (Filed
as Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended July 31, 2004, as filed with the
Commission on August 26, 2004)
|
|
10
|
.3*
|
|
Amendment No. 2 to Employment Agreement between the Company
and Scott A. Edmonds, dated December 18, 2008 and effective
as of January 1, 2005 (Filed as Exhibit 10.1 to the
Companys
Form 8-K,
as filed with the Commission on December 19, 2008)
|
|
10
|
.4*
|
|
Separation letter agreement and release between Chicos
FAS, Inc. and Scott A. Edmonds, dated as of January 7, 2009
(Filed as Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on January 8, 2009)
|
|
10
|
.5*
|
|
Employment letter agreement between the Company and Donna Noce
Colaco, with employment commencing on August 6, 2007 (Filed
as Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended August 4, 2007, as filed with the
Commission on August 29, 2007)
|
60
|
|
|
|
|
|
10
|
.6*
|
|
Employment letter agreement between the Company and Kent A.
Kleeberger, with employment commencing on November 1, 2007
(Filed as Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on October 23, 2007)
|
|
10
|
.7*
|
|
Employment letter agreement between the Company and David F.
Dyer, dated as of January 7, 2009 (Filed as
Exhibit 10.2 to the Companys
Form 8-K,
as filed with the Commission on January 8, 2009)
|
|
10
|
.8*
|
|
Amendment No. 1 to employment letter agreement between the
Company and David F. Dyer, dated March 5, 2009 (Filed as
Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on March 12, 2009)
|
|
10
|
.9*
|
|
Employment letter agreement between the Company and Jeffrey A.
Jones, dated as of February 11, 2009 (Filed as
Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on February 27, 2009)
|
|
10
|
.10*
|
|
Employment letter agreement between the Company and Cynthia S.
Murray, dated as of January 29, 2009 (Filed as
Exhibit 10.16 to the Companys
Form 10-K
for the year ended January 31, 2009, as filed with the
Commission on March 27, 2009)
|
|
10
|
.11*
|
|
Employment letter agreement between the Company and Laurie Van
Brunt, dated as of April 21, 2010 (Filed as
Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended May 1, 2010, as filed with the
Commission on May 28, 2010)
|
|
10
|
.12*
|
|
Employment letter agreement between the Company and Sara K.
Stensrud, dated as of July 6, 2010 (Filed as
Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended July 31, 2010, as filed with the
Commission on August 27, 2010)
|
|
10
|
.13*
|
|
1993 Stock Option Plan (Filed as Exhibit 10.14 to the
Companys
Form 10-K
for the year ended January 2, 1994, as filed with the
Commission on April 1, 1994)
|
|
10
|
.14*
|
|
First Amendment to the 1993 Stock Option Plan (Filed as
Exhibit 10.9 to the Companys
Form 10-K
for the year ended January 30, 1999, as filed with the
Commission on April 28, 1999)
|
|
10
|
.15*
|
|
Second Amendment to 1993 Stock Option Plan (Filed as
Exhibit 10.21 to the Companys
Form 10-K
for the year ended February 2, 2002, as filed with the
Commission on April 24, 2002)
|
|
10
|
.16*
|
|
Non-Employee Directors Stock Option Plan (Filed as
Exhibit 10.49 to the Companys
Form 10-K
for the year ended January 30, 1999, as filed with the
Commission on April 28, 1999)
|
|
10
|
.17*
|
|
First Amendment to Chicos FAS, Inc. Non-Employee Directors
Stock Option Plan (Filed as Exhibit 10.51 to the
Companys
Form 10-K
for the year ended January 29, 2000, as filed with the
Commission on April 25, 2000)
|
|
10
|
.18*
|
|
2002 Omnibus Stock and Incentive Plan (Filed as
Exhibit 10.22 to the Companys
Form 10-K
for the year ended February 2, 2002, as filed with the
Commission on April 24, 2002)
|
|
10
|
.19*
|
|
First Amendment to Chicos FAS, Inc. 2002 Omnibus Stock and
Incentive Plan, effective as of June 20, 2006 (Filed as
Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on June 22, 2006)
|
|
10
|
.20*
|
|
Amended and Restated 2002 Omnibus Stock and Incentive Plan
(Filed as Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on July 2, 2008)
|
|
10
|
.21*
|
|
Form of 2002 Omnibus Stock and Incentive Plan Stock Option
Certificate for Employees (Filed as Exhibit 10.1 to the
Companys
Form 8-K,
as filed with the Commission on February 3, 2005)
|
|
10
|
.22
|
|
Revised Form of 2002 Omnibus Stock and Incentive Plan Stock
Option Agreement for Employees
|
|
10
|
.23*
|
|
Form of 2002 Omnibus Stock and Incentive Plan Stock Option
Certificate for Non-Management Directors (Filed as
Exhibit 10.2 to the Companys
Form 8-K,
as filed with the Commission on February 3, 2005)
|
|
10
|
.24*
|
|
Form of 2002 Omnibus Stock and Incentive Plan Restricted Stock
Agreement for Employees (Filed as Exhibit 10.25 to the
Companys
Form 10-K
for the year ended January 31, 2009, as filed with the
Commission on March 28, 2008)
|
|
10
|
.25
|
|
Revised Form of 2002 Omnibus Stock and Incentive Plan Restricted
Stock Agreement for Employees
|
61
|
|
|
|
|
|
10
|
.26
|
|
Form of 2002 Omnibus Stock and Incentive Plan Performance-Based
Restricted Stock Agreement for Employees
|
|
10
|
.27*
|
|
Form of 2002 Omnibus Stock and Incentive Plan Restricted Stock
Agreement for Non-Management Directors (Filed as
Exhibit 10.28 to the Companys
Form 10-K
for the year ended February 2, 2008, as filed with the
Commission on March 27, 2009)
|
|
10
|
.28*
|
|
Form of 2002 Omnibus Stock and Incentive Plan Performance Share
Unit Agreement for Employees (Filed as Exhibit 10.28 to the
Companys
Form 10-K
for the year ended January 30, 2010, as filed with the
Commission on March 24, 2010)
|
|
10
|
.29*
|
|
Chicos FAS, Inc. Amended and Restated 2002 Employee Stock
Purchase Plan (Filed as Exhibit 10.29 to the Companys
Form 10-K
for the year ended January 31, 2004, as filed with the
Commission on April 9, 2004)
|
|
10
|
.30*
|
|
2005 Cash Bonus Incentive Plan (Filed as Exhibit 10.5 to
the Companys
Form 8-K,
as filed with the Commission on February 3, 2005)
|
|
10
|
.31*
|
|
First Amendment to 2005 Cash Bonus Incentive Plan (Filed as
Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on April 5, 2006)
|
|
10
|
.32*
|
|
Second Amendment to 2005 Cash Bonus Incentive Plan (Filed as
Exhibit 10.1 to the Companys
Form 8-K,
as filed with the Commission on April 13, 2007)
|
|
10
|
.33*
|
|
Amended and Restated Chicos FAS, Inc. Cash Bonus Incentive
Plan (Filed as Exhibit 10.2 to the Companys
Form 10-Q
for the quarter ended July 31, 2010, as filed with the
Commission on August 27, 2010
|
|
10
|
.34*
|
|
Chicos Amended and Restated Executive Severance Plan
(Filed as Exhibit 10.32 to the Companys
Form 10-K
for the year ended January 31, 2009, as filed with the
Commission on March 28, 2008)
|
|
10
|
.35*
|
|
Amendment No. 1 to Chicos FAS, Inc. Executive
Severance Plan (Filed as Exhibit 10.35 to the
Companys
Form 10-K
for the year ended January 31, 2009, as filed with the
Commission on March 27, 2009)
|
|
10
|
.36*
|
|
Chicos FAS, Inc. Vice President Severance Plan (Filed as
Exhibit 10.32 to the Companys
Form 10-
K for the year ended February 2, 2008, as filed with the
Commission on March 28, 2008)
|
|
10
|
.37*
|
|
Amendment No. 1 to Chicos FAS, Inc. Vice President
Severance Plan (Filed as Exhibit 10.37 to the
Companys
Form 10-K
for the year ended January 31, 2009, as filed with the
Commission on March 27, 2009)
|
|
10
|
.38*
|
|
Participation Agreement with Kent A. Kleeberger (Filed as
Exhibit 10.2 to the Companys
Form 8-K,
as filed with the Commission on March 6, 2008)
|
|
10
|
.39*
|
|
Indemnification Agreement with David F. Walker (Filed as
Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended October 29, 2005, as filed with the
Commission on November 29, 2005)
|
|
10
|
.40*
|
|
Indemnification Agreements with Betsy S. Atkins, John W.
Burden, III, Verna K. Gibson, and Ross E. Roeder (Filed as
Exhibits 10.1-10.3
and 10.8 to the Companys
Form 8-K
as filed with the Commission on December 9, 2005)
|
|
10
|
.41*
|
|
Indemnification Agreement with A. Alexander Rhodes (Filed as
Exhibit 10.2 to the Companys
Form 8-K
as filed with the Commission on May 2, 2006)
|
|
10
|
.42*
|
|
Indemnification Agreements with John J. Mahoney and David F.
Dyer (Filed as
Exhibits 10.1-10.2
to the Companys
Form 8-K
as filed with the Commission on July 25, 2008)
|
|
10
|
.43
|
|
Indemnification Agreement with Andrea M. Weiss
|
|
10
|
.44
|
|
Indemnification Agreement with Stephen E. Watson
|
|
10
|
.45*
|
|
Credit Agreement by and among SunTrust Bank, the Company and the
subsidiaries of the Company dated as of November 24, 2008,
including the schedules and exhibits (Filed as Exhibit 10.1
to the Companys
Form 8-K/A
(Amendment No. 2) as filed with the Commission on
September 30, 2009)
|
|
10
|
.46
|
|
Amendment No. 1 to Credit Agreement by and among SunTrust
Bank, the Company and the subsidiaries of the Company dated as
of March 3, 2011
|
|
10
|
.47*
|
|
Chicos FAS, Inc. Deferred Compensation Plan effective
April 1, 2002 (Filed as Exhibit 10.53 to the
Companys
Form 10-K
for the year ended February 2, 2002, as filed with the
Commission on April 24, 2002)
|
62
|
|
|
|
|
|
10
|
.48*
|
|
Chicos FAS, Inc. 2005 Deferred Compensation Plan effective
January 1, 2005 (amended and restated January 1, 2008)
(Filed as Exhibit 10.1 to the Companys
Form 10-Q
for the quarter ended November 1, 2008, as filed with the
Commission on December 9, 2008)
|
|
10
|
.49*
|
|
Lease Agreement between Joint Development Authority of
Winder-Barrow County and Chicos Real Estate, LLC dated as
of March 25, 2002 (Filed as Exhibit 10.54 to the
Companys
Form 10-K
for the year ended February 2, 2002, as filed with the
Commission on April 24, 2002)
|
|
21
|
|
|
Subsidiaries of the Registrant
|
|
23
|
|
|
Consent of Ernst & Young LLP
|
|
31
|
.1
|
|
Chicos FAS, Inc. and Subsidiaries Certification Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002- Chief
Executive Officer
|
|
31
|
.2
|
|
Chicos FAS, Inc. and Subsidiaries Certification Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002- Chief
Financial Officer
|
|
32
|
.1
|
|
Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.2
|
|
Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101
|
.INS
|
|
XBRL Instance Document
|
|
101
|
.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
101
|
.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101
|
.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
101
|
.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101
|
.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Chicos Fas, Inc.
David F. Dyer
President, Chief Executive Officer and Director
Date: March 22, 2011
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ David
F. Dyer
David
F. Dyer
|
|
President, Chief Executive Officer, and Director (Principal
Executive Officer)
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Kent
A. Kleeberger
Kent
A. Kleeberger
|
|
Executive Vice President, Chief Operating Officer and Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Ross
E. Roeder
Ross
E. Roeder
|
|
Chairman of the Board
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Betsy
S. Atkins
Betsy
S. Atkins
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ John
W. Burden, III
John
W. Burden, III
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Verna
K. Gibson
Verna
K. Gibson
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ John
J. Mahoney
John
J. Mahoney
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ David
F. Walker
David
F. Walker
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Stephen
E. Watson
Stephen
E. Watson
|
|
Director
|
|
March 22, 2011
|
|
|
|
|
|
/s/ Andrea
M. Weiss
Andrea
M. Weiss
|
|
Director
|
|
March 22, 2011
|
64