(Filed Under Financial and General Interest News). After 25 consecutive quarters of growth, sales at the Soma chain of lingerie stores were down 0.9% for the three months ended October 31. Meanwhile, at parent company Chico’s FAS as a whole (which also includes the Chico’s and White House | Black Market stores), sales dropped 3.3%.
Outgoing Chico’s president and CEO Dave Dyer (who is being replaced by Shelley Broader as of December 1) explained that Soma, as well as the rest of the company, experienced a particularly difficult September. “The brand was up against the successful Enhancing Shape bra launch from September 2014.” And while the brand did have positive sales growth in the other two months in the quarter, August and October “it was not enough to offset [the] September sales miss.”
In comments made during the conference call to discuss the financial results, Dyer added, “As the quarter progressed and we increased our promotional messaging, Soma starting to see the traffic come back and comps return to the mid-single digit level. Our most successful category for the quarter were bras, sleepwear and beauty. It’s important to note that the fourth quarter for Soma, unlike our other brands, is the largest quarter in terms of both sales and profits. We’re confident that we will gear up and [are] ready for it.”
“Soma is back to positive comps in both August, October, and November and so I feel like, kind of, back on track there, which is important for us and for our long-term.”
The Chico’s CEO also used the conference call “to announce that we just signed a new franchise agreement with Liverpool department stores for 31 Soma shop-in-shops in Mexico.” The Liverpool group claims to be the largest full-scale department store company in Mexico.
In additional comments about Soma, Dyer said the brand recently launched a “new TV and digital ad campaign, which will be one of their strongest ever with three new commercials, bras, sleepwear and fragrance [that] will appear together in one spot for the first time, highlighting their selection of gifting options. In a second commercial we are presenting their first ever Black Friday promotion.”
Dyer added that Soma’s holiday catalog has already been published and “We’ve intensified gift giving items and adjusted the store layouts to deliver a more elevated experience.”
Speaking about Chico’s results as a whole, Dyer complained “it was really the perfect storm that happened in September with the Labor Day shift.” He added, “Honestly, in September I haven’t, in quite a while, seen brakes come on business the way they did in that first three weeks of September. It was across all brands, across all regions, across the board. It’s like somebody flipped a light switch then.”
This summer Chico’s announced it was exiting one of its former brands, Boston Proper, and the third quarter results reflected, among other things, “restructuring and strategic charges” related to the departure. There was also a decrease in overall selling space.
In the quarter the company as a whole reported a net loss of $11.6 million compared to net income of $26.5 million in last year’s third quarter. At the same time sale decreased 3.7% to $641.2 million, compared to $665.6 million in last year’s third quarter.
The full transcript of the conference call can be found here: http://seekingalpha.com/article/3710796-chicos-fas-chs-ceo-dave-dyer-on-q3-2015-results-earnings-call-transcript?auth_param=n9vbh:1b59eer:7527480fd3276294b793f8abd597abc8&uprof=53&dr=1
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