Local ShoppingChico's was ready for its customers in Q1 as sales surged 40%

Chico’s was ready for its customers in Q1 as sales surged 40%

Dive Brief:

  • Women’s apparel conglomerate Chico’s embarked on its turnaround pre-pandemic, and that paid off in Q1. Net sales rose 39.4% year over year to $540.9 million, reflecting a 40.6% comps increase that was partly offset by 29 store closures.

  • Comps at White House Black Market surged 64.8% year over year and 14% from 2019; at namesake Chico’s rose 52% year over year and 0.8% from 2019; and at lingerie brand Soma fell 1.4% year over year and rose 37.5% from 2019.

  • Despite higher raw material and freight costs, gross margin expanded 730 basis points to 40%. Inventories were up 55.3% to $325.6 million, per a company press release. The retailer swung into the black with net income of $34.9 million, from last year’s $8.9 million net loss.

Dive Insight:

Chico’s own efforts to improve — including the fit and quality of its garments — were gaining traction this year just as consumers pulled out their wallets to refresh their closets. That led to a first quarter performance that was a pleasant surprise to many analysts.

The retaler “appears to be benefiting from a return to occasion and workwear at a time when management has been working over the past several years to improve the merchandising at Chico’s and WH|BM, allowing the brands to stand ready for a resurgence of customer interest,” Telsey Advisory Group CEO Dana Telsey said in emailed comments.

The retailer is on a roll, with growth in most categories and all its brands taking share, CEO Molly Langenstein said during a conference call with analysts.

But consumer behavior may not be so amenable in the second half of the year, as inflation persists and recession fears grow. That and the company’s bloated inventories could mean more promotions in coming months, analysts warned.

The company continues to optimize its footprint. Plans are for 28 new Soma stores, and possibly as many as 30, and for 40 White House Black Market and Chico’s closures, although Chief Financial Officer PJ Guido said that those brands’ emerging strength makes the latter “a moving target.”

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