Chico's Pushes on With Omnichannel Efforts Amidst Sales Miss

Chico's FAS store

Fashion retailer Chico’s FAS' first half 2017 financial results fell short of the goals the company set. Net sales in the second quarter 2017 were $578.6 million, compared to $635.7 million in the same quarter a year ago.

"Second quarter sales were disappointing, and we are taking decisive actions to adjust our assortments and enhance omnichannel capabilities in bellwether categories such as Jackets at Chico's and Dresses at White House Black Market," said Shelley Broader, CEO and President. "Our leadership team also continues to be keenly focused on driving our strategic priorities to transform Chico's FAS, Inc. into a more nimble, efficient and innovative retailer that continues to drive strong free cash flow in the long term."

Chico's FAS' second quarter capital expenditures totaled $8.5 million, mostly comprised of investments in technology projects and existing stores. For the year, the company anticipates capital expenditures of $55 to $60 million due to enhancement to its omnichannel capabilities, as well as other projects within the retailer's digital strategy roadmap and investment in existing stores (year-to date, the company has reinvested in 59 locations through relocations, refreshes and remodels).

The company's digital commerce channels are gaining traction due to recent efforts, according to the retailer. Chico’s FAS offers three brands: Chico’s, White House Black Market and Soma. With the completion of Soma in July, all three brands are now on the same website platform.

"This responsive design is providing faster load times, better site functionality, and an increase in sales conversion, and a decline in cart abandonment," said Broader.

CFO Todd Vogensen noted, "not surprisingly, our e-commerce sales were up this quarter."

Some of the benefits of running a shared service model is the ability to combine back of the house cost, Broader noted.

"It’s why we can have the kind of e-commerce experience for our customer because it’s shared, the cost of that is shared between those three brands," said Broader.

Chico’s FAS is also ramping up efforts to increase digital sales through exclusive products, events and promotions.

In-store, the retailer has recently expanded its omnichannel capability, expanding the endless aisle available to customers, shipping orders either from its distribution center, which fulfills both floor replenishment orders and online orders, or another store. Chico’s FAS' has also added faster and easier "look and find" features for store associates.

"Whether shipped from our distribution center or in other store, the expanded omnichannel capabilities are yielding strong improvements in sales, margin and inventory utilization," noted Broader. "This functionality also continues to leverage technology in-store to facilitate the seamless interaction between stores and online."

As Chico's FAS boosts its e-commerce and omnichannel capabilities, the retailer is also shifting from more traditional marketing to more digital marketing, utilizing its analytics. The retailer captures customer information on over 90% of its sales, which Vogensen said gives Chico's the "ability to go back and look at marketing effectiveness in a way that a lot of folks would not have."

In other news, the company added Mary van Praag on September 5 as the new Soma President. Ms. van Praag most recently served as CEO of Perricone MD. Prior to that, she held senior executive roles at Coty, Inc. and Johnson & Johnson's beauty division.

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