Could one longtime turnaround story actually be turning
around? Despite my former skepticism, I'm beginning to
suspect that
Chico's (NYSE: CHS) might be pulling it
off.
Chico's increased its second-quarter net income by 122%,
to $14.9 million, or $0.08 per share. Even better, its sales
increased 3.6%, to $419.9 million. Same-store sales increased
by 1.3%. Its White House/Black Market chain led the way with
a 3.7% increase in comps, while Chico's namesake stores'
comps increased just 0.4%. The direct-to-consumer segment
increased sales by a whopping 46%.
Things looked
far bleaker for Chico'searlier this year. Its stock price
had
gone wild, even though it showed few signs of real
operational improvement.
This quarter seems far more heartening. Even though the
sales gains are modest, they're still gains -- a rare feat
among retail names this earnings season. Chico's also has
cash on the balance sheet and no debt, which always made it a
slightly shinier investment than most peers.
Though Chico's may be finally pulling off a turnaround, I
still defend my previous rationale for concern. Retail
turnarounds are
verydifficult to execute, and investors shouldn't
underestimate the dangers. Beset by changing fashion tastes
and fickle, budget-conscious consumers, these retail recovery
stories rarely end happily.
Urban Outfitters (Nasdaq: URBN)
rebounded relatively quicklyfrom a major fashion stumble
a few years back. But tons more retailers, including
Talbots (NYSE: TLB) and
Gap (NYSE: GPS), have struggled for years to
little avail. Given its nasty numbers and teen shoppers'
apparently growing indifference, I still wouldn't want to
touch
Abercrombie & Fitch (NYSE: ANF) with a
10-foot pole.
I'm not exactly all-in on Chico's, either. Its stock price
has risen 193% over the last six months, even though the
consumer climate remains fairly ugly. Given a choice, I
prefer strong performers like
Aeropostale (NYSE: ARO) and
Buckle (NYSE: BKE). Still, I've got to give
credit where it's due; even if its shares previously seemed
to trade more on hope than anything else, Chico's did deliver
some signs of life this quarter.
For more Foolishness:
out below for Chico's
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This article was originally published as
Is Chico's Finally a Buy?on
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