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Chico’s Revises Fourth-Quarter FY17 View, Issues Tax Updates


Chico's FAS, Inc. CHS has revised its guidance for the fourth quarter of fiscal 2017, which is slated to release on Feb 28.

Depending upon the results so far, management now expects total comparable sales (comps) to decline in the band of 5-7% during the quarter versus earlier projection of high single-digits decline. This guidance excludes nearly $30 million of sales from the additional 53rd week.

However, the company reaffirmed its fourth-quarter gross margin guidance of roughly flat to slightly up. SG&A expenses are now projected to be nearly flat year over year, following the costs from the additional week. Earlier, management anticipated SG&A expenses to decline compared with last year, partly offset by additional costs from the 53rd week.

Furthermore, management has concluded a preliminary analysis of the Tax Cuts and Jobs Act of 2017 effects on its business, which was signed into law on Dec 22. Notably, the law reduces the corporate tax rate from 35% to 21% as well as guides on the limitations of interest expense deduction and executive compensation. Nevertheless, the company expects its tax rate in the band of 26-28% for fiscal 2018 versus a tax rate of roughly 38%, projected earlier.

Analysts expect Chico's to benefit from the recent tax cut as a lower tax burden might help it to channelize the surplus funds in the best possible manner.

Following the news, Chico's shares were up nearly 4% yesterday. However, the stock has lost 34.9% over the past year, wider than the industry’s decline of mere 2.4%. Chico's carries a Zacks Rank #3 (Hold).

Looking For Solid Retail Stocks, Check These

Some better-ranked stocks in the same industry are Zumiez Inc. ZUMZ, American Eagle Outfitters, Inc. AEO and The Buckle, Inc. BKE, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez with a long-term earnings growth rate of 18% has pulled off an average positive earnings surprise of 22.2% in the trailing four quarters.

American Eagle with a long-term earnings growth rate of 7.5% has delivered an average positive earnings surprise of 2.6% in the last four quarters.

Buckle has delivered an average positive earnings surprise of 3.8% in the trailing four quarters.

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