"We have been evaluating the potential number of doors for our brands, and we believe the market for Chico's to be at least 750 doors with the potential for 800," said Chico's FAS' president and CEO Scott Edmonds during the call. "For White House|Black Market, we see expanding opportunities for this brand and are confident that the market can support at least 600 stores."
Specifically, 60% of the new stores will be Chico's stores, with the balance being White House|Black Market units. In addition to the new stores, the company plans to relocate or expand 30 to 40 locations. Together, the new stores and relocations/expansions will add 20% of net sf to the company's store base. The company said that new Chico's and White House|Black Market units in 2006 will be somewhat larger than the average existing locations.
Currently, the company owns 477 Chico's stores, 27 Chico's outlet stores, 181 White House|Black Market stores, five White House|Black Market outlet stores and 10 Soma by Chico's stores, while franchisees own and operate 13 Chico's stores.
The new stores are part of Chico's growth strategy, Edmonds said, adding that they position the company for future growth similar to the results generated during the most recent quarter.
During the second quarter, the company generated an operating margin in excess of 22%, a sales increase of 35% and a net-income increase of 38%. "Second quarter gross margins for the core Chico's brand were somewhat off from last year's gross margins while White House|Black Market's gross margins were up 270 basis points on a quarter over quarter basis," Edmonds said during the earnings call.
Net sales for the second quarter increased 34.6% to a record $343 million from $255 million for the same period last year. Similarly, net income rose 38.4% to $49 million, or 27 cents a diluted share, compared to net income of $35 million, or 20 cents a diluted share for the same period last year.
The company achieved comp-store sales growth of 15.7% for the second quarter, including high single-digit growth for Chico's. The White House|Black Market brand boasted same-store sales in the mid 40% range.
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