Through TheFLY's Eyes: Chico's FAS Inc.
from Theflyonthewall.com









A Great Growth Company Hits A Bump In The Road

Chico's (CHS) has been one of the great growth companies this decade with company-wide sales increasing from $155 million in fiscal year 2000 to $1.4 billion in the most recent fiscal year. However, Chico's stock is selling at $31, down from a high of $49 earlier in the year as its core business has shown a slowdown in same-store sales growth.

Wall Street is concerned that the market for Chico's stores might be maturing. However, management says it needs to be more diligent in talking about future merchandising strategies which competitors are now copying. Chico's management historically has communicated very clearly with the investment community about marketing and merchandising strategies, but it appears to be backfiring as competition quickly adjusts their own merchandise.

With the stock down 37% from its peak, it is worth being a contrarian with Chico's. In addition to its Chico's brand it owns two newer brands, WhiteHouse/BlackMarket and Soma, that are now growing in the mid-teens and should do so for a number of years. In addition, the company has another new brand which will see growth in 2008.

This management team has demonstrated a great ability to grow profitably and throw off cash. This is most likely a good time to buy a high quality company after a big correction in share price.