Through The Fly's Eyes: FAS Chico's
Same-Store-Sales Growth Returning; Gross Margins Still A Question
Chico's FAS (CHS), the great growth stock that has run into hard times the past year, appears to be successfully addressing its lack of growth issues. Same-store-sales growth has returned after a prolonged period of big declines for this women's retailer.
Last night, Chico's reported same store sales of 5.2% and total company-wide sales of 22%. However, one of the flaws of retail monthly sales data is that it does not tell investors what gross margins were. Did management slash prices to get sales growing or did the company successfully change its product mix?
Look for analyst reports today to see if Chico's successfully changed product mix and did not slash prices to get sales going. If improved product mix was the reason for the sales jump, jump back into this stock.
When Chico's has its product mix right, its loyal, high-end customer base will use its deep pockets to buy a lot of stuff which amounts to huge free cash flow generation for shareholders. With the stock trading for around $25, down from $48 in early 2006, this stock could revisit its former highs if sustainable growth has returned.