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11: R1 Cover Page HTML 67K
12: R2 Condensed Consolidated Statements of Income HTML 97K
(Unaudited)
13: R3 Condensed Consolidated Statements of Comprehensive HTML 36K
Income (Unaudited)
14: R4 Condensed Consolidated Balance Sheets (Unaudited) HTML 130K
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- Parenthetical
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Equity (Unaudited)
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Accounting Policies
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Accounting Policies (Policies)
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(Details)
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(Exact name of registrant as specified in its charter)
iFlorida
i59-2389435
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i11215 Metro Parkway, iFort Myers, iFloridai33966
(Address of principal executive offices)
i239-i277-6200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iCommon
Stock, Par Value $0.01 Per Share
iCHS
iNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes☑No ☐
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes☑No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer,""accelerated filer,""smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
iLarge
accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No ☑
Preferred stock, $iii0.01//
par value; iii2,500//
shares authorized; iiiiiino/////
shares issued and outstanding
i—
i—
i—
Common
stock, $iii0.01//
par value; iii400,000//
shares authorized; i166,481 and i163,823 and i163,862
shares issued respectively; and i125,184 and i122,526 and i122,565
shares outstanding, respectively
i1,252
i1,225
i1,226
Additional
paid-in capital
i508,105
i508,654
i503,168
Treasury
stock, at cost, iii41,297//
shares, respectively
(i494,395)
(i494,395)
(i494,395)
Retained
earnings
i282,910
i206,020
i177,077
Accumulated
other comprehensive gain
i5
i—
i10
Total
Shareholders’ Equity
i297,877
i221,504
i187,086
$
i1,232,513
$
i1,196,837
$
i1,213,067
The accompanying notes are an integral part of these condensed consolidated statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per
share amounts and where otherwise indicated)
(Unaudited)
1. iBASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
iThe
accompanying unaudited condensed consolidated financial statements of Chico's FAS, Inc., a Florida corporation, and its wholly-owned subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. The fiscal year ended January 29, 2022 balance sheet data was derived from audited
consolidated financial statements. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 29, 2022, included in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2022 filed with the Securities and Exchange Commission ("SEC") on March 15, 2022 ("2021 Annual Report on Form 10-K").
As used in this report, all references to "we,""us,""our", "the Company" and "Chico's FAS," refer to Chico's FAS, Inc. and all of its wholly-owned subsidiaries.
Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen and twenty-six weeks ended July 30, 2022 are not necessarily indicative of the results that may be expected for the entire year.
COVID-19 Pandemic Update
The novel strain of coronavirus (‘‘COVID-19’’) pandemic (the ‘‘COVID-19 pandemic’’ or the ‘‘pandemic’’) resulted in significant challenges across our business since March 2020 and is expected to continue to disrupt our business operations for fiscal 2022 to varying degrees. In response to the pandemic, many of our markets imposed limitations, varying by market and in frequency, on the access to the
Company’s store fleet, including temporary store closures and/or a reduction in hours, staffing and capacity. We continue to focus on evolving consumer demand emerging from the pandemic and have accelerated our transformation to a digital-first company, fast-tracking numerous innovation and technology investments across all three of our brands. Even as governmental restrictions have relaxed and markets are primarily open, we expect continued uncertainty and volatility on our business operations, operating results and operating cash flows as the ongoing economic impacts and health concerns associated with the pandemic continue to affect consumer behavior, spending levels and shopping preferences and cause disruptions to the supply chain and increase our raw materials and freight costs. Due to the uncertainty over the duration and severity of the economic and operational impacts of the pandemic, the adverse impacts of the pandemic may continue throughout our fiscal
year 2022.
i
Reclassifications
Certain reclassifications have been made to the prior period's financial statements to enhance the comparability with the current year's financial statements. As a result, certain line items have been amended in the unaudited condensed consolidated balance sheets to conform to the current period's presentation.
i
Adoption
of New Accounting Pronouncements
There were no new accounting pronouncements adopted by the Company during the thirteen and twenty-six weeks ended July 30, 2022.
2. iRECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
The Company currently has no material recent accounting pronouncements yet to be adopted.
iThe following table disaggregates our operating segment revenue by brand, which we believe provides a meaningful depiction of the nature of our revenue. Amounts shown include licensing and wholesale revenue, which is not a significant component of total revenue, and is aggregated within the respective brands in the table below.
Contract liabilities in the unaudited condensed consolidated balance sheets are comprised of obligations associated with our gift card and customer loyalty programs. As of July 30, 2022, January 29, 2022 and July 31, 2021, contract liabilities primarily consisted of gift cards of $i33.7
million, $i43.5 million and $i33.8 million, respectively.
For the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021, revenue recognized from performance obligations related to prior
periods were not material. Revenue to be recognized in future periods related to performance obligations is not expected to be material.
4. iLEASES
We lease retail stores, a limited amount of office space and certain equipment under operating leases expiring in various years through the fiscal year ending 2032. All of our leases have been
classified as operating leases and are recognized and measured as such.
Certain operating leases provide for renewal options that are at a pre-determined period and rental value. Furthermore, certain leases provide that we may cancel the lease if our retail sales at that location fall below an established level. Within the first few years of the initial lease term, a majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at our discretion, if certain minimum sales levels are not met. In the normal course of business, operating leases are typically renewed or replaced by other leases.
Escalation of operating lease payments of certain leases depend on an existing index or rate, such as the consumer price index or the market interest rate. These are considered variable lease payments and are included in lease payments when the escalation
is known.
In April 2020, the FASB granted a practical expedient permitting an entity to choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract, specifically in situations where rent concessions have been agreed to with landlords as a result of the pandemic. Instead, the entity may account for pandemic-related rent concessions, whatever their form (e.g. rent deferral, abatement or other) either: a) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or b) as lease modifications. During the thirteen and twenty-six weeks ended July 31, 2021, we received concessions from certain landlords in
the form of rent deferrals, rent abatements and other lease or rent modifications as a result of the ongoing impact of the pandemic. In accordance with the practical expedient allowed by the FASB, the Company elected to treat all pandemic-related rent concessions and related amendments, including pandemic-related lease amendments that extended the lease term, as lease modifications under ASC 842, Leases. In addition, the Company continued recording lease expense during deferral periods, as applicable, in accordance with its existing policies.
(1)
For the thirteen and twenty-six weeks ended July 30, 2022, includes $i9.6 million and $i19.1 million, respectively, in variable
lease costs. For the thirteen and twenty-six weeks ended July 31, 2021, includes $i9.3 million and $i19.2 million, respectively, in variable lease costs.
/i
Supplemental
balance sheet information related to operating leases was as follows:
(1)
The incremental borrowing rate used by the Company is based on the rate at which the Company could borrow funds using its credit rating for a collateralized loan of similar term to the lease. The weighted average discount rate represents a weighted average of the incremental borrowing rate for each lease weighted based on the remaining fixed lease obligations.
Supplemental cash flow information related to operating leases was as follows:
For
the twenty-six weeks ended July 30, 2022 and July 31, 2021, share-based compensation expense was $i7.2 million and $i5.7
million, respectively. As of July 30, 2022, approximately i6.6 million shares remain available for future grants of equity awards under our 2020 Omnibus Stock and Incentive Plan.
Restricted Stock Awards
Restricted stock awards vest in equal annual installments over
a ithree-year period from the date of grant, except for a restricted stock award granted to our then Chief Executive Officer in fiscal 2019, which vests over a ifour-year
period from the date of grant, and restricted stock awards granted in March 2021, which vest i50% one year from the date of grant, i30%
two years from the date of grant and i20% three years from the date of grant.
i
Restricted
stock award activity for the twenty-six weeks ended July 30, 2022 was as follows:
Number of Shares
Weighted Average Grant Date Fair Value
Unvested, beginning of period
i5,140,240
$
i3.18
Granted
i2,572,233
i4.78
Vested
(i2,347,510)
i3.26
Forfeited
(i341,303)
i3.59
Unvested,
end of period
i5,023,660
i3.93
/
Restricted
Stock Units
Restricted stock units vest i100% ione
year from the date of grant with certain rights to defer settlement in shares of our common stock, except for restricted stock units granted in March 2021, which vest i50% one year from the date of grant, i30%
two years from the date of grant and i20% three years from the date of grant, and restricted stock units granted in March 2022, which vest in equal annual installments over a ithree-year
period from the date of grant.
Restricted stock unit activity for the twenty-six weeks ended July 30, 2022 was as follows:
During the twenty-six weeks ended July 30, 2022, we granted performance-based restricted stock units ("PSUs") contingent upon the achievement of Company-specific performance goals during the three fiscal years 2022 through 2024. Any units earned as a result of the achievement of the performance goals of the PSUs will vest ithree
years from the date of grant and will be settled in shares of our common stock.
i
PSU activity for the twenty-six weeks ended July 30, 2022 was as follows:
Number of
Units/ Shares
Weighted Average Grant Date Fair Value
Unvested, beginning of period
i3,734,207
$
i2.24
Granted
i1,082,050
i3.85
Vested
(i1,697,130)
i1.16
Forfeited
(i434,122)
i2.96
Unvested,
end of period
i2,685,005
i3.45
/
6.
iINCOME TAXES
The provision for income taxes is based on a current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix of earnings across jurisdictions.
For the thirteen weeks
ended July 30, 2022 and July 31, 2021, the Company's effective tax rate was i26.6% and i22.7%,
respectively. The effective tax rate of i26.6% for the thirteen weeks ended July 30, 2022 primarily reflects the impact of losses in foreign jurisdictions on which a full valuation allowance is recorded. The i22.7%
effective tax rate for the thirteen weeks ended July 31, 2021 primarily reflects a change in estimate from the first quarter of fiscal 2021 due to an increase in the Company’s projected annual pre-tax income and an increase in annual projected deferred tax assets on which a full valuation allowance exists, partially offset by the impact of the annual loss projected during the first quarter of fiscal 2021.
For the twenty-six weeks ended July 30, 2022 and July 31, 2021, the Company's effective tax rate was i24.3%
and i30.0%, respectively. The effective tax rate of i24.3% for the twenty-six weeks ended July 30, 2022 primarily
reflects a favorable share-based compensation benefit and a reduction in the liability for future reversing deferred tax liabilities. The i30.0% effective tax rate for the twenty-six weeks ended July 31, 2021 primarily reflects a change in the estimate from the first quarter of fiscal 2021 due to an increase in the Company’s projected annual pre-tax income and an increase in annual projected deferred tax assets on which a full valuation
allowance exists, partially offset by the impact of the annual loss projected during the first quarter of fiscal 2021 and favorable state audit settlements.
As of July 30, 2022, our unaudited condensed consolidated balance sheet reflected an $i11.4 million income tax receivable related to the recovery of Federal income taxes paid in prior years and other tax law changes as a result of the Coronavirus Aid, Relief, and Economic Security Act.
7.
iINCOME PER SHARE
In accordance with relevant accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of income per common share pursuant to the "two-class" method. For the Company, participating securities are comprised entirely of unvested restricted stock awards granted
prior to fiscal 2020.
Net income per share is determined using the two-class method when it is more dilutive than the treasury stock method. Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted net income per share reflects the dilutive effect of potential common shares from non-participating securities such as restricted stock awards granted after fiscal 2019, stock options, PSUs and restricted stock units.
The
following table sets forth the computation of net income per basic and diluted share shown on the face of the accompanying condensed consolidated statements of income:
Weighted average common shares outstanding – basic
i120,003
i117,021
i119,498
i116,855
Dilutive
effect of non-participating securities
i3,894
i5,703
i4,082
i4,367
Weighted
average common and common equivalent shares outstanding – diluted
i123,897
i122,723
i123,580
i121,222
Net
income per common share:
Basic
$
i0.35
$
i0.22
$
i0.64
$
i0.15
Diluted
$
i0.34
$
i0.21
$
i0.62
$
i0.14
/
For
the thirteen weeks ended July 30, 2022 and July 31, 2021, i0.05 million and i0.1
million potential shares of common stock, respectively, were excluded from the diluted income per common share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.
For the twenty-six weeks ended July 30, 2022 and July 31, 2021, i0.1 million and i0.1
million potential shares of common stock, respectively, were excluded from the diluted income per common share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.
8. iiFAIR
VALUE MEASUREMENTS/
Our financial instruments generally consist of cash, money market accounts, marketable securities, assets held in our non-qualified deferred compensation plan, accounts receivable and payable, and debt. Cash, accounts receivable and accounts payable are carried at cost, less reserves for credit losses as applicable, which approximates their fair value due to the short-term nature of the instruments.
Marketable securities are classified as available-for-sale and as of July 30, 2022, consisted of U.S. government agencies, corporate bonds and commercial paper, with $i8.8
million of securities with maturity dates within one year or less and $i6.5 million with maturity dates over one year.
We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the unaudited condensed consolidated balance sheets, as applicable, as they were available to support current operational liquidity needs. Marketable securities are carried at fair value,
with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive gain until realized, and any credit risk related losses recognized in net income during the period incurred. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.
Fair value is defined as the price that would be received to sell an a set or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
Level 1
—
Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2
—
Unadjusted
quoted prices in active markets for similar assets or liabilities; or Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or Inputs other than quoted prices that are observable for the asset or liability
Level 3
—
Unobservable inputs for the asset or liability
Assets Measured on a Recurring Basis
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, as applicable, which are classified as available-for-sale securities, certain
cash equivalents, specifically our money market accounts and assets held in our non-qualified deferred compensation plan, as applicable. The money market accounts are valued based on quoted market prices in active markets. Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. government securities which are valued based on quoted market prices in active markets. The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our unaudited condensed consolidated balance sheets.
Assets Measured on a Nonrecurring Basis
From time to time, we measure certain
assets at fair value on a nonrecurring basis when carrying value exceeds fair value. This includes the evaluation of long-lived assets, goodwill and other intangible assets for impairment using Company-specific assumptions which would fall within Level 3 of the fair value hierarchy. Assets that are measured at fair value on a nonrecurring basis are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value.
We assess the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses market participant rents and a market participant discount rate to calculate the fair value of ROU assets. The Company
uses discounted future cash flows of the asset or asset group using a discount rate that approximates the cost of capital of a market participant to quantify fair value for other long-lived assets within the asset group, which are primarily leasehold improvements. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores, is primarily at the store level.
To assess the fair value of goodwill, we have historically utilized both an income approach and a market approach. Inputs used to calculate the fair value based on the income approach primarily include estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the fair value based on the market approach include identifying sales and EBITDA multiples based on guidelines
for similar publicly traded companies and recent transactions.
To assess the fair value of trademarks, we utilize a relief from royalty approach. Inputs used to calculate the fair value of the trademarks primarily include future sales projections, discounted at a rate that approximates the cost of capital of a market participant and an estimated royalty rate.
As of July 30, 2022, January 29, 2022 and July 31, 2021, our revolving loan and letter of credit facility approximates fair value as this instrument has a variable interest rate which approximates current market rates (Level 2 criteria).
Fair value calculations contain significant judgments and estimates, which may differ from actual
results due to, among other things, economic conditions, changes to the business model or changes in operating performance. The most sensitive assumptions in our estimates include short and long-term revenue recoverability rates as a result of the pandemic, which could impact future impairment charges.
We conduct reviews on a quarterly basis to verify pricing, assess liquidity and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.
iIn
accordance with the provisions of the guidance, we categorized our financial assets and liabilities which are valued on a recurring and nonrecurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows:
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Recurring fair value measurements:
Current
Assets
Cash equivalents:
Money market accounts
$
i14,493
$
i14,493
$
i—
$
i—
Marketable
securities:
Corporate
bonds
i10,891
i—
i10,891
i—
Noncurrent
Assets
Deferred compensation plan
i6,124
i6,124
i—
i—
Total
recurring fair value measurements
$
i31,508
$
i20,617
$
i10,891
$
i—
Impairment
charges for assets evaluated for impairment on a nonrecurring basis were not material during the twenty-six weeks ended July 30, 2022 and July 31, 2021 and for the fifty-two weeks ended January 29, 2022.
9. iDEBT
On February
2, 2022, the Company and certain material domestic subsidiaries entered into Amendment No. 2 (the "Amendment") to its credit agreement (as amended, the "Credit Agreement") originally entered into on August 2, 2018 and amended October 30, 2020, by and among the Company, certain material domestic subsidiaries as co-borrowers and guarantors, Wells Fargo Bank, National Association ("Wells Fargo Bank"), as Agent, letter of credit issuer and swing line lender, and certain lenders party thereto. Our obligations
under the Credit Agreement are guaranteed by the guarantors and are secured by a first priority lien on certain assets of the Company and certain material domestic subsidiaries, including inventory, accounts receivable, cash deposits, certain insurance proceeds, real estate, fixtures and certain intellectual property. The Credit Agreement provides for a ifive-year asset-based senior secured revolving loan ("ABL") and letter of credit facility of up to $i285.0
million, maturing February 2, 2027. The interest rate applicable to Term Secured Overnight Financing Rate ("SOFR")
Loans drawn under the ABL is equal to Term SOFR plus i1.60%
(subject to a further decrease to Term SOFR plus i1.35% or an increase to Term SOFR plus i1.85% based upon average quarterly excess availability under the ABL). The Credit Agreement
also provides for a $i15.0 million first-in last-out ("FILO") loan. The interest rate applicable to the FILO is equal to Term SOFR plus i3.60%
(subject to a further decrease to Term SOFR plus i3.35% or an increase to Term SOFR plus i3.85% based on average quarterly excess availability under the FILO). However, for any
ABL or FILO with a SOFR interest rate period of six months, the interest rate applicable to the ABL and FILO is increased by i30 basis points.
The Credit Agreement contains customary representations, warranties, and affirmative covenants, as well as customary negative covenants, that, among other things restrict, subject to certain exceptions, the ability of the Company and certain of its domestic subsidiaries
to: (i) incur liens, (ii) make investments, (iii) issue or incur additional indebtedness, (iv) undergo significant corporate changes, including mergers and acquisitions, (v) make dispositions, (vi) make restricted payments, (vii) prepay other indebtedness and (viii) enter into certain other restrictive agreements. The Company may pay cash dividends and repurchase shares under its share buyback program, subject to certain thresholds of available borrowings based upon the lesser of the aggregate amount of commitments under the Credit Agreement and the borrowing base, determined after giving effect to any such transaction or payment, on a pro forma basis. In addition, the Company must pay a commitment fee per annum on the unused portion of the commitments under the Credit Agreement.
As
of July 30, 2022, $i99.0 million in net borrowings were outstanding under the Credit Agreement. Availability under the Credit Agreement is determined based upon a monthly borrowing base calculation which includes eligible credit card receivables, real estate and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As of July 30, 2022, the available additional borrowing capacity under the Credit Agreement was approximately $i188.0 million,
inclusive of the current loan cap of $i30.0 million.
As of July 30, 2022, deferred financing costs of $i3.7
million was outstanding related to the Credit Agreement and is presented in other current assets in the accompanying unaudited condensed consolidated balance sheet.
10. iCOMMITMENTS AND CONTINGENCIES
In February 2021, the Company
was named as a defendant in Mercedes Haldy, et al. v. White House Black Market, Inc. (‘‘WHBM’’), et al., a putative class action filed in the Superior Court of California, Orange County, and subsequently removed to the United States District Court, Central District of California (‘‘Haldy’’). The Haldy complaint alleges numerous violations of California law related to payment of wages and other compensation, meal periods, rest periods, and wage statements, among other things. Plaintiff seeks to represent a class of current and former nonexempt employees of WHBM and Chico’s stores in California.
In August 2021, the Company was named as a defendant in Margarita Hernandez v. Chico’s FAS, Inc., et al., a putative class action filed in the Superior Court of California, Orange County seeking to represent a class of current and former nonexempt employees
of Chico’s, WHBM and Soma stores in California (‘‘Hernandez’’). The Hernandez complaint alleges many of the same wage and labor violations as the Haldy complaint and seeks the same relief.
During a mediation in September 2021, the Company reached an agreement in principle to settle the above cases. A Memorandum of Understanding was entered into by all parties as of October 18, 2021 and a full settlement agreement was executed by all parties as of January 10, 2022. On May 19, 2022, the Superior Court of California entered an Order granting the parties' unopposed motion for preliminary approval of the class settlement, and set October 14, 2022
as the hearing date for final approval of the settlement.Based on the foregoing, the Company does not expect that the resolution of these cases will have a material adverse effect on its business, results of operations or consolidated financial statements, but if the settlement agreement is not approved by the respective courts, the ultimate resolution of these cases could have a material adverse effect on the Company’s results of operations or consolidated financial statements.
Other than as noted above, we are not currently a party to any material legal proceedings other than claims and lawsuits arising in the normal course of our business. All such matters are subject to uncertainties, and outcomes may not
be predictable. Consequently, the ultimate aggregate amounts of monetary liability or financial impact with respect to other matters as of July 30, 2022 are not estimable. However, while such matters could affect our consolidated operating results when resolved in future periods, management believes that upon final disposition, any monetary liability or financial impact to us would not be material to our annual consolidated financial statements.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q ("this Form 10-Q") and in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, filed with the Securities and Exchange Commission ("SEC") on March 15, 2022 ("2021 Annual Report on Form 10-K").
Executive Overview
Chico’s FAS is a
Florida-based fashion company founded in 1983 on Sanibel Island, Florida. The Company reinvented the fashion retail experience by creating fashion communities anchored by service, which put the customer at the center of everything we do. As one of the leading fashion retailers in North America, Chico’s FAS is a company of three unique brands - Chico’s®, White House Black Market® ("WHBM") and Soma® - each thriving in their own white space, founded by women, led by women, providing solutions that millions of women say give them confidence and joy. We sometimes refer to our Chico’s and WHBM brands collectively as our "Apparel Group." Our distinct lifestyle brands serve the needs of fashion-savvy women with household incomes in the
moderate to high income level. We earn revenue and generate cash through the sale of merchandise in our domestic retail stores, our various Company-operated e-commerce websites, social commerce, our call center (which takes orders for all of our brands) and through unaffiliated franchise partners.
We utilize an integrated, omnichannel approach to managing our business. We want our customers to experience our brands holistically and to view the various commerce channels we operate as a single, integrated experience rather than as separate sales channels operating independently. This approach allows our customers to browse, purchase, return or exchange our merchandise through whatever sales channel and at whatever time is most convenient. As a result, we track total sales and comparable sales on a combined
basis.
Our growth strategy is supported by the "power of three" unique brands and the "power of three" commerce channels. Our physical stores serve as community centers for entertainment, self-discovery and a home for interactions with our store associate stylists and bra experts. Our digital stores serve as a first impression of our brands and an efficient platform to teach and inspire our customers about our merchandise. Our social brand ambassadors, which are a combination of store associates, social media platform hosts and hyperlocal social stylists who arrange events within their communities, are an additional connection between our physical stores and digital.
Business Highlights
The Company's highlights for the thirteen weeks ended
July 30, 2022 (the "second quarter") include:
•Consistent strong results: Chico's FAS posted $0.34 net income per diluted share for the second quarter, driven by strong comparable sales growth and meaningful gross margin expansion. This performance was 62% over the thirteen weeks ended July 31, 2021 (“last year’s second quarter”) and the Company’s highest-ever second quarter net income per diluted share.
•Powerful portfolio outperforming: For the second quarter, total Chico’s FAS net sales grew 18.4% and comparable sales increased 19.5% versus last year’s second quarter, led by the
Company’s apparel brands. Chico’s and White House Black Market (“WHBM”) comparable sales grew 29.7% and 31.9%, respectively, in the second quarter versus last year’s second quarter. Compared to the thirteen weeks ended August 3, 2019, all three brands delivered double-digit comparable sales growth.
•Marketing drove traffic and new customers: Chico's FAS continued to elevate its marketing, focusing more resources on digital. Strategic marketing efforts continue to drive more customers to the Company’s brands, with total year-over-year customer count up mid-single digits, spend per customer up over last year’s second quarter and the average age of new customers continuing to trend younger.
•Newly
launched loyalty programs exceeding expectations: During the second quarter, Chico’s FAS launched its new loyalty programs at Chico’s and WHBM. Customer sentiment and redemption rates are exceeding expectations, and the newly-launched programs are increasing shopper frequency.
•Gross margin expansion: The second quarter gross margin rate rose to 41.4%, outperforming last year’s second quarter by 300 basis points. Higher average unit retail and full-price sales combined with inbound freight and occupancy leverage was partially offset by elevated raw material costs.
•Double-digit operating margin: Income from operations for the second quarter was $58.2 million, or 10.4% of net sales, driven by strong sales growth and gross margin expansion, partially offset by planned
increased selling, general and administrative expenses (“SG&A”), including labor and marketing.
Income per diluted share for the second quarter was $0.34 compared to income per diluted share of $0.21 for last year's second quarter.
Income per diluted share for the twenty-six weeks ended July 30, 2022 was $0.62 compared to income per diluted share of $0.14 for twenty-six weeks ended July 31, 2021.
Select
Financial Results
The following table depicts select financial results for the thirteen and twenty-six weeks ended July 30, 2022 and July 31, 2021:
Net income per common and common
equivalent share - diluted
0.34
0.21
0.62
0.14
Current Trends
The ongoing pandemic has resulted in significant challenges across our business starting in March 2020 and is expected to continue to disrupt our business operations in fiscal 2022 to varying degrees. In response to the pandemic, many of our markets imposed limitations, varying by market and in frequency, on the access to the Company’s store
fleet, including temporary store closures and/or a reduction in hours, staffing and capacity. We continue to focus on evolving consumer demand emerging from the pandemic experience and have accelerated our transformation to a digital-first company, fast-tracking numerous innovation and technology investments across all three of our brands.
While most government and health authority restrictions have lifted, we expect continued uncertainty and volatility on our business operations, operating results and operating cash flows as the ongoing macro challenges of the pandemic, supply chain, economic uncertainty and health concerns associated with the pandemic and war in Ukraine continue to affect, among other things, consumer behavior, spending levels and shopping preferences.
Overall economic uncertainty is also affecting consumer behavior. Consumers are experiencing an overall increase
in the cost of living and are shifting their spending habits away from discretionary items. In particular, the rise in fuel and grocery costs has had a widespread impact on how consumers are prioritizing their spending. Inflation caused by the pandemic and geopolitical conditions, such as the war in Ukraine, also has contributed to economic concerns including cost of raw materials and products, fuel and freight costs, and labor costs, and is also affecting consumer confidence and spending habits.
The Company remains confident that it currently has sufficient liquidity to repay its obligations as they become due for the foreseeable future as the Company continues to drive operational efficiency and effectiveness, including ongoing expense management and actively
managing its inventory positions and production calendar to mitigate the macro challenges of the pandemic, supply chain and economic uncertainty. However, the extent to which the pandemic, geopolitical events and overall economic uncertainty caused by the same impacts our business operations, financial results, and liquidity will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic, rising inflation and/or geopolitical conditions; our response to and ability to mitigate the impacts of the pandemic, inflation and geopolitical conditions; the negative impact the pandemic, inflation and geopolitical conditions have on global and regional economies and economic activity, including the duration and magnitude of their impacts on unemployment rates and consumer discretionary spending, among other items; their short- and longer-term impact on the levels of consumer confidence; the ability
of our suppliers, vendors and customers to successfully address the impacts of the pandemic, inflation and geopolitical conditions; supply chain disruptions; actions governments, businesses and individuals take in response to the pandemic, inflation and geopolitical conditions; how quickly economies recover after the pandemic, inflation and geopolitical conditions subside, if at all; and our response to and ability to mitigate the impact of heightened concerns over a possible recession.
For the fiscal 2022 third quarter, the
Company currently expects:
•Consolidated net sales of $495 million to $510 million;
•Gross margin rate as a percent of net sales of 38.9% to 39.4%;
•SG&A as a percent of net sales of 34.4% to 34.8%;
•Effective income tax rate of 25.0%; and
•Earnings per diluted share of $0.11 to $0.14.
For the fiscal 2022 full year, the Company currently expects:
•Consolidated net sales of $2,140 million to $2,170 million;
•Gross
margin rate as a percent of net sales of 38.8% to 39.1%;
•SG&A as a percent of net sales of 32.2% to 32.5%;
•Effective income tax rate of 25.0%;
•Earnings per diluted share of $0.79 to $0.87; and
•Capital and cloud-based expenditures of approximately $65 million to $70 million.
Key Performance Indicators
In assessing the performance of our business, we consider a variety of key performance and financial measures to evaluate our business, develop financial forecasts and make strategic decisions. These key measures include comparable sales, gross margin as a percent of sales, diluted income per share
and return on net assets ("RONA"). In light of the pandemic, we have shifted our focus to effectively manage our liquidity position, including aligning our operating cost structure with expected sales. We will continue to evaluate our other key performance and financial measures in addition to our liquidity position. The following describes these measures.
Liquidity
Liquidity is measured through cash flow, which is the measure of cash provided by or used in operating, investing and financing activities. We believe that as a result of the Company’s extensive measures to mitigate the impact of the pandemic discussed above, we were able to, and continue to, effectively manage our liquidity position.
Comparable Sales
Comparable
sales is an omnichannel measure of the amount of sales generated from products the Company sells directly to the consumer relative to the amount of sales generated in the comparable prior-year period. Comparable sales is defined as sales from stores open for the preceding twelve months, including stores that have been expanded, remodeled or relocated within the same general market and includes online and catalog sales, and beginning in the third quarter of fiscal 2019, includes international sales. The comparable sales calculation excludes the negative impact of stores closed four or more days. The Company views comparable sales as a key performance indicator to measure the performance of our business, however, we are not providing comparable sales figures for the thirteen and twenty-six weeks ended
July 31, 2021 compared to the thirteen and twenty-six weeks ended August 1, 2020 as we do not believe it is a meaningful measure due to the varying degrees of business disruptions and periods of store closures and/or stores operating at reduced hours as a result of the pandemic during fiscal 2020.
Gross Margin as a Percentage of Net Sales
Gross margin as a percentage of net sales is computed as gross margin divided by net sales. We believe gross margin as a percentage of net sales is a primary metric to measure the performance of our business as it is used to determine the value of incremental sales, and to guide pricing and promotion decisions.
Income per share is determined using the two-class method when it is more dilutive than the treasury stock method. Basic income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted income per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options, performance stock units and restricted stock units. Whereas basic income per share serves as an indicator of the Company's profitability, we believe diluted income per share is a key performance measure because it gauges the
Company's quality of income per share assuming all potential common shares from non-participating securities are exercised.
Return on Net Assets
RONA is defined as (a) net income divided by (b) the “five-point average” (based on balances at the beginning of the first quarter plus the final balances for each quarter of the fiscal year) of net working capital less cash and marketable securities plus fixed assets. We believe RONA is a primary metric as it helps to determine how well the Company is utilizing its assets. As such, a higher RONA could indicate that the Company is using its assets and working capital efficiently and effectively.
Our Business
Strategy
Our overall business strategy is focused on building a collection of distinct high-performing retail brands primarily serving the fashion needs of women with moderate to high household income levels.
In fiscal 2020, the Company took actions to rapidly transform into a digital-first company, fast-tracking numerous innovation and digital technology investments, and we have continued those investments in fiscal 2022. We have also enhanced our marketing efforts to drive traffic and new customers to our brands, while retaining newly acquired customers at a meaningfully higher rate than the pre-pandemic year of fiscal 2019.
The primary function of the Company
is the production and procurement of beautiful merchandise that delivers the brand promise and brand positioning of each of our brands and resonates with customers. To that end, we continue to strengthen our merchandise and design capabilities and enhance our sourcing and supply chain to deliver product in a timely manner to our customers while also concentrating on improvements to the quality and aesthetic of our merchandise. Over the long term, we may build our brand portfolio by organic development or acquisition of other specialty retail concepts if research indicates that the opportunity complements our current brands and is appropriate and in the best interest of our shareholders.
We pursue improving the performance of our brands by building our omnichannel capabilities, growing our online presence, managing our store base, executing marketing plans, effectively leveraging expenses, considering additional sales channels
and markets, and optimizing the merchandise offerings of each of our brands. We continue to invest heavily in our omnichannel capabilities so our customers can fully experience our brands in the manner they choose.
We view our stores and Company-operated e-commerce websites as a single, integrated sales function rather than as separate, independently operated sales channels. As a result, we maintain a shared inventory platform for our primary operations, allowing us to fulfill orders for all channels from our distribution center ("DC") in Winder, Georgia. Our domestic customers can return merchandise to a store or to our DC, regardless of the original purchase location. Using our enhanced “Locate” tool, we ship in-store orders from other locations directly to the customer, expediting delivery
times while reducing our shipping costs. In addition, our shared inventory system, Endless Aisle, enables customers to make purchases online and ship from store. In fiscal 2019, we completed the implementation of our Buy On-Line, Pick-up In-Store (BOPIS) capability across all our brands, further enhancing our omnichannel capabilities, and in fiscal 2020, we completed the implementation of StyleConnect® and MY CLOSETTM, our customized, branded, digital styling software tools that enable us to communicate directly with the majority of our customers, to drive the frontline business to digital fulfillment.
We seek to acquire new customers and retain existing customers by leveraging existing customer-specific data and through targeted marketing, including digital marketing, social media, television, catalogs and mailers. We seek to
optimize the potential of our brands with innovative product offerings, potential new merchandise opportunities, and brand extensions that enhance the current offerings, as well as through our continued emphasis on our trademark “Most Amazing Personal Service” standard. We also will continue to consider potential alternative sales channels for our brands, including international franchise, wholesale, licensing and other opportunities.
We continue to leverage our digital investments to convert single-channel customers to be omnichannel, or multi-channel, customers, as the average omnichannel customer spends more than three times the average single-channel customer.
We have four clearly defined strategic pillars that have guided our turnaround strategy since 2019 and will continue to guide us in the future.
For the second quarter, the Company reported net income of $42 million, or $0.34 per diluted share, compared to net income of $26 million, or $0.21 per diluted share, in last year's second quarter.
Net Sales
The following table depicts net sales by Chico's, WHBM and Soma in dollars and as a percentage of total net sales for the thirteen weeks ended July 30, 2022 and July 31, 2021:
For the second quarter, net sales were $559 million compared to $472 million in last year's second quarter. This 18.4% improvement primarily reflects a comparable sales increase of 19.5%, partially offset by 26 permanent net store closures since last year’s second quarter. The 19.5% comparable sales improvement was driven by an increase in transaction count and higher average dollar
sale.
The following table depicts comparable sales percentages by Chico's, WHBM and Soma for the second quarter:
(1) The Company is not providing comparable sales figures for last year’s second quarter compared to the thirteen weeks ended August 1, 2020 as we do not believe it is a meaningful measure due to the significant impacts of the pandemic during fiscal 2020.
Cost of Goods Sold/Gross Margin
The following table depicts cost of goods sold ("COGS") and gross margin in dollars and gross margin as a percentage of total net sales for the thirteen weeks ended July 30,
2022 and July 31, 2021:
For
the second quarter, gross margin was $232 million, or 41.4% of net sales, compared to $181 million, or 38.4% of net sales, in last year's second quarter. The 300 basis point improvement in gross margin rate primarily reflects higher average unit retail and full price sales combined with inbound freight and occupancy leverage, partially offset by higher raw material costs.
The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and National Store Support Center ("NSSC") expenses,
in dollars and as a percentage of total net sales for the thirteen weeks ended July 30, 2022 and July 31, 2021:
For the second quarter, SG&A was $173 million, or 31.0% of net sales, compared to $146 million, or 30.9% of net sales, for last year's second quarter, primarily reflecting planned marketing investments and
elevated labor costs, partially offset by ongoing expense management.
Income Taxes
For the second quarter, the $15.2 million income tax provision resulted in an effective tax rate of 26.6% compared to $7.7 million, or an effective tax rate of 22.7%, for last year’s second quarter. The 26.6% effective tax rate for the second quarter primarily reflects the impact of losses in foreign jurisdictions on which a full valuation allowance is recorded. The 22.7% effective tax rate for last year's second quarter primarily reflects a change in the estimate from the first quarter of fiscal 2021 due to an increase in the Company's projected annual pre-tax income and an increase in annual projected deferred tax assets on which a full valuation allowance exists, partially offset by the impact of the annual
loss projected during the first quarter of fiscal 2021.
For the twenty-six weeks ended July 30, 2022, the Company reported net income of $77 million, or $0.62 per diluted share, compared to net income of $17 million, or $0.14 per diluted share, for the twenty-six weeks ended July 31, 2021.
Net
Sales
The following table depicts net sales by Chico's, WHBM and Soma in dollars and as a percentage of total net sales for the twenty-six weeks ended July 30, 2022 and July 31, 2021:
Net sales for the twenty-six weeks ended July 30, 2022 increased to $1,100 million from $860 million for the twenty-six weeks ended July 31, 2021. This 27.9% improvement primarily reflects a comparable sales increase of 28.9%, partially offset by 26 permanent net store closures since
last year’s second quarter. The 28.9% comparable sales improvement was driven by an increase in transaction count and higher average dollar sale.
(1) The Company is not providing comparable sales figures for the twenty-six weeks ended July 31, 2021 compared to the twenty-six weeks ended August 1, 2020 as we do not believe it is a meaningful measure due to the significant impacts of the pandemic during fiscal 2020.
Cost of Goods Sold/Gross Margin
The following table depicts COGS and gross margin in dollars and gross margin as a percentage of total net sales for the twenty-six weeks ended
July 30, 2022 and July 31, 2021:
Gross
margin for the twenty-six weeks ended July 30, 2022 was $448 million, or 40.7% of net sales, compared to $308 million, or 35.8% of net sales, for the twenty-six weeks ended July 31, 2021. The 490 basis point improvement in gross margin rate primarily reflects higher average unit retail and full price sales combined with occupancy leverage, partially offset by increased raw material costs.
Selling, General and Administrative Expenses
The following table depicts SG&A, which includes store and direct operating expenses, marketing expenses and NSSC expenses, in dollars and as a percentage of total net sales for the twenty-six weeks ended July 30, 2022 and July 31, 2021:
For the twenty-six weeks ended July 30, 2022, SG&A was $344 million, or 31.3% of net sales, compared to $280 million, or 32.5% of net sales, for the twenty-six weeks ended July 31, 2021. The decrease in SG&A as a percent of total net sales primarily reflects sales leverage and ongoing expense management.
Income Taxes
The effective tax rate for the twenty-six weeks ended July 30, 2022 and July 31,
2021 was 24.3% and 30.0%, respectively. The 24.3% for the twenty-six weeks ended July 30, 2022 primarily reflects a favorable share-based compensation benefit and a reduction in the liability for future deferred tax liabilities. The effective tax rate of 30.0% for the twenty-six weeks ended July 31, 2021 primarily reflects a change in estimate from the first quarter of fiscal 2021 due to an increase in the Company’s projected annual pre-tax income and an increase in annual projected deferred tax assets on which a full valuation allowance exists, partially offset by the impact of the annual loss projected during the first quarter of fiscal 2021 and favorable state audit settlements.
At the end of the second quarter, cash and marketable securities totaled $173 million compared to $137 million at the end of last year’s second quarter. Debt at the end of the second quarter totaled $99 million compared to $149 million at the end of last year’s second quarter.
Inventories
At the end of the second quarter, inventories totaled $339 million compared to $202 million at the end of last year's second quarter. The $137 million increase over last year’s second quarter primarily reflects elevated in-transit inventories and early receipts to mitigate supply chain disruptions. On-hand inventories, adjusted for early fall receipts, increased 25.0% year-over-year to more align
with higher consumer demand.
Income Tax Receivable
At the end of the second quarter, our unaudited condensed consolidated balance sheet reflected an $11 million income tax receivable related to the recovery of Federal income taxes paid in prior years and other tax law changes as a result of the Coronavirus Aid, Relief, and Economic Security Act.
Liquidity and Capital Resources
The Company’s material cash requirements include amounts outstanding under operating leases; open purchase orders for inventory and other operating expenses in the normal course
of business; contractual commitments for future capital expenditures; long-term debt obligations; and interest payments on long-term debt. Our ongoing capital requirements will continue to be primarily for enhancing and expanding our omnichannel capabilities, including investments in our stores; information technology; and supply chain.
In response to the pandemic, the Company has taken actions to reinforce its financial position and liquidity. Specific actions include: significantly reducing capital and expense structures, centralizing key functions to create a more nimble organization to better align costs with expected sales; suspending the quarterly dividend commencing April 2020; aligning inventory receipts with expected demand; partnering with suppliers and vendors to reduce operating costs and extend payment terms; and reviewing
real estate and actively negotiating with landlords to deliver rent relief in the form of reductions, abatements and other concessions. In October 2020 and February 2022, the Company amended and extended its credit facility to strengthen its liquidity and enhance its financial stability.
The Company anticipates satisfying its material cash requirements from its cash flows from operating activities, our cash on hand, capacity within our credit facility and other liquidity options.
The following table summarizes cash flows for the year-to-date period July 30, 2022 compared to last year's year-to-date period July 31, 2021:
Net cash (used in) provided by investing activities
(25)
2
Net
cash used in financing activities
(8)
(1)
Net increase in cash and cash equivalents
$
42
$
36
(1) May not foot due to rounding.
Operating Activities
Net cash provided by operating activities for the
year-to-date period of fiscal 2022 was $76.0 million compared to $34 million in last year's year-to-date period. The change in net cash provided by operating activities primarily reflects higher net income and rent settlements made in last year's year-to-date period, partially offset by elevated inventories and income tax refunds received in last year's year-to-date period.
Net cash used in investing activities for the year-to-date period of fiscal 2022 was $25 million compared to net cash provided by investing activities of $2 million in last year's year-to-date
period, reflecting a net $23 million increase in marketable securities and a $5 million increase in capital spend.
Financing Activities
Net cash used in financing activities for the year-to-date period of fiscal 2022 was $8 million compared to $1 million in last year's year-to-date period, primarily reflecting $7 million in payments of tax withholding related to the vesting of share-based awards.
Credit Facility
On February 2, 2022, the Company and certain material domestic subsidiaries entered into Amendment No. 2 (the "Amendment") to its credit agreement (as
amended, the "Credit Agreement") originally entered into on August 2, 2018 and amended October 30, 2020, by and among the Company, certain material domestic subsidiaries as co-borrowers and guarantors, Wells Fargo Bank, National Association ("Wells Fargo Bank"), as Agent, letter of credit issuer and swing line lender, and certain lenders party thereto. Our obligations under the Credit Agreement are guaranteed by the guarantors and are secured by a first priority lien on certain assets of the Company and certain material domestic subsidiaries,
including inventory, accounts receivable, cash deposits, certain insurance proceeds, real estate, fixtures and certain intellectual property. The Credit Agreement provides for a five-year asset-based senior secured revolving loan ("ABL") and letter of credit facility of up to $285.0 million, maturing February 2, 2027. The interest rate applicable to Term Secured Overnight Financing Rate ("SOFR") Loans drawn under the ABL is equal to Term SOFR plus 1.60% (subject to a further decrease to Term SOFR plus 1.35% or an increase to Term SOFR plus 1.85% based upon average quarterly excess availability under the ABL). The Credit Agreement also provides for a $15.0 million first-in last-out ("FILO") loan. The interest rate applicable to the FILO is equal to Term SOFR plus 3.60% (subject to a further decrease to Term SOFR plus 3.35% or an increase to Term SOFR plus 3.85% based on average quarterly excess availability
under the FILO). However, for any ABL or FILO with a SOFR interest rate period of six months, the interest rate applicable to the ABL and FILO is increased by 30 basis points.
The Credit Agreement contains customary representations, warranties, and affirmative covenants, as well as customary negative covenants, that, among other things restrict, subject to certain exceptions, the ability of the Company and certain of its domestic subsidiaries to: (i) incur liens, (ii) make investments, (iii) issue or incur additional indebtedness, (iv) undergo significant corporate changes, including mergers and acquisitions, (v) make dispositions, (vi) make restricted payments, (vii) prepay other indebtedness and (viii) enter into certain other restrictive agreements.
The Company may pay cash dividends and repurchase shares under its share buyback program, subject to certain thresholds of available borrowings based upon the lesser of the aggregate amount of commitments under the Credit Agreement and the borrowing base, determined after giving effect to any such transaction or payment, on a pro forma basis. In addition, the Company must pay a commitment fee per annum on the unused portion of the commitments under the Credit Agreement.
As of July 30, 2022, $99.0 million in net borrowings were outstanding under the Credit Agreement. Availability under the Credit Agreement is determined based upon a monthly borrowing base calculation which includes eligible credit card receivables,
real estate and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As of July 30, 2022, the available additional borrowing capacity under the Credit Agreement was approximately $188.0 million, inclusive of the current loan cap of $30.0 million.
Store and Franchise Activity
During the twenty-six weeks ended July 30, 2022, we had 8 permanent net store closures, consisting of 5 Chico's store closures, 5 WHBM store closures and 2 Soma net store openings. As of July 30, 2022, the Company's franchise operations consisted of 58 international retail locations in Mexico and 2 domestic airport locations.
Stores
continue to be an important part of our omnichannel strategy, and digital sales are higher in markets where we have a retail presence, but we intend to optimize our real estate portfolio, reflecting our emphasis on digital and our priority for higher profitability standards. We will continue to adjust our store base to align with these standards, primarily as leases come due, lease kickouts are available, or buyouts make economic sense. We closed net 8 underperforming locations during the twenty-six weeks ended July 30, 2022 and ended the second quarter with 1,258 boutiques. The Company anticipates closing approximately 30 stores in fiscal 2022, which primarily includes underperforming, mall-based Chico's and WHBM boutiques. We also plan to invest in opening over 20 additional Soma stores this fiscal year. We will continue to evaluate
our store base in light of economic conditions and our business strategy and may adjust the openings and closures as conditions require or as opportunities arise.
The discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and believes the assumptions and estimates, as set forth in our 2021 Annual Report on Form 10-K, are significant to reporting our results of operations and financial position. There have been no material
changes to our critical accounting estimates as disclosed in our 2021 Annual Report on Form 10-K.
Forward-Looking Statements
This Form 10-Q may contain statements concerning our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry and other statements that are not historical facts. These are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, words or phrases such as “aim,”“anticipates,”“believes,”“confident,”“could,”“estimates,”“expects,”“intends,”“target,”“will,”“plans,”"path,"“should,”“assumptions,”“outlook” and similar expressions identify forward-looking statements. These forward-looking statements are based largely on information currently available to our management and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those expressed or implied by such forward-looking statements. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance. There is no assurance that our expectations will occur or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K and, from time to time, in Item 1A, “Risk Factors” of our Quarterly Reports
on Form 10-Q and the following:
•the effects of the pandemic, including uncertainties about its depth and duration, new variants of COVID-19 that have emerged, the speed, efficacy and availability of vaccines and treatments, its impact on general economic conditions, human capital management, consumer behavior and discretionary spending, the effectiveness of any actions taken in response to the pandemic, and the impact of the pandemic on our manufacturing operations, shipping costs and timelines and the global supply chain;
•the ability of our suppliers, logistics providers, vendors and landlords, to meet their obligations to us in light of financial stress, labor shortages, liquidity challenges, bankruptcy filings by other industry participants, and supply chain and other disruptions;
•increases
in unemployment rates and labor shortages;
•our ability to sufficiently staff our retail stores;
•changes in general economic conditions, including, but not limited to, consumer confidence and consumer spending patterns;
•the impact of inflation on consumer spending;
•market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts (such as the war in Ukraine) or other major events, or the prospect of these events, including their impact on consumer spending, inflation, and the global supply chain;
•shifts
in consumer behavior, and our ability to adapt, identify and respond to new and changing fashion trends and customer preferences, and to coordinate product development with buying and planning;
•changes in the general or specialty retail or apparel industries, including significant decreases in market demand and the overall level of spending for women’s private branded clothing and related accessories;
•our ability to secure and maintain customer acceptance of in-store and online concepts and styles;
•increased competition in the markets in which we operate, including our ability to remain competitive with customer shipping terms and costs;
•fluctuations in foreign currency exchange rates and commodity prices;
•significant increases in the costs of manufacturing, raw materials, transportation, importing, distribution, labor and advertising;
•decreases in the quality of merchandise received from suppliers and increases in delivery times for receiving such merchandise;
•our ability to appropriately manage our store fleet, including the closing of underperforming stores and opening of new stores, and our ability to achieve the expected results of any such store openings
or store closings;
•our ability to appropriately manage inventory and allocation processes and leverage targeted promotions;
•our ability to maintain cost saving discipline;
•our ability to operate our retail websites in a profitable manner;
•our ability to successfully identify and implement additional sales and distribution channels;
•our ability to successfully execute and achieve the expected results of our business, brand strategies, brand awareness programs, and merchandising and marketing programs including,
but not limited to, the Company’s turnaround strategy, retail fleet optimization plan, sales initiatives, multi-channel strategies and five operating priorities which are: 1) continuing our ongoing digital transformation; 2) further refining product through fit, quality, fabric and innovation in each of our brands; 3) driving increased customer engagement through marketing; 4) maintaining our operating and cost discipline; and 5) further enhancing the productivity of our real estate portfolio;
•our ability to utilize our NSSC, DC and other support facilities in an efficient and effective manner;
•our reliance on sourcing from foreign suppliers and significant adverse economic, labor, political or other shifts (including adverse changes in tariffs,
taxes or other import regulations, particularly with respect to China, or legislation prohibiting certain imports from China);
•U.S. and foreign governmental actions and policies and changes thereto;
•the continuing performance, implementation and integration of our management information systems;
•our ability to successfully update our information systems;
•the impact of any system failure, cyber security or other data security breaches, including any security breaches resulting in the theft, transfer, or unauthorized disclosure of customer, employee, or company information;
•our ability to comply with applicable domestic and
foreign information security and privacy laws, regulations and technology platform rules or other obligations related to data privacy and security;
•our ability to attract, hire, train, motivate and retain qualified employees in an inclusive environment;
•our ability to successfully recruit leadership or transition members of our senior management team;
•increased public focus and opinion on environmental, social and governance (“ESG”) initiatives and our ability to meet any announced ESG goals and initiatives;
•future unsolicited offers to buy the Company and actions of activist
shareholders and others and our ability to respond effectively;
•our ability to secure and protect our intellectual property rights and to protect our reputation and brand images;
•unanticipated obligations or changes in estimates arising from new or existing litigation (including settlements thereto), income taxes and other regulatory proceedings;
•unanticipated adverse changes in legal, regulatory or tax laws; and
•our ability to comply with the terms of our Credit Agreement, including the restrictive provisions limiting our flexibility in operating our business and obtaining additional credit on commercially reasonable terms.
These factors should
be considered in evaluating forward-looking statements contained herein. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The forward-looking statements included herein are only made as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk of our financial instruments as of July 30, 2022 has not materially changed since January 29, 2022. We are exposed to market risk from changes in interest rates on any future indebtedness and our marketable securities and from foreign currency exchange rate fluctuations.
Our exposure to interest rate risk relates in part to our Credit Agreement with Wells Fargo Bank, which is further discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1, Note 9 to the accompanying unaudited condensed consolidated financial statements included in this Form 10-Q. The interest rate applicable to Term SOFR Loans drawn under the ABL is equal to Term SOFR plus
1.60% (subject to a further decrease to Term SOFR plus 1.35% or an increase to Term SOFR plus 1.85% based upon average quarterly excess availability under the ABL). The Credit Agreement also provides for a $15.0 million FILO loan. The interest rate applicable to the FILO is equal to Term SOFR plus 3.60% (subject to a further decrease to Term SOFR plus 3.35% or an increase to Term SOFR plus 3.85% based on average quarterly excess availability under the FILO). However, for any ABL or FILO with a SOFR interest rate period of six months, the interest rate applicable to the ABL and FILO is increased by 30 basis points. As of July 30, 2022, $99 million in borrowings were outstanding under the Credit Agreement and is reflected as long-term debt in the accompanying unaudited condensed consolidated balance sheet. An increase in market interest rates of 100 basis points would increase interest expense in the amount of approximately
$4.5 million over the remaining term of the loan.
Our investment portfolio is maintained in accordance with our investment policy which identifies allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investment portfolio consists of cash equivalents and marketable securities which includes U.S. government agencies, corporate bonds and commercial paper. The marketable securities portfolio as of July 30, 2022 consisted of $8.8 million of securities with maturity dates within one year or less and $6.5 million with maturity dates over one year. We consider all securities available-for-sale including those with maturity dates beyond 12 months, and therefore classified these securities, as applicable, as short-term investments within current assets on the consolidated balance sheets as they are available to support current
operational liquidity needs.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
As
of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective in providing reasonable assurance in timely alerting them to material information relating to us (including our consolidated subsidiaries) and that information required to be disclosed in our reports is recorded, processed, summarized and reported as required to be included in our periodic SEC filings.
Changes
in Internal Controls
There was no change in our internal controls over financial reporting or in other factors during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Information regarding legal proceedings is incorporated by reference from Note 10 to our unaudited condensed consolidated financial statements included in this Form 10-Q under the heading "Commitments and Contingencies."
ITEM 1A.
RISK FACTORS
In addition to the other information discussed in this report, the factors described in Part I, Item 1A. “Risk Factors” in our
2021 Annual Report on Form 10-K should be considered as they could materially affect our business, financial condition or future results. Except as presented below, there have been no material changes with respect to the risks described in our 2021 Annual Report on Form 10-K but these are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.
Risks Related to General Economic Conditions
Numerous economic conditions, all of which are outside of our control, could negatively affect the level of our customers' spending or our costs of operations. If these economic conditions persist for a sustained period, our consolidated financial
condition and results of operations could be materially adversely impacted. These economic conditions include, but are not limited to, the following:
Risk
Description
1. Decreases in discretionary spending and demand for our products
An economic recession, depression, downturn, periods of inflation, or economic uncertainty in our key markets may adversely affect consumer discretionary spending and demand for our products. Many of our products may be considered
discretionary items for consumers. Some of the factors that may influence consumer spending on discretionary items include general economic conditions, high levels of unemployment, health pandemics (such as the impact of the COVID-19 pandemic), higher consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures, reductions in home values, fluctuating interest and foreign currency exchange rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity prices, inflationary pressures, tax rates and general uncertainty regarding the overall future economic environment. Global economic conditions are currently uncertain and volatile, due in part to the impacts of the COVID-19 pandemic and mitigation measures, the potential impacts of increasing inflation in the United States, the potential impacts of geopolitical uncertainties, and any potential sanctions, restrictions or responses to those conditions.
For example, significant increases in inflation may impact the cost of our merchandise, which in turn could impact consumer spending decisions if passed through causing them to postpone or forgo purchasing discretionary items, such as our merchandise. As global economic conditions continue to be volatile or economic uncertainty remains, consumer discretionary spending also remains unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Consumer demand for our merchandise may not reach our targets, or may decline, when there is an economic downturn or economic uncertainty in our key markets.
Fluctuations in the price, availability and quality of fabrics and other raw materials used to manufacture our products, as well as the price for labor and transportation, may contribute to ongoing pricing pressures throughout our supply chain. The price and availability of such inputs to the manufacturing process may fluctuate significantly, depending on several factors, including commodity costs (such as higher cotton prices), energy costs (such as fuel), shipping costs, inflationary pressures from emerging markets, concerns regarding public health crises, increased labor costs, weather conditions, including risks associated with climate change, and currency fluctuations.
Moreover, increasing costs of materials and labor due to recent heightened inflation may materially adversely impact our margins and results of operations. We have
recently experienced significant inflation in labor, materials and shipping costs as a result of the COVID-19 pandemic. The cost of materials that are used to manufacture our products can fluctuate because of inflation and other factors. Additionally, a majority of the merchandise we sell is manufactured and produced outside of the U.S. and declines in the value of the U.S. dollar may result in higher costs. Moreover, sudden decreases in the costs for materials may result in the cost of inventory exceeding the cost of new production, which could result in lower profitability, particularly if these decreases cause downward price pressures that we are not able to control. If, in the future, there is volatility in the costs for materials and labor that we are unable to be offset through price adjustments or improved efficiencies, our business, results of operations, financial condition and cash flows may be adversely affected.
In
addition, there continues to be global uncertainty, such as the ultimate impact of uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other countries, and similar events of global, political unrest. These events have increased global uncertainty and have impacted and may in the future impact the cost, availability and quality of merchandise, as well as the cost, availability and quality of the fabrics or other raw materials used to manufacture our merchandise.
3. Fluctuating comparable sales and operating results
Our comparable sales and overall operating results have fluctuated in the past and are expected to
continue to fluctuate in the future. In addition to other risk factors discussed in this section and in our 2021 Annual Report on Form 10-K, a variety of factors affect comparable sales and operating results, including concerns regarding public health crises, changes in fashion trends, changes in our merchandise mix, customer acceptance of merchandise offerings, the timing of marketing activities, calendar shifts of holiday periods, the periodic impact of a fifty-three-week fiscal year, climate risks including weather conditions on our supply chain, political or social unrest and general economic conditions, such increased inflationary pressures and the effect of such pressures on discretionary spending and consumer purchases of discretionary items such as our merchandise. In addition, our ability to address potential challenges of sustained declining store traffic or a highly promotional retail environment and our execution of our retail fleet optimization plan and
related store closings may impact our comparable sales, operating results and ability to maintain or gain market share. Past comparable sales or operating results are not an indicator of future results. For example, see “The ongoing COVID-19 pandemic” in our 2021 Annual Report on Form 10-K.
Risks Related to Sourcing and Distribution Strategies
Our sourcing and distribution strategies are subject to numerous risks that could materially adversely impact our consolidated financial
condition and results of operations. These risks include, but are not limited to, the following:
Risk
Description
4. Reliance on foreign sources of production
The majority of the merchandise we sell is produced outside the United States. As a result, our business remains subject to the various risks of doing business in foreign markets and importing merchandise from abroad, such as: geo-political instability, non-compliance with the Foreign Corrupt Practices Act and other anti-corruption laws and regulations,
potential changes to the United-States-Mexico-Canada Agreement and other international trade agreements, imposition of new legislation relating to import quotas, imposition of new or increased duties, taxes, or other charges on imports, foreign exchange rate challenges and pressures presented by implementation of monetary policy by the Federal Reserve and other international central banks, challenges from local business practices or political issues, manufacturing and transportation disruptions, our shift to a predominantly FOB (free on board) shipping structure rather than predominantly DDP (delivered duty paid), natural disasters and weather conditions due to the effect of climate change or other reasons, public health crises, customer activism related to our use of particular foreign markets, delays in the delivery of cargo due to port security considerations or government funding; seizure or detention of goods by U.S. Customs authorities, or a reduction in the availability
of shipping sources caused by industry consolidation or other reasons. We source a substantial portion of our merchandise from Asia, including China. A reduction in the number of foreign suppliers, through bankruptcy or otherwise, or any change in exchange rates, labor laws or policies affecting the costs of goods in Asia could negatively impact our merchandise costs and the timely availability of the desired amount of merchandise. Furthermore, delays in production or shipping product, whether due to work slow-downs, work stoppages, strikes, port congestion, labor disputes, product regulations and customs inspections, public health crises or other factors, could also have a negative impact.
Our supply chain could be disrupted or delayed by the impact of global health endemics or pandemics, such as has been the case during the COVID-19 pandemic and the related government and private sector responsive actions thereto, including,
but not limited to, border closures, restrictions on product shipments, sanctions and travel restrictions.During fiscal 2021, China sourced product accounted for approximately 31% of our merchandise cost. If the COVID-19 pandemic continues, we could experience significant additional supply chain disruptions. If we experience significant additional supply chain disruptions in China or other countries, we may not be able to develop alternate sourcing quickly on favorable terms, if at all, which could result in increased costs, loss of sales and a loss of customers, and adversely impact our margins and results of operation.
Further, there have been ongoing discussions, commentary and governmental actions regarding potentially significant changes to the United States trade policies, treaties, tariffs and taxes, including trade policies and tariffs regarding China. Tariffs imposed
on Chinese origin goods under Section 301 in 2018 and 2019 largely continue to be in place today and range from 10% to 25% on certain Chinese-made imported products. While the Office of the United States Trade Representative (“USTR”) issued exclusions to Section 301 tariffs for certain products, most exclusions expired in December 2021, and have not been re-issued.
These tariffs, as well as any
additional tariffs, may result in lower gross margins on affected products or could require us to increase prices, which may impact customer demand for our products. While the USTR and the Ministry of Commerce of China signed a “phase one” trade deal on January 15, 2020, which, among other things, officially agreed to the rollback of tariffs and expansion of trade purchases, there is significant uncertainty about the future relationship between the United States and China and other countries with respect to the trade policies, treaties, taxes, government regulations and tariffs that would be applicable. It is unclear what changes might be considered or implemented and what response to any such changes may be by the governments of other countries. Significant tariffs or other restrictions placed on Chinese imports and any related counter-measures that are taken by China could have an adverse effect on our consolidated
financial condition or results of operations.
Other trade restrictions, including more stringent embargoes, safeguards and customs restrictions against apparel items, could increase the cost or reduce the supply of merchandise or raw materials available to us and adversely affect our business, financial condition and results of operations. For example, the current political landscape, including with respect to U.S.-China relations and recent bans imposed by the United States and other countries related to the prevention of forced labor in importers’ supply chains (such as the Uyghur Forced Labor Prevention Act (“UFPLA”)), with focus on certain commodities such as cotton, is affecting global supply chains including the global cotton supply chain. Compliance with UFLPA could continue to affect the global supply chain, the price and scarcity of sourceable cotton in the marketplace and could lead to an
increase in the cost of goods, which may have an adverse effect on our profitability.
Even in the absence of further tariffs, the related uncertainty and the market's fear of an escalating trade war might create forecasting difficulties for us and cause our customers and business partners to place fewer orders for our products, which could have a material adverse effect on our business, liquidity, consolidated financial condition, and/or results of operations. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these nations and the United States. Any of these factors could depress economic activity, restrict our access to suppliers or customers and have a material adverse effect on our business,
consolidated financial condition and results of operations and affect our international strategies.
Tariff risks beyond China include increased enforcement of intellectual property (“IP”) rights under Section 301 of the Trade Act of 1974 (the “Trade Act”). For example, the USTR conducts a review to identify countries that deny adequate and effective protection of IP or deny fair and equitable market access to U.S. persons who rely on IP protection. Given the relatively fluid regulatory environment in China and the United States and relative uncertainty with respect to tariffs, international trade agreements and policies, a trade war, further governmental action related to tariffs or international trade policies, or additional tax or other regulatory changes in the future could directly and adversely impact our consolidated financial condition and results of operations.
5. Our
suppliers’ inability to provide quality goods in a timely manner
We are subject to risk because we do not own or operate any manufacturing facilities and depend on independent third parties to manufacture our merchandise. A key supplier may become unable to address our manufacturing needs for a variety of reasons. If we were unexpectedly required to change suppliers or if a key supplier were unable to supply quality merchandise in sufficient quantities on acceptable terms, we could experience a significant impact to the supply or cost of merchandise. The entire apparel industry, including our company, continues to face supply chain challenges as a result of economic uncertainty due to the impacts of the COVID-19 pandemic, political instability, inflationary pressures, and other factors, including reduced freight availability
and increased costs, port disruption, manufacturing facility closures, and related labor shortages and other supply chain disruptions. See “The ongoing COVID-19 pandemic” in our 2021 Annual Report on Form 10-K for additional information.
Our business is subject to numerous other risks that could materially adversely impact our consolidated financial condition and results of operations. These risks include, but are not limited to, the following:
Risk
Description
6. War,
terrorism, public health crises or other catastrophes
In the event of war (such as the war in Ukraine), acts of terrorism or the threat of terrorist attacks, public health crises, climate risks and weather catastrophes or other events outside of our control, consumer spending could significantly decrease for a sustained period or impair our ability to source and/or distribute our products in a cost effective manner. In addition, local authorities or shopping center management could close stores in response to any immediate security concern, public health concern or weather catastrophe such as hurricanes, earthquakes or tornadoes. Any of these disruptions or other events outside of our control could affect our business negatively, harming our operating results.
Similarly, war, acts of terrorism, threats of terrorist attacks, public health crises or a weather
catastrophe, including those caused by climate change, could severely and adversely affect our National Store Support Center (“NSSC”) campus, our DC, or our entire supply chain. If any of our facilities, including our DC, our company-operated or franchised stores or the facilities of our suppliers or third-party service providers is affected by a natural disaster, public health crisis (such as a pandemic and epidemic), terrorism, war, political instability or other conflict, or other events outside of our control, or if we are unable to mitigate the likelihood or potential impact of such events, our business and operating results could be negatively impacted. For example, see “The ongoing COVID-19 pandemic” in our 2021 Annual Report on Form 10-K.
ITEM 2.
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information concerning our purchases of common stock for the periods indicated (amounts in thousands, except share and per share amounts):
Period
Total Number of Shares Purchased (a)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans (b)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Publicly Announced Plans
(a)
Total number of shares purchased consists of 35,481 shares of restricted stock repurchased in connection with employee tax withholding obligations under employee compensation plans, which are not purchases under any publicly announced plan.
(b) In November 2015, we announced a $300 million share repurchase plan. There was approximately $55.2 million remaining under the program as of the end of the second quarter. The repurchase program has no specific termination date and will expire when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier by our Board of Directors. The Company has no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions
and other considerations.
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed
Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
Exhibit 104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30, 2022, formatted in Inline XBRL (included within Exhibit 101).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
