Chico's FAS wants to color coordinate its customers with its own brands of chic clothes. Once a Mexican folk art shop, Chico's owns and operates more than 1,550 specialty stores nationwide, in Canada, and now Mexico (through a franchise agreement). Its stores are mostly located in enclosed malls and shopping centers under the banners Chico's, White House/Black Market (WH/BM), Soma, and Boston Proper. The boutiques target middle-to-high-income women ages 30 and up with clothes made primarily from natural fabrics (cotton, linen, silk). Its casual wear includes tops, pants, shorts, skirts, and dresses, as well as jewelry and accessories. Chico's FAS was founded in 1983 by ex-chairman Marvin Gralnick and wife Helene.
While Chico's rings up 100% of its sales in the US, the fast-growing chain operates several White House/Black stores in Canada (a new market for Chico's). The chain's largest US markets are California, Florida, and Texas, which combined are home to about a quarter of its stores.
Chico's portfolio consists of four brands: Chico's (about 720 boutique and outlet stores); White House/Black Market (WH/BM) with some 500 locations; some 250 Soma stores that sell intimate apparel; and its newest online and catalog brand Boston Proper (acquired in 2011). Together, Chico's and Soma account for nearly two-thirds of the retailer's total sales.
Sales & Marketing
To drive traffic to its stores and websites Chico's relies on national print and broadcast campaigns, email and direct marketing, social media (Facebook and Twitter) and other outreach programs. It also utilizes loyalty programs to retain customers. The company spent more than $152 million in fiscal 2014 (ended January), up from $145 million the prior year.
After several years of healthy revenue and profit growth, Chico's sales were flat in fiscal 2014 (ended January), and net income declined sharply. Indeed, the nearly $2.6 billion in sales Chico's rang up in fiscal 2014 was just 0.2% higher than the prior year. The retailer credited the slight rise to the addition of 115 new stores and a 6% increase in sales at its White House/Black Market chain, partially offset by falling sales at Chico's and Soma stores, and a 22% plunge in sales at Boston Proper. The disappointing performance at Boston Proper (acquired in 2011) was due to decreased demand for its merchandise and the adverse impact of post-acquisition information systems conversion in early 2013. Overall, same-store sales across all the company's banners declined by 2% in fiscal 2014.
The decline in net income was due to the absence of an extra week in the 2014 fiscal year (compared with the previous one), and various impairment charges, higher expenses and cost of goods sold, partially offset by the modest uptick in sales and decreased acquisition and integration costs.
Following a rough patch during the deep recession and steep drop off in women's clothing sales, the retailer has worked hard to revive its Chico's brand stores by improving customer service and merchandise. Judging by the recent run up in sales, CEO David Dyer (who joined the company in 2009) is meeting with considerable success. Indeed, historically fast-growing Chico's is back in growth mode -- including international growth. In fiscal 2014 (ended January), the chain added 115 new shops and plans to add between 104 and 118 locations in fiscal 2015, including more stores in Canada and its first in Mexico via a partnership with Mexican retailer El Puerto de Liverpool.
Canada is a relatively new market for the company. After opening three White House/Black shops there in fiscal 2014, Chico's is making its north-of-the-border debut in fiscal 2015. Beyond physical stores, the company is taking a multichannel approach to growth, investing in website functionality to improve the online shopping experience.
Mergers and Acquisitions
In 2011, Chico's purchased Boston Proper, a privately-held women's retailer for about $205 million to expanded its direct-to-consumer business. The company was enticed by Boston Proper's 2010 net revenue of about $110 million and its multi-catalog circulation of 35 million. Besides boosting its earnings, the move allowed Chico's to integrate marketing, circulation, and sourcing, among other functions. While Boston Proper did not operate stores when it was acquired, under Chico's ownership it has since added four boutiques.