• Q1 profit falls 21.9% to $39.9m 
  • Sales climb 1.6% to $681.6m
  • Gross margin down 150 basis points
Chicos was forced to be more promotional in the quarter due to unfavourable weather

Chico's was forced to be more promotional in the quarter due to unfavourable weather

Chico's has reported a double-digit decline in first-quarter profit, after adverse weather forced the women's wear retailer to be more promotional to move product. 

Net income amounted to US$39.9m during the 13 weeks to 3 May, compared to $51.1m in the same period of last year.

Sales climbed 1.6% to a record $681.6m from $670.7m a year ago, while comparable store sales fell 2.6%. Gross margin declined 150 basis points to56.2%, reflecting increased promotional activity in response to lower traffic.

FBR Research analyst Susan Anderson viewed the results as a "positive" given the retail environment.

"While adverse weather was likely a headwind in February and March, Chico's [segment] sales picked up significantly when the weather improved in April, posting a +high single digit comp in April (slightly less than -1% for 1Q).

Although trends likely decelerated in May, Anderson added, Chico's assortment looks "attractive" - particularly elevated knit assortment and golf wear, and she expects trends to pick up as the quarter progresses.

Chico's, meanwhile, said second-quarter to date sales and comparable store sales increased 5% and 1% respectively year-on-year.

"We believe that the environment will continue to be promotional, particularly given aggressive stances by the department stores," Anderson noted. "However, given improvements in industry-wide inventories and a pick-up in demand, the promotional level could be sequentially improved."