Chico’s FAS reported a net income of $5m in Q3 2023, down from $24.6m in Q3 2022. However, it says it has seen “consistent profitability” and has a “solid balance sheet” ahead of its expected merger with Sycamore Partners.

Private equity firm Sycamore Partners is currently in the process of acquiring Chico’s, in a deal that will see the retailer become privately owned. The deal is expected to complete in the first quarter of 2024.

Due to the merger, Chico’s FAS said it would not be providing a financial outlook for the future and withdrew its guidance for fiscal 2023.

At the time the deal was announced, chair of Chico’s board, Kevin Mansell, said: “The agreement with Sycamore Partners validates Chico’s FAS’s leadership as a customer-led, product-obsessed, digital-first company with a strong record of operational excellence.

“The transaction reflects the Board’s commitment to maximising shareholder value. It provides Chico’s FAS shareholders with significant immediate cash value and creates exciting opportunities for employees of the company and our brands.”

Key results for Chico’s FAS in Q3 2023

$505.1m in net sales, down from $518.3m in Q3 2022
$196.4m gross profit, down from $207.4m in Q3 2022
Operating income fell to $10.5m from $31.6m
Net income of $5m, or $0.04 per diluted share, down from $24.6m or $0.20 per diluted share in Q3 2022.

Chico’s FAS’ CEO and president Molly Langenstein said the quarter was in line with the company’s outlook. She added: “Our results reflect our team’s continued execution on our four strategic pillars of customer led, product obsessed, digital first, and operationally excellent.”

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Chico’s FAS said the year-on-year decline in sales was primarily caused by a 2.7% decrease in comparable sales, as the overall number of transactions declined. It said this was partially offset by higher-than-average dollar sales.

Chico’s FAS reported a gross margin of 38.9%, which it said was at the high end of its outlook. The retailer closed Q3 2023 with $127m in cash and marketable securities.

Ahead of its merger with Sycamore Partners, Chico’s FAS reported costs of $7.3m associated with the transaction.

Langenstein added: “We are excited about the next chapter in our Company’s future with the pending acquisition by Sycamore Partners. We believe they will provide Chico’s FAS with additional expertise, financial resources, and strategic flexibility to further fuel our growth. Our commitment to providing solutions, building communities, and creating memorable experiences to bring women confidence and joy is shared by Sycamore Partners. We look forward to working with them to unlock Chico’s FAS’s full potential.”

Sycamore Partners has made 23 acquisitions across several sectors, with at least four acquisitions in apparel brands and retail chains, according to tracxn.com.

Shortly after the deal was announced, industry onlookers commented that the acquisition “made sense” and could help fuel the retailer’s growth.