Clothing and accessories retailer Chico's FAS Inc has swung to a fourth quarter loss on lower sales at its Chico's and White House|Black Market stores, and says it plans to trim its inventory and costs in 2008 to weather an expected drop in sales and earnings.

For the 13 weeks to 2 February, net loss was $20.5m, or $0.12 per share, compared to net income of $18.2m, or $0.10 per share, in the prior year's quarter.

Net sales fell 7.9% to $409.3m from $444.6m, with comparable store sales dropping 15.7%. Same store sales at the Chico's brand fell 16% and dropped 17% at WH|BM.

Gross profit for the quarter fell 19.2% to $195.1m from $241.5m, and gross profit as a percentage of sales was 47.7% versus 54.3% in the prior year period.

Merchandise margins at Chico's front-line stores dropped by 680 basis points on heavy markdowns at the end of the year.

Scott A Edmonds, chairman, president and CEO, described the quarterly results as "disappointing."

"While we attribute much of our under-performance to last year's merchandising issues, some of the corrective measures we have taken are being masked by the slowdown in retail overall and in the missy sector in particular," he said.

Expecting the women's sector to continue to face major challenges this spring, the company has "pulled back our inventory commitments for much of 2008, and continue to attack all elements of our expense structure."

For the year, net income was $88.9m, or $0.50 per share, compared to $166.6m, or $0.93 per share, the year before.

Net sales increased 4.3% to $1.71bn from $1.64bn, and same-store sales fell 8.1% - down 8% at Chico's and down 9% at WH|BM.

The Fort Myers, Florida-based company is forecasting negative same-store sales for the first half of 2008, and lower earnings than the first half of 2007.

But it hopes "to return to positive comparable store sales increases in the second half of 2008 resulting in overall earnings growth during this time frame."

Capital expenditure for 2008 is being cut to $120-$125m compared with $202m in 2007, and real estate growth targets have been pulled back for 2008 and 2009.

The company currently operates 604 Chico's stores, 37 Chico's outlet stores, 309 White House|Black Market stores, 19 White House|Black Market outlet stores, 68 Soma Intimates stores and 1 Soma Intimates outlet store.