Chico's on the Cheap?

What a difference a year makes.

Chico's FAS (NYSE: CHS) has been well-known for years for being the kind of company for which investors paid a premium price because its growth was astronomical, long-running, and consistent. Investors punished Chico's soundly Thursday when its news didn't sound much like the Chico's everybody knew and loved.

Chico's earnings for the second quarter increased 10% to $54 million, or $0.30 per share (certainly not its usual heady performance). Net sales increased 18% to $405 million and overall same-store sales increased 5.7%; Chico's comps rose a mere 3%, while those for White House/Black Market increased an impressive 19%. President and CEO Scott Edmonds admitted that the company's main Chico's stores didn't perform up to snuff, blaming "a lack of 'wear now' merchandise in our stores, a reduction in overall store traffic, and a pre-planned marketing effort that turned out not to inspire our customer to shop."

Shares of Chico's have been flagging for months now, and investors simply aren't accustomed to bad news from the retailer (although we have been getting hints for a while now). Another concern is that it has hungry competitors like Gap's (NYSE: GPS) new Forth & Towne concept, Ann Taylor (NYSE: ANN), Talbots (NYSE: TLB), and Coldwater Creek (Nasdaq: CWTR), the last of which really blew everybody away with its recent quarter and is a formidable rival.

Chico's warned about upcoming quarters, with one notable nugget being the expectation that August's same-store sales will be negative for the first time in nine -- count 'em -- nine years. On that note, though, shouldn't the calm, cool, and collected response be: Wasn't this bound to happen at some point? A fashion misstep is never good news, but again, it's bound to happen sometime, to every retailer. Add to that current macroeconomic concerns and you've got a perfect prescription for negative sentiment for a stock like Chico's.

Shares of Chico's hit a 52-week low Friday, and it's down 62% in the last six months. It's currently trading at a mere 16 times earnings, a real anomaly for this company. Somehow I highly doubt that a brand like Chico's is broken over the long term (although investors should definitely watch for signs that rivals really are taking a bite out of it), and it has other potential growth drivers in its White House/Black Market, Soma, and Fitigues concepts. There are of course risks that investors should keep an eye on, but when the negative sentiment on a stock reaches such an extreme, it's a good time to stop and consider whether the stock's venturing into value territory.

For related Foolish content, see:

• Unlike Chico's, Coldwater Creek stayed hot last quarter.
• One Fool recently supposed that Chico's is still charming.
• Stephen Simpson checked up on Chico's last May.

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Alyce Lomax does not own shares of any of the companies mentioned.