Chico's and the (New) Man

Chico's (NYSE: CHS  ) may have reported some dismal same-store sales for December yesterday, but the retailer's shares rose significantly anyway. Maybe some investors were heartened by word that the retailer was getting a brand new CEO.

Same-store sales dropped 12.4% in December, although such dramatic drops in monthly comps are, unfortunately, nothing new at Chico's. Of course, I suppose that might look like a minor bump, considering many retailers reported abysmal December figures -- look at Abercrombie & Fitch (NYSE: ANF  ) , with its 24% plunge in comps -- but then again, Chico's has been lagging on the same-store sales front for several years now.

Meanwhile, Chico's named David Dyer to replace CEO Scott Edmonds, who has retired. Dyer has been a board member at Chico's and does have retail experience. He previously served as CEO at Tommy Hilfiger and Land's End (which was purchased years ago by Sears (Nasdaq: SHLD  ) ).

Edmonds was a veteran at Chico's, although the last several years certainly didn't allow him to leave on a high note, so shareholders probably aren't shedding many tears over his departure. Chico's five-year chart tells quite a tale; remember in February 2006, when the stock topped out at about $48 per share? It's hard to remember those days now that Chico's has needed a turnaround for several years running, and said turnaround still doesn't really seem all that forthcoming, especially with the current economic headwinds battering so many retailers.

I once thought that Chico's looked like a beaten down value stock, but I have since given up on that notion. I am just not keen on the specialty retailers that aim for older female customers in general; these include not only Chico's but retail names like Ann Taylor (NYSE: ANN  ) , Talbots (NYSE: TLB  ) , and Coldwater Creek (Nasdaq: CWTR  ) .

All of these companies may be having their share of problems getting the right merchandise on the racks lately, but I also strongly believe that older female shoppers have quite a knack for shutting their wallets with a resounding snap when times are bad. While Chico's may be the best candidate for a turnaround in its niche, I'd prefer to look for value retail stocks elsewhere. A new CEO may be able to turn the ship around, but investors should remember the serious challenges this retailer faces; a fresh face at the helm is not likely to be enough.

Sears Holdings is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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  • Report this Comment On January 11, 2009, at 9:35 PM, fishstickkitty wrote:

    <sarcastic>please</sarcastic> Thanks for the "insight"...meanwhile, if the economy turns around those companies will all look like fire sales at current prices.

  • Report this Comment On January 13, 2009, at 5:52 PM, moppen wrote:

    There are several things I find odd about your arcticle.

    1. Dyer's "retail experience" is nothing at all like what he's facing at Chico's. Tommy Hilfiger has nowhere near that many stores and (let's remember) Land's End's big numbers have always come from catalogs and (now) on line. Chico's is entirely different experience. Just a clarification.

    2. In addition - I'm not so sure it is the likeliest "turnaround candidate" anymore (mostly because of the recent installment of Dyer). Christopher & Banks would top my list - IF and

    (only IF) they clean house of their current management team.

    No female (older or not) ever shuts their wallets completely if their are things they love on the racks.

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