Image source: Chico's FAS, Inc.

What happened

Shares of Chico's FAS Inc. (NYSE:CHS) were up 12.4% as of 3:15 p.m. EDT Wednesday after the specialty retailer announced stronger-than-expected fiscal second-quarter 2016 results and new initiatives focusing on cost reduction and operational efficiency.

So what

Quarterly revenue declined 7.3% year over year, to $635.7 million, including a $26.3 million decline related to Boston Proper, which Chico's sold to Brentwood Associates earlier this year. Excluding Boston Proper, Chico's revenue would have declined a more modest 3.6% year over year, driven by a combination of closed locations and a 3.1% decline in comparable-store sales.

Based on generally accepted accounting principles (GAAP), that translated to net income of $23 million, or $0.17 per share, up from net income of $2.1 million, or $0.02 per share, in last year's fiscal Q2. On an adjusted (non-GAAP) basis, which excludes items like restructuring expenses, goodwill, and other intangible impairment charges, net income declined 11.3% year over year, to $33.3 million, or $0.25 per share.

Analysts, on average, were only expecting adjusted earnings of $0.22 per share on revenue of $632 million.

Now what

In addition, Chico's revealed an "organizational redesign" with "clarified roles, responsibilities, and processes across the company's brands and shared service center." This redesign ultimately reduced Chico's corporate and field leadership headcount by 200, or 13%, which the company believes will make it "more nimble and responsive to customers' evolving needs."

The redesign will also result in $25 million in pre-tax annualized savings. And combined with previously announced cost reduction iniatives, Chico's estimates future annualized cost reductions of between $90 million and $110 million.

Finally, Chico's now anticipates comparable sales will decline in the low single-digit range for the second half of the fiscal year, with total inventory roughly in line with 2015 levels.

That said, I'm not anxious to pick up shares of Chico's until the company shows more tangible progress toward returning its operations to sustained, profitable growth over the long term. But given Chico's encouraging quarterly performance and incremental cost savings efforts, it's no surprise to see shares up big Wednesday.

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