What happened

Women's apparel retailer Chico's FAS (NYSE:CHS) saw its stock fall as much as 39.6% on Wednesday. As of 2:06 p.m. EST, the company's shares were down 38.5%.

Investors are heading for the exits because the retailer's financial results for its third quarter were worse than what management and analysts were expecting. In addition, the company's worsened outlook for full-year results is likely weighing on sentiment as well. 

A chalkboard sketch of a chart showing a stock price moving lower

Image source: Getty Images.

So what

Chico's third-quarter net sales were $499.9 million, down from $532.3 million in the year-ago quarter. On average, analysts were expecting net sales of $515.6 million. Earnings per share for the period came in at $0.05, down from $0.13 in the same quarter last year. The consensus analyst forecast was for EPS of $0.08.

"Brand performance in the third quarter was mixed," said CEO Shelley Broader in the company's third-quarter earnings release. "Soma again performed well and better than expectations, and White House Black Market is continuing its brand repositioning. However, our Chico's brand did not deliver the sales we anticipated, which led to total Company results that were below expectations."

Chico's has been struggling to grow comparable sales recently. Third-quarter consolidated comparable sales fell 6.8% year over year during the period, "driven by a decrease in transaction count and lower average dollar sale," the company said.

Now what

Looking ahead, management anticipates more headwinds. Chico's said it expects "a mid-teen [percentage point] decline" in fourth-quarter net sales. Additionally, the company's full-year 2018 sales outlook has weakened, going from a previously forecast "mid-single digit decline" to "a high single-digit decline."

Though the company is taking actions to benefit its Chico's brand's performance, it said it doesn't expect these changes to result in any meaningful improvement to the brand until spring of fiscal 2019.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.