What happened

Shares of Chico's FAS (NYSE:CHS) fell on Wednesday, declining as much as 11.2% but finishing the trading day down 10.3%.

The stock's decline followed Chico's fourth-quarter earnings report, which featured better-than-expected sales and adjusted earnings per share but also included a weak outlook for first-quarter revenue and comparable sales.

A chalkboard sketch of a chart showing a stock price falling

Image source: Getty Images.

So what

Chico's reported sales of $524.7 million, down from $587.8 million in the year-ago quarter but higher than analysts' average forecast of $516.4 million. Chico's non-GAAP fourth-quarter loss per share was $0.07, narrower than analysts' consensus estimate for a loss of $0.09.

Consolidated comparable sales were down 3.8%, driven by a lower transaction count and a decrease in average dollar sale. Comparable sales for the company's namesake brand took a particularly hard hit, falling 7.9% during the quarter.

Chico's first-quarter revenue guidance likely disappointed. Management said it expected a mid- to high-single-digit percentage year-over-year decline in both net sales and comparable sales in Q1, "reflecting softer sales throughout the month of February." Analysts were expecting first-quarter revenue to decline 5% year over year.

Check out the latest earnings call transcript for Chico's FAS.

Now what

Management said lower sales and investments in its omnichannel programs will likely weigh on profitability, leading to a gross margin headwind in its first quarter. Management guided for a 300 to 400 basis-point year-over-year decline in its gross margin during the period.