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

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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.

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.