Could one longtime turnaround story actually be turning around? Despite my former skepticism, I'm beginning to suspect that Chico's
Chico's increased its second-quarter net income by 122%, to $14.9 million, or $0.08 per share. Even better, its sales increased 3.6%, to $419.9 million. Same-store sales increased by 1.3%. Its White House/Black Market chain led the way with a 3.7% increase in comps, while Chico's namesake stores' comps increased just 0.4%. The direct-to-consumer segment increased sales by a whopping 46%.
Things looked far bleaker for Chico's earlier this year. Its stock price had gone wild, even though it showed few signs of real operational improvement.
This quarter seems far more heartening. Even though the sales gains are modest, they're still gains -- a rare feat among retail names this earnings season. Chico's also has cash on the balance sheet and no debt, which always made it a slightly shinier investment than most peers.
Though Chico's may be finally pulling off a turnaround, I still defend my previous rationale for concern. Retail turnarounds are very difficult to execute, and investors shouldn't underestimate the dangers. Beset by changing fashion tastes and fickle, budget-conscious consumers, these retail recovery stories rarely end happily.
Urban Outfitters
I'm not exactly all-in on Chico's, either. Its stock price has risen 193% over the last six months, even though the consumer climate remains fairly ugly. Given a choice, I prefer strong performers like Aeropostale
For more Foolishness:
- Look out below for Chico's
- Analysts weigh in on the best stocks to buy in a recession
- How's the rest of the retail sector doing?