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%.
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.
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
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