Please ensure Javascript is enabled for purposes of website accessibility

Chico's FAS Inc. Jumps on Buyout Speculation

By Timothy Green - Sep 14, 2015 at 12:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A private equity firm is reportedly interested in the apparel retailer for the second time this year.

What: Shares of apparel retailer Chico's FAS (CHS 10.42%) jumped on Monday after Bloomberg reported that the company was considering a sale to a private equity buyer. At 12:45 p.m., the stock was up about 9%.

So what: Chico's is reportedly weighing a sale of the company after it was approached by private equity firm Sycamore Partners, which has made an offer for the company, according to Bloomberg. This is the second time this year that shares of Chico's have spiked on rumors of a buyout. Back in February, Sycamore Partners made an attempt to acquire the retailer, but that effort was ultimately abandoned.

Now what: Chico's has been going through a difficult period over the past few years. Revenue has been growing, but the company's operating margin has collapsed, falling to 4.3% during 2014, down from over 11% in 2012. During the first six months of Chico's current fiscal year, comparable-store sales at its namesake stores, which account for a little more than half of sales, declined by 0.8%.

Taking the company private may be the best option, allowing costs to be cut and the business to be restructured without quarterly expectations from investors. That said, buying a stock based solely on the hope of a buyout is rarely a good idea, and there's no guarantee that a deal will be reached.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chico's FAS, Inc. Stock Quote
Chico's FAS, Inc.
$5.04 (10.42%) $0.47

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.