Why Chico's FAS, Inc. Stock Popped Today

What happened

Shares of Chico's FAS, Inc. (NYSE: CHS) were soaring Wednesday after the struggling women's apparel retailer posted better-than-expected results in its first-quarter earnings report. Like other retailers, Chico's seemed to benefit from a strong holiday season and the new tax law. The stock was up 17% as of 12:56 p.m. EST.

A woman looks at a blazer in a clothing store.

Image source: Getty Images.

So what

The parent of Chico's, White House Black Market, and Soma beat estimates on both the top and bottom lines. Comparable sales fell 5.2% in the quarter, but that was still an improvement over prior quarters as traffic was flat, but the average ticket was down. Overall revenue in the quarter, which included an extra week, was down 2.2% to $587.8 million, topping expectations at $579.8 million. Gross margin improved 220 basis points to 37.7%, due primarily to lower average unit costs and a reduction in occupancy expenses. On the bottom line, earnings per share jumped from $0.10 a year ago to $0.22, or $0.14 excluding the benefit from the new tax reform law. That was still well ahead of the consensus at $0.09.

CEO Shelley Broader said, "The results exceeded expectations and demonstrate clear progress in the execution of our strategic initiatives to drive improved performance and value creation."

Now what

Chico's did not issue guidance in its press release, but the new tax law should help raise earnings per share this year, and the increase in gross margin is also favorable for the coming quarters. The ongoing decline in comparable sales is still a concern, but the stock had fallen so much over the last year, dropping 39% in 2017, that today's jump seems to be a relief rally as much as anything else.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.