(Casey Logan) Chico’s FAS says it will cut 240 existing positions and close 120 stores between 2015 and 2017.
The company reported adjusted net income of $7.5 million for the fourth quarter ending Jan. 31, 2015, compared to $5.9 million in 2014.
The job cuts and store closings are part of the company’s organizational realignment. The 240 positions eliminated are expected to result in $38 million in savings.
The cuts will result in a 12 percent reduction at the company’s Fort Myers headquarters.
The past two weeks have been a whirlwind for Chico’s FAS, first with news of a takeover bid, then news of layoffs.
Investors and employees eager to hear what’s happened and what’s next will be listening intently this morning as the Fort Myers-based company releases its results for the fourth-quarter and the fiscal year that ended Jan. 31.
Rumors of layoffs circulated in Southwest Florida on Wednesday. Chico’s executives would not discuss the layoffs and employees contacted said they were told not to comment.
Cole Peacock, a former Chico’s executive who now works as a consultant, did hear about employees losing their jobs. “I have relationships with people there who have said yes, there were layoffs,” he said.
Meanwhile, Sycamore Partners has abandoned its attempt to buy the women’s specialty clothing retailer, according to a Wall Street Journal report.
The buyout attempt from the New York firm fell through after “failing to line up financing for the deal on acceptable terms,” a source told the Wall Street Journal.
Chico’s operates 1,547 stores under the Chico’s brand, as well as Soma Intimates, White House Black Market and Boston Proper.
Lenders recognize there is great risk in this retail segment, said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm based in New York.
“Sycamore prior to Chico’s tried to buy Express and the deal fell apart. Why did it fall apart? For the same reason,” he said. “The lenders are saying they are putting on tougher conditions, they are willing to lend less and they want to get paid more. Sycamore is saying that’s unacceptable.”
With the takeover bid seemingly over, Davidowitz said Chico’s can get back to concentrating on its businesses rather than on what might happen in an acquisition.
“I think this was a tremendous diversion for Chico’s,” he said. “The first thing they have to do is decompress. And now they have to do what they should be doing and that is focusing on their own business — the right merchandise, the right time, the right place and the right price.”
Davidowitz said the layoffs could be “a function of soft earnings,” with Chico’s executives able to say on the earnings call that “this is what we’ve done about it. … we’re addressing it.”
Susan Anderson, senior vice president at FBR Capital Markets & Co. and a Chico’s analyst, wasn’t so sure earnings will be soft.
“I’ve seen a lot of big investors have been kind of pressuring them to cut back on costs,” she said, adding Chico’s is one of the few in the segment that has not downsized. “I’m thinking there’s going to be decent earnings, in line with expectations. I think it’s a little bit more methodical, restructuring the business.”
Chico’s stock (NYSE: CHS) fell 4.14 percent Wednesday, closing at $17.36.