(Filed Under wholesale Lingerie News). Soma comparable sales in the fourth quarter rose 6.2%, but it will, nevertheless, close 60 of its locations over the next three fiscal years. It began 2019 with a total of 277 lingerie stores.
Parent Chico’s FAS had announced in January that it was planning to close about 250 stores company-wide, but had not specified the number of Soma shops involved. The list now also includes 100 Chico’s and 90 White House Black Market locations, “with the majority of the closings occurring in years two and three.”
Soma sales slipped slightly to $338 million in fiscal 2018. It ended fiscal 2017 with 289 stores that had generated $344 million in sales; and ended fiscal 2016 with 294 locations that had also generated $344 million in sales.
Chico’s explained that company-wide “in fiscal 2019, the closures are expected to be approximately 60 to 80 stores. The closings will be across all brands and weighted to the second half of the fiscal year. The closings are expected to have minimal impact on sales and earnings in fiscal 2019.”
During the conference call to discuss the financial results with analysts, Chico’s CEO Shelley Broader called Soma’s fourth quarter 2018 comps, “the best performance in 15 quarters, ending the year in positive territory.” She added, “This better than expected increase is primarily driven by our innovative solution bras and the holiday performance of sleepwear.”
“In January, the brand successfully launched SOMAINNOFIT, which uses a revolutionary way to help women find their best bra fit through a mobile app,” she continued, promising further “investments in Soma marketing” in 2019.
During the call analyst, Roxanne Meyer of MKM Partners, pressed management on the unexpected decision to close so many Soma locations. “Of your three brands, it’s obviously your smallest and performing very well. I guess I was surprised to hear you are closing 60 stores, which is almost a quarter of your fleet. So just wanted to get a little bit of perspective as to the decision to close so many and how you’re thinking about what is the optimal size of that chain longer term?”
Chico’s CFO Todd Vogensen responded, “so, yes, Soma is growing very well. We’re seeing great response to new merchandise at Soma. What we’ve ended up with Soma over time is a chain that grew very fast and in a very low cost way in a lot of cases. So in a lot of those locations, we’re not where we ultimately want to be. So what we’re doing with Soma is testing a lot of different formats, so you could see different sizes, different product whatever. And we want to make sure that we get that overall format set and have the ability to have flexibility around that before we go forward with it. And what that means in the short term is we are going to optimize out of some of those locations that are not where we want to be before we refocused on the locations that we do want to be.”
During the call, Broader provided additional details about Soma. She explained that during the fourth quarter, the “PJ bar in store performed very well as our customers responded favorably to the mix advanced options. Given this response, we’re planning to do the same thing with our bra and panty assortment. In addition to sending out mailers that demonstrate how many choices we offer the customer, we have in store style boards that show all the colors you can get in any one style, and are also testing digital screens. As always, we’re committed to providing our customers with plenty of options to look and feel their best.”
Broader continued, “we have a number of products launching in the first quarter. Last week, we introduced two new Enbliss style bras and three new Enbliss matching panty. We’re also rolling out a new marketing campaign called Underpower, which celebrates diverse women of all sizes and ages, feeling powerful in Soma products and returning to TV to broadly share our message. We’re investing in our Soma business, enthusiastic about what’s on deck and proud of what the team has achieved.”
Company-wide, Chico’s FAS earned $35.6 million on sales of $2.131 billion in 52-week fiscal 2018, compared to $101.0 million on sales of $2.282 billion in 53-week fiscal 2017. In its annual report the company describes Soma’s selection: “bras range in size from 32A-46H. The sleepwear and loungewear offerings range in size from extra small to extra-extra-large.” — NM
The complete Chico’s conference call transcript can be found here: https://seekingalpha.com/article/4246706-chicos-fas-inc-chs-ceo-shelley-broader-q4-2018-results-earnings-call-transcript.
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