Soma Claims To Be Reversing Its Decline

Soma’s Bodify Front-Close Perfect Coverage Bra ($70) and Vanishing Tummy Retro Brief ($24).

Sales at Soma, the underwear division of Chico’s FAS, Inc., rose slightly to $107.623 million in the quarter ended April 29, compared to $107.420 million in the same period last year.

Meanwhile comparable sales for Soma declined 2.5% following a 1.4% decline in the same three months last year. The company noted that its comparable sales declines were “driven by a decrease in transaction count, mostly offset by an increase in average dollar sale.”

Up to the end of fiscal 2021 Soma had registered “six consecutive quarters of comparable sales growth, but sales dipped for the brand in 2022 and three months ago it announced it was slowing the pace of new store openings in 2023, down to 15 from a previously announced 30. In fiscal 2022 the brand opened 27 standalone Soma stores.

In addition to underwear, the company operates two other divisions, Chico’s and White House|Black Market, which offer a variety of other women’s apparel.

As the company reported its first quarter results, Chico’s FAS CEO Molly Langenstein argued that “Soma sales trends continued to improve from prior quarters,” adding later in the conference call with analysts, “Soma has had four quarters of sequential year-over-year improvement in comparable sales performance with the first quarter improving 250 basis points over last year’s fourth quarter. Innovation and discipline drove double-digit AUR and profitability growth over last year’s first quarter. Our best-in-class bra and panty offering continued to outperform for last year, indicating the overall long-term power and strength of the brand.”

She also pointed out that in the last 12 months, “Soma gained market share with customers over 35 with household incomes over $100,000.” And later explained that “At Soma, customers responded to our expanded bra and panty assortments including the launch of unlined and stretch lace bras and panties. And our expanded Bodify and Vanishing collections, that included a wider range of bra and cup sizes. This newness drove sales in these categories ahead of last year.”

The CEO continued that “While sales of sleepwear declined due to lower levels of markdown inventory, we significantly had healthier margins at Soma this year.” She added: “For the last 12 months, digital sales represented 41% of total company revenues,” indicating that “over the trailing 12 months, total customer count was up 2%; Chico’s was up 6%; White House Black Market was up 4%; and Soma was down 3%. The new customers we are attracting to our brands are younger than existing customers by 10 years at Chico’s; two years at White House Black Market; and three years at Soma.”

Despite the various declines at Soma, Langenstein maintained, “we look at this as a positive because what we were less promotional in the brand for the quarter and that last year drove one and done customer that did not stay with the brand. So overall, our customer file is much healthier than it has been in the past.”

The CEO concluded that “We are encouraged by the trend at Soma. And we look forward to that continued improvement as we move through the balance of this year. And we do expect the brand to turn positive” for the full year. “We remain bullish on the long-term opportunities for Soma because this segment of the market is not crowded. And there is a lot of white space for us to be able to go out and capture. And when you look at our performance consistently each quarter, we have gained market share in the core components of bras and panties. So this is, to me, a big indicator of the long-term health of the brand.”

Soma reported it was operating 259 frontline boutiques and 20 outlets, the same number as it had as of January 28. CFO PJ Guido offered that this year “we may open up to 15 Soma boutiques” if “the right high-return opportunities develop. We have identified three stores so far and are actively looking for additional locations.” ­— NM

The full Chico’s transcript can be found here: https://seekingalpha.com/article/4609732-chicos-fas-inc-chs-q1-2023-earnings-call-transcript