Chico's FAS, Inc.

Welcome to Chico's FAS Third Quarter 2021 Conference Call and Webcast. All participants will be in a listen-only mode. Please note, this call is being recorded. I would now like to turn the call over to Corporate Controller David Oliver. Mr. Oliver, please go ahead, sir.

Good morning, and welcome to the Chico's FAS Third Quarter 21 Conference Call and Webcast. For reference, our earnings release can be found on our website, at www.chicasfas.com under press releases on the investor relations page. Today's comments will include four looking statements regarding our current expectations, assumptions, plans, estimates, judgments, and projections about our business and our industry, which speak only as of today's date. You should not unduly rely on these statements. Important factors that could cause actual results or events to differ materially from those projected or implied are included in today's earnings release, RSCC filings, and the comments made on this call. We disclaim any obligation to update or revise any information discussed on this call, except as may be otherwise required by law. Now I'll turn the call over to our CEO and President, Molly Lingenstein.

Thank you, David, and good morning, everyone. I would like to officially welcome PJ Guido to the company in his role as Chief Financial Officer. He comes to us with a wealth of retail financial experience and we are pleased to have him on board and on the call today. We achieved another great quarter and the momentum continues. Third quarter earnings per share of 15 cents represents the company's best third quarter performance since 2016 and demonstrates the extraordinary progress we continue to make in our turnaround strategy. The return to third quarter profitability was driven by healthy year-over-year comparable sales growth, meaningful gross margin expansion, in fact, the best third quarter gross margin performance since 2014, and continued diligent expense management. The robust year-over-year third quarter comparable sales increase of 28% was driven by significant digital and store outperformance across all three brands, propelled by meaningful quality, fit, and fabrication enhancements in our products, which have continued to significantly drive full price selling, reduce markdowns, and increase gross margin quarter-over-quarter. Dramatic improvement is continuing at Chico's and White House black market, as indicated by our third quarter comp sales increase of 23% and 33%, respectively, on significantly lower inventory levels. Both apparel brands are driving meaningfully faster sell-through rates, higher productivity, more full-price sales, and better maintained margins. Existing and new customers are enthusiastically responding to our updated fabric, fits, and new product offerings. The apparel brands generated their best third quarter gross margin performance in more than five years. Thoma posted a 30% comp sales increase over last year's third quarter, on top of an 11% comp sales increase in the third quarter of 2019. marking five consecutive quarters of comp sales growth. To continue driving this business forward, we have invested in the necessary inventory, capital, and staffing. Twelve months trailing data from market research NPD group shows that Selma's growth continues to outpace the market in non-sports bras, panties, and sleepwear. We believe this data, along with our recent performance, is a strong indication that Selma is well positioned to continue capturing additional market share on our journey to becoming a billion dollar brand. Our third quarter performance highlights the remarkable progress we are making on our five strategic priorities. Let me take a few minutes to update you on each. First, continuing our ongoing digital transformation. Over the last two and a half years, we have successfully transformed Chico's SAS into a seamless, digital-first, customer-led company as evidenced by the trajectory of our digital sales over this time. Even as store revenues have continued to rebound, digital sales have remained very strong. The investments we have made in talent and technology have paid off. Our proprietary digital tools continue to gain traction. And customers using these tools are more engaged and have higher conversion rates and average order values. These tools continue to drive year-over-year new multi-channel customer growth, and these customers are our most valuable, spending three times a single-channel customer. We continue to leverage our online outfitting experiences, Style Connect and My Closet, and customer engagement grows every quarter. Approximately 3 million customers, representing nearly half of our active customer file, are now enrolled in Style Connect. My Closet, the personalized experience enabling customers to augment their closets by coordinating their wardrobes with past purchases, generates conversion at four and a half times the site average and significantly higher average order value than those not using the feature. We are continually enhancing our personalization efforts to drive engagement, conversion, and orders, including our Shop the Look feature launched last year. Afterpay, allowing for customers to pay for their purchases and installments, has also proven to be a terrific UPTN sales driver. Since it launched about a year ago, it continues to exceed our expectations. Buy online, pick up in store has also remained popular and is still growing double digits. Second, further refining our product. On the product front, we are doing two key things at each of our brands to take market share and drive results. First, leveraging our customer data and insights. And second, constantly innovating and elevating our assortment. Customers are clearly responding across all three brands. At Chico's, denim and our new pant selections are big hits, which she is pairing with wovens, rowanas, sweaters, and our great no-iron shirts to make complete outfits. She is responding to our elevated fabrics and new comfort features in bottoms. White House black market continues to benefit from elevated styling and quality improvements as well. we had an outstanding response to our new denim fit and fabric, with year-over-year denim revenues nearly doubling for the quarter. She is pairing denim with our three new key White House black market jacket silhouettes that are versatile for every occasion. Continually creating comfortable, beautiful solutions are core to the Selma brand. we offer a full bra menu of solutions so she can find the absolute right bra for all of her needs. Year over year, bra revenues were up 38% in the quarter, boosted by the fact that our customers returned to the stores for in-person fittings. Sleepwear and panties continue to be strong and drove double-digit growth over last year and 2019 levels. Next, driving customer engagement. Through enhanced customer data analytics and insights, we have elevated and targeted our marketing efforts, which are driving brand awareness, generating traffic, and acquiring new customers. We continue to allocate more resources to digital, digital storytelling, influencers, and other social efforts. We are elevating our content, including using more organic and user-generated content. our social media customer engagement continues to grow and customers are responding. For example, our weekly Facebook Live selling events are engaging and continue to gain traction and generate sales. In the third quarter, our apparel brand had over 2.3 million views in social selling, live videos, and reels. We continue to acquire new customers with the customer count up nearly 8% from the prior year third quarter, and their average age continues to trend younger than existing customers. This data reinforces the runway for all three brands. Priority four, maintaining our operating and cost discipline. One of our most meaningful third quarter accomplishments was our gross margin performance. We achieved Our highest third quarter gross margin rate since 2014, driven by strength in full price sales and the corresponding reduction in promotions. Strategic inventory management and improved leverage of occupancy costs on higher sales. Continued cost discipline efforts and sales leverage resulted in a third quarter SG&A rate lower than both the third quarters of 2020 and 2019. In fact, we posted our best SG&A rate performance since 2018. And finally, delivering higher productivity in our real estate portfolio. Store traffic was very healthy, and we delivered strong store sales growth during the third quarter. Stores continue to be an integral part of our overall strategy as data indicates that digital sales are higher in markets where we have a strong retail presence. Food and store growth for the portfolio of brands makes sense where the investment delivers profitable returns. We have successfully opened 64 Soma shop and shops inside Chico stores, which are exceeding expectations, driving new customers to both brands, lifting store productivity, and further expanding our digital business. We plan to open nine more shop and shops in the fourth quarter. At the same time, we continue to rationalize and tighten our real estate portfolio as appropriate in order to deliver overall higher store profitability. We will make decisions to close stores when it is accretive to the overall portfolio. This remains a dynamic process. For example, at the beginning of the year, we expected to close 45 to 50 locations this fiscal year. but have reduced that number to 37 due to a combination of favorable store performance and successful lease negotiations. Now let me turn the call over to P.J. to update you on our financial performance. P.J.