Chico's FAS, Inc.

Welcome to the Chico's FAS Second Quarter 2022 Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Corporate Controller, David Oliver. Please go ahead.

Good morning, and welcome to the Chico's FAS Second Quarter 2022 Conference Call and Webcast. For reference, earnings released can be found on our website at www.chicosfas.com, under Press Releases on the Investor Relations page. Today's comments will include forward-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 by our forelooking statements are included in today's earnings release, RACC 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. Certain non-GAAP measures may be referenced on today's call. A GAAP and non-GAAP reconciliation schedule is included in our earnings presentation posted this morning on the Chico's FAS Investor Relations page. Now, I'll turn the call over to our CEO and President, Molly Langenstein.

Thank you, David, and good morning, everyone. Our strong momentum continues with comparable sales of 19.5% to last year and 17.4% to 2019. We posted another quarter of outstanding operating income in our highest ever second quarter EPS, driven by both digital and store sales growth and meaningful year-over-year growth margin rate expansion. Our consistent performance is evidence of the power of our portfolio and the successful implementation of our strategic pillars. Six months into our three-year strategic plan, we are pleased with the considerable progress to date and remain confident in our ability to achieve our long-term goals. Our power of three brands and strategic pillars have proven resilient in this environment. We remain focused on delivering over $2.5 billion in sales by 2024. Let me cover some highlights of the second quarter. We generated exceptionally strong bottom line results with diluted EPS of $0.34, which was 62% over last year. This performance was driven by comparable sales growth of nearly 20% combined with significant growth margin expansion. Consistent newness, innovation, and product enhancement drove strong digital and store sales growth and allowed for greater full-price selling and higher AUR. In fact, full-price sales were 35% greater than last year and nearly 60% higher than 2019. White House black market continued to deliver exceptional sales results with comparable sales growth of 32%. White House black market customers responded to our versatile dressings, seasonless fabrics, and product innovation to meet her work-from-anywhere needs and return to occasion wear. Compared to the second quarter of 2019, White House black market delivered comparable sales gains of 25% and generated higher AUR and more full-price sales. Chico's continued to deliver exceptional sales results with comparable sales growth of 30%. Chico's customers returned to traveling and entertaining and responded to our higher quality product and fashion newness, building her outfits with solution-oriented products. Compared to the second quarter of 2019, Chico's delivered a comparable sales gain of 11% and also generated higher AUR and more full-price sales. While Selma posted a second quarter 9% decrease in comparable sales versus last year's second quarter, driven largely by the slowdown in lounge and cozy categories, Selma's comparable sales grew 24% compared to the second quarter of fiscal 2019, demonstrating the overall strength and long-term power of the brand. Inventories are well controlled, and AUR was up to last year and 2019. Soma continues on its innovative and solutions-based path, and we believe we are competitively positioned to continue to capture market share over time. We successfully opened three new standalone Soma stores during the second quarter, with plans to open over 20 additional stores this fiscal year. We continue to elevate our marketing, allocating targeted resources to digital and driving more traffic and customers to our brands. Total year-over-year customer count rose mid-single digits. Spend per customer is up over last year's second quarter, and the average age of new customers is continuing to trend younger. Second quarter gross margin rate rose to 41.4%, exceeding last year's second quarter by 300 basis points and 2019 by 820 basis points. This improvement was driven by higher average unit retail and full price sales, combined with occupancy and freight leverage, offset by elevated raw material costs. Our nearly 20% sales growth and 300 basis point margin expansion delivered an operating margin of more than 10%, well above last year's second quarter operating margin of 7.5%. Our four clearly defined strategic pillars of being customer-led, product-obsessed, digital-first, and operationally excellent continue to guide us to deliver on our three-year strategic plan. Let me update you on each of these pillars. We are customer-led, focused on community engagement and creating extraordinary and memorable customer experiences, forming lasting relationships and increasing customer lifetime value. The power of our three unique brands is fueling growth through three powerful platforms, creating connections and enabling our customers to interact with us in a seamless manner. Our physical stores are community centers for brand introduction, customer celebration, and key interactions with our stylists and bra experts. Digital is a community hub for content, a first impression of our brands, and an efficient way to teach and inspire. And our social brand ambassadors can expertly connect the two. Chico's FAS has a uniquely strong foundation with some of the most loyal and dedicated customers in retail. Our newly launched loyalty programs are exceeding expectations in customer sentiment and redemption rates, and they are increasing shopper frequency. We are strengthening our already strong customer relationships and adding new customers through these elevated loyalty programs. And we are product obsessed, continually delivering innovative and best in class goods in each of our brands that offer our customers beautiful solutions and inspire confidence and joy. At each brand, we are focused on elevating AUR and driving full price sales growth. At Chico, Style, fit, comfort, and solutions are our hallmarks, and these are driving our revenue increases. Customers responded enthusiastically to our product innovation and elevated fashion, including dresses, pants, and denim, woven shirts, and our Zenergy and Travelers collections. At White House Black Market, versatile dressing with feminine details in seasonless fabric drove the business in key categories. whether she was looking for power pieces or outfits for special occasions or just relaxing on the weekend. Customers responded to dresses, jackets, wovens, pants, and premium denim. At both Chico's and White House black market, customers bought coordinating outfits and accessories instead of single items, which increased AUR and basket size. At both apparel brands, Nearly every category grew significantly over last year, demonstrating that product enhancements and innovation are moving the entire brand forward, and that customers appreciate our elevated quality and are receptive to paying for value. Soma continues to make investments in cutting-edge product innovation, including our new Botify Demi, which successfully launched in the quarter. as well as newness in strapless and push-up bras and solutions in panties. We are chasing the categories customers are overwhelmingly responding to, and we are well-positioned with replenishment inventory to drive growth. We are digital first, leveraging technology to engage and deliver to our customers across channels and brands. Digital sales grew by double digits for the quarter, outpacing store sales, which were also strong. We are focused on growing multi-channel customers as evidenced by our 9% total customer count growth and 17% increase in spend during the trailing 12 months. Each digital touchpoint inspires the customer to find solutions and build her wardrobe across brands. and we are driving frequency of visits by adding new features like our limited edition online capsule collection. Our customized branded digital styling tools like Style Connect and My Closet continue to drive sales and engagement is growing. Our mobile apps are exceeding our expectations with downloads and engagement growing month over month and driving higher average order value and conversion. Sales generated from the apps are over 25% higher than the site average, and conversion is more than 10% higher than the site average. Our apps are being designed to become the key hub for our new loyalty program. Combined digital tools grew over 40% over last year's second quarter. All of these actions further nurture and grow the multi-channel customer who is so valuable to us. spending more than three times single channel customers and fueling overall digital growth. We are thrilled that Liana Les will be joining Chico's FAS next month as SVP of Marketing. Liana not only has valuable agency experience, but has held key roles at Coca-Cola and Estee Lauder's Aveda. With her 27 years of experience, she is a data-driven marketing expert with deep understanding of performance marketing, digital and e-commerce personalization, CRM, and loyalty programs, which will help us drive top-line growth. And last, we are operationally excellent, continually focused on prudently managing our inventory, cost of sales, supply chain, expenses, and real estate, generating healthy cash flow and delivering a strong bottom line. During the quarter, we had exceptional growth margin performance. driven by strength in full price sales, higher AURs, and improved leverage in inbound freight and occupancy costs, despite increases in raw materials. We are focusing on constantly improving our sourcing, logistics, and operational processes to help drive efficiencies and lower costs. We have carefully managed our calendar and inventory flow to assure products will be available to our customers in a timely manner. We have also recently controlled our mix of ocean versus air freight compared to last year, with air costs for the second quarter approximately 85% less than last year, reducing overall freight costs by approximately 50%, the benefit which will be realized as we sell the goods into the back half of the year. Now let me turn the call over to PJ to update you on our financial performance. PJ.