Q4 2019 Earnings Call

our comments and discussion

A fourth-quarter financial results will be on an adjusted or non-gaap basis. You will find a gaap to non-gaap reconciliation schedule included in our press release issued this morning, which is available on our website. And with that I'll turn it over to Bonnie. Thank you David and good morning. Everyone has announced this morning a fantastic, all three of our brand Chico's FAS reported a comparable sales up 2.2% marking the first positive, order for Chico's FAS off in Q2 of 2015. This is an improvement a 440 basis points from Q3 and a nine hundred twenty basis points, swing since q1 demonstrating three quarters of sequential sales increases and not only stabilization of the business but strong growth

The fourth quarter also marks the first positive sales quarter for all three brands since Q4 of 2014.

Cheat codes had significant Improvement in the quarter reporting a comparable sales increase of 9% driven by improvements to the assortment in the quality design and relevance of our products. This is an improvement a four hundred fifty basis points from Q3. And is Chico's first positive, sales quarter since you two 2015

Whitehouseblackmarket delivered a 10 basis-point comparable sales results. It's best quarter in the past eighteen quarters, since you won a 2015 the Improvement was driven by our ability to quickly edit our assortment and bring in new products. The positive comment is a full sixteen Point swing from Q2 off an extraordinary recovery, which we believe is one of the fastest ever in fashion retailing

Fourth-quarter financial performance for Chico's and White House Black Market was fueled by our discipline focus on delivering our strategic priorities. We worked quickly to make significant changes to nearly 50% packet loss department. This came in the form of major changes to the pipeline of goods and sizable cancellations that the teens were Stellar at executing mm positive results. We invest it in elevating the quality taste and styling of our new products and it's resonating with customers. We got behind key items in a major way from both an inventory home and marketing perspective the trajectory change in both. She tells and White House Black Market validates. We are on the right path. And today. I'm pleased to have Molly Lane and Stine president of our Peril group on the call with us to elaborate on how she is driving the impressive performance for both Chico and White House Black Market.

Incredible growth continued in the fourth quarter under Intimates president Mary van Prague and all categories drove outstanding results delivering a comparable sales growth of 9.4% was the sixth consecutive quarter of Positive Growth for Soma on top of a strong 6.2 increase last year in fourth quarter barrel, we realized the opportunity to grow so much exponentially early in 2019 and moved quickly to increase investments in inventory and markets near the Brand This momentum is supported by our focus on creating a continuous pipeline of innovative and solution oriented products, which are key for customer acquisition and retention our sleep business life strong double-digit comp and a record-setting Q4 earlier this week. We announced an extension to Somas Vanishing 360 franchise with new Styles and extended sizes.

This launched and others will continue to increase sales through Innovation as well. We have a significant growth plan for Soma supported by increased investments in the store footprint in 2028 and in digital both for a position and new customer.

For Chico's FAS Q4 was also a very strong quarter for digital sales. Our company-wide online penetration had double-digit growth as more customers shop seamlessly inconveniently, however, wherever and whenever they want

Dial connect.

Proprietary digital styling tools has exceeded our goal of deepening our personal connection with our customers in our Boutique and in digital notably in the quarter. All three grams had read my mobile traffic.

Additionally in the back half of the year the team reduced clicked the delivery time and enhanced shipping and product tracking information which improved customer experience. We also set new records to online order fulfillment performance at our distribution center during the peak holiday. We've implemented digital improvements including a digital shoppable catalog improve search engine engine optimization and better site navigation.

Lochley office and mobile POS. We're fully operational across all banners in Q4 and for 2020. We have invested in a significant tree platform and are transforming the sourcing and supply chain operations to increase overall efficiencies are sourcing group continues to focus on reducing our overall China penetration and diversifying our country of origin myth.

I'd like to

Comment on the impact of nineteen specifically to our business. We are very closely monitoring and measuring the situation and three things are working in our favor first fortunately for us. Our total penetration is kind of good has been reduced from the high 40s percent last year in this time. To the low 20% range this year. So any slowdown in summer deliveries will impact them much lower percent of our total inventory for all of our q1 products and at this time expect minimal to low impact from the virus on q1 delivery.

Third we do have time to implement mitigation strategies. Should they be needed going forward to move some production to other countries off the movement of goods out of China will also positively offset the impact of the terror

When I joined the business at the end of q1, I stated then that we would strengthen our team with seasoned apparel Merchant who had demonstrated proven track records in our specific product category. I'm pleased to report that major progress has been made against that initiative in the last nine months with 12,000 members added to the overall company leadership in significant senior role not only in merchandising and design but also in digital and marketing these Executives with impressive and directly related experience further enhance and reinforce the bench strength right across the company in all three brands.

We also have implemented new disciplines to the financial planning forecasting and tracking of all components of inventory in sales to ensure. We not only meet but exceed our goals along with these we have focused our effort on the proper Market positioning for each brand and the closer alignment of the brand DNA to the customer. We are a company of three unique brand each with specific and unique DNA each with compelling competitive advantages and each operating in its own light stays off.

the market

Are we lost in recent years and the Peril was directly related to the product not being precisely aligned to the Target customer and the experts we now have on the teams have already begun to affect their knowledge.

Yeah, familiarity and competent in aligning the product for the exact target customer.

We are on a terrific path forward and expect the Improvement and new disciplines in our business to continue to reap benefits in 2020 and Beyond as we work diligently to return Chico to the strong past performance track performance track record. It is certainly capable of delivering in the future.

I know like just turn this morning's call over to Molly Lane and Stine to discuss the chico and White House Black Market brand in more detail. Thanks Bonnie off to speak with you this morning about the strong results at Chico's and White House Black Market and the great momentum. We are seeing in both Brands. She goes had a remarkable 456 this point improvement from Q3 to Q4 and White House Black Market had a 580 basis-point improvement from Q3 to Q4 the rigor and discipline that was put in place is working.

The Talented

Cuz we experience at Chico's and White House Black Market. We're related to fundamental disciplines that can be and are being fixed. We identified our talent gaps and made Swift changes in the organization which streamline decision-making.

The new and existing leadership team across both brand have multiple years of experience in multi-brand management, which brought trigger and focus to driving every detail in the business office.

We addressed our assortment architecture editing process and category Investments. We have built a more robust forecasting process to more accurately forecasts and identify risks and opportunities. We also have established a fashion Matrix to drive change in our product. Our disciplined approach is delivering results. We are continuing to make progress and I'm excited to share the highlights for a fourth-quarter.

Because we make great strides in our assortment and we had big wins as a result of improvements in quality design and newness between quickly reasserted our fashion product and also reworked Armour plans to highlight the renewed aesthetic and value our customers love and expect from us. We were able to cancel product on the