Q2 2024 Chico's FAS Inc Earnings Call

August 29, 2023

Welcome to Chico's, Fas second quarter, 2023 conference call and webcast.

All participants will be in listen only mode.

Please note that this call is being recorded.

I would now like to turn the call over to the company's head of Investor Relations joining me Cleveland.

Please go ahead.

Good morning, and welcome to the Chico's Fas second quarter, 2023 conference call and webcast.

For reference our earnings release can be found on our website at www Dot Chico's Fas Dot com under press releases on the Investor Relations page.

Today's comments will include forward looking statements regarding our current expectations assumptions plans.

<unk> estimate.

Judging men and projections about our business and our industry.

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 forward looking statements are included in today's earnings release.

Our SEC filings and the comments made on this call.

We disclaim any obligation to update or revise any information discussed on this call.

As may be otherwise required by law.

Certain non-GAAP measures maybe referenced on today's call.

A GAAP to non-GAAP reconciliation schedule is included in our earnings presentation posted this morning on the Chico's Fas Investor Relations page.

Now I will turn the call over to our CEO and President Multi-language starring Molly.

Thank you Julie and good morning, everyone.

We delivered another quarter of strong operating income and earnings performance consistent with our outlook.

Total second quarter year over year sales were also in line with our outlook on Papa 18, 4% growth in the second quarter of last year.

On a year over year basis, we delivered a net sales increase of two 1% at Soma.

A modest decline at Chico's and a sequential improvement over last quarter at White House Black market.

For all three brands full price sales remain healthy and we attracted new customers and gained market share.

Total company average dollar spent and units per transaction increased.

We expanded average unit retail at both Chico's and Soma as apparel customers continued to buy head to toe dressing and our intimates customers responding to innovative new products.

Let me provide some highlights for the quarter.

We delivered adjusted earnings per diluted share of 28.

And operating income of 8.5%.

This performance was driven by solid gross margin and continued expense management.

Our diverse brand portfolio delivered total sales of $545 million.

And a two year stacked comparable sales increase of 16.5%.

In fact, we were just recognized by N R F as the ninth fastest growing retailer in 2022.

Its almost comparable sales were down 5% versus last year's second quarter.

This marked a sequential comparable sales improvement over the last four consecutive quarters.

And an 870 basis point increase year over year.

Product innovation and discipline drove year over year growth in AUR spend.

Spend per customer gross margin and profitability.

New online and strapless bra, along with panties and sleepwear continue to outperform last year.

Chico's posted a two and a 5% comparable sales decline with a 27% two year stacked growth.

Customers continued to respond to innovation and our elevated product offerings from casual to dressy styles and remain focused on head to toe dressing.

Chico's gained sales momentum in the quarter, which has continued into August .

White house Black market comparable sales fell 5.7%.

A 230 basis point improvement over last quarter.

And we're up 26% on a two year stacked basis.

Customers continued to respond to our new fabric innovation and fashion offering and also focus on complete outfit.

As we mentioned last quarter, our fashion inventory levels were depleted due to high demand.

The second quarter was a transition quarter and as we enter the fall season, our inventory levels are more in line with demand and should drive our back half trends change.

Our brands continue to take market share during the quarter. According to sarcoma, Chico's and White House Black market took share for customers 45, plus with household income of over 100000.

Pharma substantially outpaced the market and gain share with customers 35 slot with household income over 100000.

Our innovative product pipeline strategic marketing and valuable loyalty program continue to drive more customers to our brands.

Over the prior 12 months multichannel customer account total customer account and spend per customer were up.

Indicating the long term health and opportunity of each brand.

And demonstrating the quality and strength of our customer file.

Our customers are more focused on fashion elevated product and newness rather than value and pricing.

We ended the quarter with total inventory down, 11% and on hand inventory down <unk>, 3%.

Appropriately positioned entering the second half of the year.

We began the fall season with fresh inventory.

With new fall inventory up, 12% and spring and summer inventory down 12% versus last year.

We see customers responding to our trend right product in August .

We further strengthened our balance sheet, ending the quarter with $151 million in cash and total liquidity of $386 million with only $24 million of debt.

Let me give you a brief update on each of our four strategic pillars.

First we're customer led.

With each of our brands connecting with customers through three robust platform.

Stores digital and social.

All three work in tandem to provide our customers the very best experiences drive engagement and propel long term profitable sales growth.

Our stores are community destination that allow our stylists and brought expert to showcase our product and share their knowledge and enthusiasm driving sales and brand loyalty.

Doors are also key to enrolling customers in our important loyalty program.

Digital is the hub for all of our product offerings and often the first impression of our brand.

Our skilled social stylus expertly connect customers to our brand and drive growth.

Within both the store and digital channels Soc.

Social stylists are gaining traction with sales for stylus growing month after month.

We continue to attract new customers to each brand in the second quarter versus last year, New Chico's Fas customers grew 7% with increases over 13% at Chico's.

Almost 6% at White house, Black market and 4% at Soma.

This is important as our customers tenure is long almost 12 years at Chico's nine years at White House Black market and six years at pharma.

We have an active and engaged customer base.

For the Rolling 12 month period total customer account grew 1% and spend per customer was up 3%.

We continue to focus on growing multichannel customers, who spend more than three times single channel customers.

And this group grew nearly 3% over the last 12 months.

These metrics demonstrate the overall health and appeal of our brand.

Next we are product obsessed at each brand customers continue to respond to our elevated fashion and solution oriented products.

Demonstrating that product enhancement and our constant pipeline of innovation are moving the brand forward.

Customers are selected and they appreciate higher quality and are receptive to paying for value and our beautiful solutions.

She goes generated higher year over year AUR in the quarter, largely driven by elevated product offering and casual and dressy knit accessory and our popular franchises like our travelers collection, no iron shirt and solution border.

Customers in Chico's continues to buy a complete outfit.

In early fall selling indicate that customers are responding to our on trend assortments like new wider leg proportions and BARDA.

At White House Black market head to toe sales resulted in higher year over year, a D. S N U P ts in the quarter.

Customers are continuing to respond to new fabrications introduced last season.

And we experienced momentum and casual to career dressing with both coordinating jackets and bottoms growing year over year.

These categories will be especially key in the fall season.

And we are pleased with early fall fashion selling.

At Soma, a D S AUR and U P T rose during the quarter as customers responded to product innovation and launches.

Including newness in strapless, and unlined Gras stretch lace panties and Shapewear.

Sleepwear was also strong for the quarter and will be even more important for the fall and holiday selling periods.

We continue to be very disciplined on promotion with gross margins improving over last year and as we head into fall inventories in Soma are appropriately balanced.

We are digital first leveraging technology to engage and deliver exceptional experiences to our customers across brands and channels.

For the last 12 months digital sales represented 41% of total company revenues.

Each digital touch points, including our customized digital styling told my closet style connect and our mobile app inspires the customer to find solution and build her wardrobe across brands.

We continue to offer more personalized digital experiences and leverage our digital tools to drive customer engagement.

Enhance our loyalty program and grow our multichannel customer base.

The utilization of my closet grew 14% over last year and conversion is six times a slight average.

In addition, we are strategically leveraging the unique customer file in each of our brands to grow customers across brands.

We experienced year over year growth with our shared customers expanding 5% over the quarter.

Our app have received over 1 million downloads.

Our most loyal customers are using the app and convert at three times a slight average.

Our redesigned loyalty program launched one year ago continue to top of our expectations and customer sentiment redemption rate and shopping frequency.

Nearly 90% of our apparel customers and nearly 80% of former customers are enrolled in the new programs.

These customers generate the vast majority of our revenues and drive higher U P teeth and AUR.

And the majority of new customers are enrolling in the program as well.

We are re platforming each of our web site, beginning with White House Black market. This fall with the others to follow soon after.

Improvements in site experience and conversion should generate future tailwind for digitalglobe.

We continued to make digital investments and marketing attribution and search personalization and order management.

Owing us to better target our marketing dollars.

In addition, we are investing more in upper funnel marketing strategies to continue to fuel new customer growth.

Operator: Welcome to Chico's FAS 2nd quarter 2023 conference call and webcast. All participants will be in listen-only mode. Please note that this call is being recorded.

And lastly, we strive to be operationally excellent.

Diligently focusing on managing our inventory.

Julie MacMedan: I would now like to turn the call over to the company's head of investor relations, Julie MacMedan.

Julie MacMedan: I would now like to turn the call over to the company's head of investor relations, Julie MacMedan. The second meeting, please go ahead.

Cost of sales expenses, and real estate generating healthy cash flow and delivering a strong bottom line.

Julie MacMedan: The second meeting, please go ahead. Good morning and welcome to the Chico's FAS 2nd quarter 2023 conference call and webcast. For reference, our earnings release can be found on our website at www.chico'sfAS.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.

Julie MacMedan: Good morning and welcome to the Chico's FAS 2nd quarter 2023 conference call and webcast. For reference, our earnings release can be found on our website at www.chico'sfAS.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 forward-looking statements are included in today's earnings release, our SEC filing, and the comments made on this call. We just claim any obligation to update or revise any information discussed on this call, except as maybe otherwise required by law. Certain non-gap measures may be referenced on today's call.

And we continually work to drive efficiencies and reduce expenses in our sourcing logistics and operational areas.

Now I'll turn the call over to Chief Financial Officer, David Oliver to update you on our financial performance David.

Thank you Molly and good morning, everyone.

As a reminder, certain numbers I will discuss today are non-GAAP adjusted numbers.

We delivered another profitable quarter with strong overall top line and gross margin performance and disciplined expense management.

Julie MacMedan: Important factors that could cause actual results or events to differ materially from those projected or implied by our forward-looking statements are included in today's earnings release, our SEC filing, and the comments made on this call. We just claim any obligation to update or revise any information discussed on this call, except as maybe otherwise required by law. Certain non-gap measures may be referenced on today's call.

We also generated strong free cash flow, while continuing to invest in our long term growth strategies.

For the quarter were generated adjusted diluted EPS of 28 cents.

The 34 in last year's second quarter.

Total sales of $545 million were down two 4% from last year and down 3% on a comparable sales basis.

Julie MacMedan: A gap to non-gap reconciliation schedule is included in our earnings presentation posted this morning on the Chico's FAS investor relations page.

This performance was consistent with our outlook and was on top of a 19, 5% comparable increase last year, representing two year stacks rote of 16, 5%.

Molly Langenstein: Now I will turn the call over to our CEO and Molly Langanstein. Molly, thank you Julie and good morning everyone. We delivered another quarter of strong operating income and earnings performance consistent with our outlook. Total second quarter, year-over-year sales were also in line with our outlook on top of 18.4% growth in the second quarter of last year. On a year-over-year basis, we delivered a net sales increase of 2.1% at SOMA, a modest decline at Chico's, and a sequential improvement over last quarter at Boythouse Black Market.

Overall average dollar sale and units per transaction increased.

Or a decrease in transaction count.

White bread, so about what's the libra for them or for the quarter.

Hosting a two 1% net sales increase at a 0.5% decline on a comparable basis.

Marketing, but Brent fourth consecutive quarter of sequential trend improve them.

Comparable sales decreased one 5% at Chico's.

And five 7% of White house Black market.

Well on top of a nearly 30% increase on a two year stack basis.

Molly Langenstein: For all three brands, full-price sales remained healthy and we attracted new customers and gained market share. Total company average dollar spend and units per transaction increased. We expanded average unit retail at both Chico's and SOMA as a pair of customers continued to buy head-to-toe dressing and our intimate customers responded to innovative new products.

Gross margin of 39, 8% exceeded our outlook.

Here to last year's high rate of 41, 4%.

The current euro rate is healthy liberalized margin.

Ticketed upstairs at inventory flow and normalized markdowns.

Yesterday expenses totaled $170 million.

31, 3% of sales compared to $173 million or 31% in the prior year.

Molly Langenstein: Let me provide some highlights for the quarter. We delivered a adjusted earnings for Julie's share of 28 cents and operating income of 8.5%. This performance was driven by solid growth margin and continued expense management. Our diverse brand portfolio delivered total sales of 545 million and a two-year stacked comparable sales increase of 16.5%. In fact, we were just recognized by NRF as the ninth fastest growing retailer in 2022. Thomas Comparable Sales were down 0.5% versus last year's second quarter.

We are disciplined and thoughtful in managing expenses.

And we will remain lean while strategically investing in areas like marketing and store payroll to support customer growth well productivity and top line growth.

The current year SG&A rate deleverage was primarily a function of sales.

All three brands contributed to our consolidated operating income of $46 5 million.

Or you can have a set of cells.

We generated $55 5 billion of EBITDA for the quarter.

Molly Langenstein: This marked a sequential comparable sales improvement over the last four consecutive quarters and an 870 basis point increase year over year. Product innovation and discipline drove year over year growth in AUR, send for customer, growth margin, and profitability. New online and strapless bras, along with panties and sleepwear, continued to outperform last year. Chico's posted a 2.5% comparable sales decline with a 27% two-year stacked growth. Customers continue to respond to innovation and are elevated product offerings from casual to dressy styles and remain focused on head-to-toe dressing.

Or 10, 2% of net sales.

Indicative of our ability to generate strong cash flow to support our strategic plan and ongoing investment in growth.

Now, let me turn to our balance sheet.

Our cash position total liquidity at the operating cash flow remained very strong provider.

Providing us with flexibility to manage the business, making investments to propel growth and return excess cash to shareholders.

We ended the quarter with 151 billion of cash and total liquidity of 386 million.

Which includes capacity or a multi year committed credit facilities.

With only 24 million of debt.

Our debt to EBITDA ratio on a trailing 12 month basis was less than <unk> two parts.

Molly Langenstein: Chico's gain sales momentum in the quarter, which has continued into August. White House Black Market Comparable Sales sells 5.7% a 230 basis point improvement over last quarter and were up 26% on a two-year stacked basis. Customers continue to respond to our new fabric innovations and fashion offerings and also focused on complete outfits. As we mentioned last quarter, our fashion inventory levels were depleted due to high demand. The second quarter was a transition quarter and as we enter the fall season, our inventory levels are more in line with demand and should drive a back-hack trend change.

At quarter end inventory totaled 300 billion compared to 339 million last year.

7% decline, primarily reflects a return to normalized supply chain conditions that.

That resulted in significantly lower in transit inventory.

What have the inventories were down 3%.

Now, let's shift our focus to real estate.

We believe our fleet is well positioned to deliver incremental growth and profitability going forward.

And we're continually working to optimize our portfolio.

This year, we've completed the upgrade of nearly 60, Chico's boutiques, which are the aggregate are meaningfully outperforming the remainder of the store base.

Molly Langenstein: Our brands continue to take market share during the quarter. According to Serkana, Chico's and White House Black Market took share for customers 45 plus with household incomes of over 100,000. SOMA substantially outpaced the market and gained share with customers 35 plus with household incomes over 100,000. Our innovative product pipeline, strategic marketing and valuable loyalty programs continue to drive more customers to our brands. Over the prior 12 months, multi-channel customer count, total customer count and spend for customer were up, indicating the long-term health and opportunity of each brand and demonstrating the quality and strength of our customer file.

For silver we expect to open a total of three stores. This year and are actively looking for additional locations should the right opportunities develop.

The aggregate.

Circumstances doors opened mostly the third and fourth quarters of last year continued to outperform and should provide a digital halo and be a boosted comparable sales this fall season.

We closed.

11 stores in the first half of the year.

Closing underperforming locations that's been accretive torpedo.

And due to our frequent financial position, we have been able to negotiate Walker, new every new leases with more favorable terms and more desirable locations.

We ended the second quarter with 258 boutiques.

Now, let me provide our updated outlook for fiscal 'twenty three.

Molly Langenstein: Our customers are more focused on fashion, elevated products and newness rather than value and pricing. We ended the quarter with total inventory down 11 percent and on-hand inventory down 0.3 percent, appropriately positioned entering the second half of the year. We began the fall season with fresh inventory, with new fall inventory up 12 percent and spring and summer inventory down 12 percent versus last year. We see customers responding to our trend-right product in August. We further strengthened our balance sheet, ending the quarter with 151 million in cash and total liquidity of 386 million with only 24 million of debt.

I'll talk about 18% total company sales increase in fiscal 'twenty, two and accounting for our first half performance. We are now planning for fiscal 'twenty three revenues to be flat to up in the low single digit range compared to last year.

This would imply two year net sales growth of 18% to 20%.

For the second half of the year, we expect improving trends over the second quarter for each of our brands as we are seeing customers respond to our fresh fall assortments.

The third quarter will continue to be a transition period for white house black market, but we expect fourth quarter trends will be bad.

Molly Langenstein: We further strengthened our balance sheet, ending the quarter with 151 million in cash and total liquidity of 386 million with only 24 million of debt.

We will continue to manage expenses and expect cash flow to remain strong as we invest in our long term growth plan.

Molly Langenstein: Let me give you a brief update on each of our four strategic pillars. First, we are customer-led. With each of our brands connecting with customers through three robust platforms, stores, digital and social. All three work in tandem to provide our customers the very best experiences, drive engagements and propel long-term profitable sales growth. Our stores are community destinations that allow our stylists and broad experts to showcase our products and share their knowledge and enthusiasm, driving sales and brand loyalty.

We will also make prudent investments in our business that will drive traffic conversion and customer growth and revenues across all channels for many years to come.

Capital expenditures for fiscal 'twenty, three are expected to total between $75 million to $85 million.

Our cloud based investments.

As our cash flow if its all remain very strong, we expect or financial position to continue to strengthen.

In addition to the funding of strategic investments and reducing that cash flow will allow us to navigate the macro environment.

So for the third quarter, we expect total sales of $505 million to $525 million.

Molly Langenstein: Stores are also key to enrolling customers in our important loyalty programs. Digital is the hub for all of our product offerings and often the first impression of our brands. Our skilled social stylists expertly connect customers to the brand and drive growth. Within both the store and digital channels, social stylists are gaining traction with sales for stylists growing month after month. We continue to attract new customers to each brand. In the second quarter versus last year, new Chico's FAS customers grew 7%, with increases over 13% at Chico's, almost 6% at White House Black Market, and 4% at SOMA.

Gross margin rate and a 38, 539% range SG&A rate in the 35, one to 35, 6% range.

Our effective tax rate of approximately 29% and diluted EPS of eight to 12 ships.

For the full year, which consist of 53 weeks. We now expect total sales of 2.1 more by the 2.175 billion.

Gross margin rate in the $38 five to 38, 8% range.

Yesterday right the 33 to 33, 3% range, but effective tax rate of <unk>.

So a 46%.

Molly Langenstein: This is important as our customers 10 years is long, almost 12 years at Chico's, 9 years at White House Black Market, and 6 years at SOMA. We have an active and engaged customer base. For the rolling 12 month period, total customer count grew 1%, and spend for customer was up 3%. We continue to focus on growing multi-channel customers, who spend more than three times single-channel customers. And this group grew nearly 3% over the last 12 months. These metrics demonstrate the overall health and appeal of our brands.

And diluted EPS of <unk> 66 to 74.

Looking ahead, we are optimistic about the green shoots we are seeing in August and are well positioned to adjust to react to this ever changing environment.

As always we are focused on controlling what we can control or.

Our inventory assortments balance sheet and expenses.

We continue to make progress on our key strategic initiatives and investments.

Digital technology in stores to deliver long term top and bottom line growth.

Now I'll turn the call back over to the operator operator.

Molly Langenstein: Next, we are product obsessed. At each brand, customers continue to respond to our elevated fashion and solution oriented product, demonstrating that product enhancements and our constant type line of innovation are moving the brand forward. Customers are selective, and they appreciate higher quality and are receptive to paying for value and our beautiful solutions. Chico's generated higher year-over-year AUR in the quarter, largely driven by elevated product offerings in casual to dressiness, accessories, and our popular franchises, like our traveler's collection, no iron shirt, and solution bottoms.

At this time, we'd be happy to take your questions.

Did you have a question. Please press Star then one on your telephone keypad.

If you are using a speaker phone we ask you. Please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Today's first question comes from Dana Telsey Telsey group. Please go ahead.

Hi, Good morning, everyone. Molly's you mentioned regarding inventory and prepared for trend change can you expand on that what that could mean for the fourth quarter by brand and could you talk a little bit about on the puts and takes of the gross margin, whether it's freight whether its raw material costs.

Molly Langenstein: Customers in Chico's continue to buy complete outfits, and early fall selling indicates that customers are responding to our on-trend assortment, like new wider leg proportions in bottoms. At White House Black Market, head to toe sales resulted in higher year-over-year ADS and UPTs in the quarter. Customers are continuing to respond to new fabrications introduced last season, and we experience momentum in casual to career dressing with both coordinating jackets and bottoms growing year over year.

Your positioning as we go through the back half of the year and just lastly on the exit rate of the second quarter into the third.

What changed versus the second quarter by brand what do you what are you seeing thank you.

Thank you Dana we did deliver another quarter of strong sales performance full price sales were healthy and each of our brand attracting new customers and gained market share. We believe we have compelling momentum as we enter the back half.

In regards to inventory we ended the quarter with total inventory down 11% and our on hand inventory was down <unk>, three which is appropriately positioned as we enter the back half of the year.

Molly Langenstein: These categories will be especially key in the fall season and we are pleased with early fall fashion selling, and online draws, stretch lace panties and shapewear. Fleetwear was also strong for the quarter and will be even more important for the fall and holiday selling periods. We continue to be very disciplined on promotions with growth margins improving over last year and as we head into fall, inventories and summer are appropriately balanced.

As I mentioned on the call it the complexity of our inventory as we entered the fall or is a fresh in terms of fall forward product. So Q2, our spring and summer inventory.

Ended down 12% to last year, and our new fall fresh inventories were up 12%. So we have a very healthy position in terms of new regular price and no liability inventories as we enter the third quarter, we believe that our back half inventories are planned to fuel our outlook in <unk>.

Terms of sales for the for the quarter when I look at it by brand I feel very well positioned in terms of the categories that the customer responded to what we started to see and she goes in particular in the second quarter is that shifted into the proportion shift in sportswear very quickly.

Molly Langenstein: We are digital first, leveraging technology to engage and deliver exceptional experiences to our customers across brands and channels. For the last 12 months, digital sales represented 41% of total company revenues. Each digital touchpoint, including our customized digital styling tools, my closet, style connect and our mobile apps, inspires the customer to find solutions and build for wardrobe across brands. We continue to offer more personalized digital experiences and leverage our digital tools to drive customer engagement, enhance our loyalty programs and grow our multi-channel customer base.

More wider leg bought them shorter length proportions, and jackets and top and this is where we made our investment in the third quarter and in the back half. So we're very encouraged by that trend change in terms of silhouette and what we're seeing in early August that also play as well in terms of White House, where we started to see that.

Same proportion shift and in particular, she was buying casual jacket and matching fabrication back to casual pants in that same proportion shift, which again is where our inventories are moving as we move into the back half of the year and Soma has been on continuing on the innovation in terms of bras and panties.

Molly Langenstein: The utilization of my closet grew 14% over last year and conversion is six times the slight average. In addition, we are strategically leveraging the unique customer files in each of our brands to grow customers across brands. We experience year over year growth with our shared customers expanding 5% over the quarter. Our apps have received over 1 million downloads. Our most loyal customers are using the app and convert at three times the slight average.

And we're very encouraged by the selling that we're seeing and the shift in trend change that we started to see later in July and into August in terms of our pyjamas, which bodes well for the fourth quarter. So we feel well positioned in the categories that are trending and also the complexity of our inventory in terms of freshness.

David sure.

Dana.

With respect to the puts and takes on gross margin in the second quarter the pluses.

Molly Langenstein: Our redesigned loyalty programs launched one year ago continue to top our expectations and customer sentiment, redemption rates and shopping frequency. Nearly 90% of our apparel customers and nearly 80% of pharma customers are enrolled in the new programs. These customers generate the vast majority of our revenues and drive higher UPTs and AURs. And the majority of new customers are enrolling in the programs as well.

On the plus side really had 30 basis points from corporate savings. The minuses included 70 basis points associated with August occupancy costs related to investments in our stores.

Extending our lease terms, which will pay dividends in the future.

We also had a net 40 basis points related to the supply chain that reflected higher raw materials offset by partially offset by a.

Lower freight in addition, there was 70 basis points, probably normalized semiannual sale at White House.

Molly Langenstein: We are re-platforming each of our website, beginning with White House Black Market this fall, with the others to follow soon after. Improvement, insight experience and conversion should generate future tailwinds for digital growth. We continue to make digital investments in marketing, attribution and search, personalization and order management, allowing us to better target our marketing dollars. In addition, we are investing more in upper funnel marketing strategies to continue to fuel new customer growth.

Really recapture.

But looking at it for the outlook for the balance of the year. There's a second part of your question, we did adjust our outlook.

To reflect our first half results.

For the year.

We are announcing a flat to low single digit topline growth and moderate gross margin contraction along with some SG&A deleverage, but we have made tremendous strides in our operating performance and we believe her parents of it is clear that our strategy is the right one.

Molly Langenstein: And lastly, we strive to be operationally excellent. Diligently focusing on managing our inventory, cost of sales, expenses, and real estate, generating healthy cash flow and delivering a strong bottom line, and we continually work to drive efficiencies and reduce expenses in our sourcing, logistics, and operational areas.

Thank you.

Thank you and our next question today comes from Jeff Lewis with B Riley financial Please go ahead.

Hi, guys.

Could you give an update on the outlet trends I know there was softness as you exited Q1 curious how that progressed in Q2.

And then also.

Could you talk I know you were pretty encouraged about the reactivation of customers could you give an update there how that stands.

David Oliver: Now, I'll turn the call over to Chief Financial Officer David Oliver to update you on our financial performance. David. Thank you, Molly, and good morning, everyone. As a reminder, certain numbers I would discuss today are none gap-adjusted numbers. We deliver another possible quarter with strong overall top line and gross margin performance and discipline expense management. We also generated strong free cash flow, what continuing to invest in our long-term growth strategies. With a quarter, we generated a adjusted deluded EPS of 28 cents compared to 34 cents in last year's second quarter.

Absolutely. Thank you Jeff in terms of outlet I, Yes, we definitely did see the outlet business in particular in stores a rebound in the in the second quarter, we did still see some softness in digital in the outlet business, but that's as much smaller penetration and encourage that the footfall and.

Conversion in the outlet centers was positive and a good trend change.

In terms of loyalty and what we're seeing and the complexity of the consumers.

You know the reactivation of customers and the active customers as well as reactivated in existing and new.

David Oliver: Total sales of 545 million were down 2.4 percent from last year and down 3 percent on a comparable sales basis. This performance was consistent with our outlook and is on top of a 19.5 percent profitable increase last year, representing two-year stacked growth of 16.5 percent. Overall, average dollar sale and units per transaction increased, also by a decrease in transaction count. By brand, someone with the lead performer for the quarter, posting a 2.1 percent net sales increase at a 0.5 percent decline on a comparable basis, marking the brand's fourth consecutive quarter of sequential trend improvement.

<unk> will change over time, because we've been reactivating customers, mostly lapsed since the pandemic that is still a strong number we've shifted a lot of our investments into upper funnel marketing to continue to fuel new and that really is the long term health are continuing to make sure that we're fueling the file so.

We're very encouraged by what we're seeing in responses to new customer with the new customer growth being up in a in all three brands and continuing to be able to drive that newness for consumers to be able to stay with us because you know once we get a new customer they stay with us for a long 10 year time.

Greg could you.

So Mike you would pretty.

Optimistic with some different internal stats underneath the surface. What you were seeing I'm just curious how that evolved in Q2 as well.

David Oliver: Coppable sales decreased 2.5 percent at Chico's and 5.7 percent at White House Flat Market, both on top of a nearly 30 percent increase on a two-year stacked basis. Gross margin of 39.8 percent exceeded our outlook and compared to last year's high rate of 41.4 percent. The current year rate is healthy, normalized margin, indicative of steady imagery flow and normalized markdowns. SGA expenses totaled 170 million are 31.3 percent of sales compared to 173 million are 31 percent in a per year.

Yeah and in pharma, we are very encouraged one there is a tremendous growth in terms of the the margin we've been very controlled and how we've been managing the business for the last year and the fact that we took significant market share in this area bodes well for the strategy and how the customers respond.

Two our products. So we continue to see strength in bras and panties and we are we had a resurgence in the second quarter and in our apparel categories and sleepwear and that big season is in front of us as we enter into them into Q4. So we feel we have a very balanced a position in terms of what the customer is responding.

Issue and also a very healthy balance in terms of promotion that will not only return sales, but also margin.

David Oliver: We are disciplined and thoughtful in managing expenses and we will remain lean while strategically investing in areas like marketing and swore payroll to support customer growth, store productivity, and top line growth. The current year SGA rate delivered was primarily a function of sales. All three brands contributed to our consolidated operating income of $46.5 million are 8.5 percent of sales. We generated $55.5 million of dividend for the quarter, or 10.2 percent of sales.

And then just lastly, one quick I'm, just curious to get your point of view.

No at this business for a while we transition from Q first half to second half I'm. Just wondering this year relative to the others are there any.

How do you see the fashion trends are there any trends relative to drive business more or less in a typical year I'm. Just curious your point of view there relative to your experience.

But anytime you have a proportion change.

It is always very good for our business.

David Oliver: Indicative of our ability to generate strong cash flow to support our strategic plan and ongoing investment growth Now let me turn to our balance sheet, our cash position, total liquidity and operating cash flow remain very strong, providing us with flexibility to manage the business, make investments to further propel growth and return excess cash to shareholders. And total liquidity of $386 million, which includes capacity on our multi-year committed credit facility, with only $24 million of debt, or debt to if it got ratio on a 12 month basis was less than 0.2 times.

So we.

We put a wider leg bottoms into our assortment and we tested it last year in the in the Q4 time period got a got a good response from consumers and started to have that trickle into our assortments in the latter half of Q2, but we weren't as strong after these categories because consumers haven't bought wide legs in a very <unk>.

A long time.

So we have many new new fabrications that are in that wildlife proportion and that drive every other purchased to change. So she needs a smaller proportion talk she needs a less volume shirt and T shirt. She needs a more controlled volume in terms of a jacket or shorter proportion she needs a different pair.

Shoes her jewelry shifts.

David Oliver: At quarter end, inventory totaled $300 million compared to $339 million last year. The 11% decline primarily reflects a return to normalize supply chain conditions that resulted in significantly lower end transit industries. One-hand inventories were down 0.3%.

<unk> to be at to be more away from the neck and more to the year. So all of that is we're very encouraged when theres a trend change and if you go into our stores today, you'll see the assortments reflect that and that gives us the the compelling momentum as we enter into the back half of the year.

Awesome, well, congratulations and look forward to catching up.

David Oliver: Now let's shift our focus to real estate. We believe our fleet is well positioned to deliver incremental growth and possibly going forward, and we are continually working to optimize our portfolio. This year, we have completed the upgrade of nearly 60 Chico's boutiques, which in the aggregate are meaningfully outperforming the remainder of the store base. For Soma, we expect to open a total of three stores this year, and are actively looking for additional locations should the right opportunities develop.

Thanks, Jeff.

Thank you and our next question today comes from Marni Shapiro with retail tracker. Please go ahead.

Hey, guys congratulations and.

I I'm blown away by how beautiful chico's looks to start the fall season, so congratulations on that.

If you wouldn't mind, just diving in a little bit on Soma and White house on a couple of things you've touched a little bit on some I think Oh well you just said that you saw a resurgence in parallel sleep in second quarter. So I'm, assuming that bodes very well for the back half of the year can you just dig into that a little bit and what should we expect in the back half of the.

David Oliver: In the aggregate, the 27 Soma stores open mostly in the third and fourth quarters of last year, continue to outperform and should provide a digital payload and be a boost to comparable sales this fall season. We close net 11 stores in the first half of the year, closing underprivileged locations has been accreted to our P&L. Due to our strength and financial position, we have been able to negotiate longer-term, new, and reduced leases with more favorable terms and more desirable locations. We enter the second quarter with 1,158 boutiques.

Or is that just goes to holiday.

And then the dress business, a white house was a bit of an issue in the back half of last year. So I'm curious if you feel comfortable with the Assortments today, you know what the balance looks like or are you still playing catch up there actually had some back half of the year I know you're still playing catch up on fashion. There does that include the justice.

Yeah. Thank.

Thank you morning, so to start with us on MA and we I feel very good about the sleepwear business. It is diversified and fabrication as we enter the back half of the year, which we have not had that sort of balance before we tested some fabrications and you'll you'll see not only our strong franchise of cool nights.

David Oliver: Now, let me provide our updated outlook for fiscal 23. On top of our 18% total company sales increase in fiscal 22, and accounting for our first-hand performance, we are now planning for fiscal 23 revenues to be flat to up in the low single-digit range compared to last year. This would imply two-year net sales growth of 18-20%. For the second half of the year, we expect improving trends over the second quarter for each of our brands, as we are seeing customers respond to our fresh fall assortments.

Continue but also some other fabrications for different consumers for a more diversified approach I also feel very good about the the color expression in the printer expression of the brand and anxious to get your point of view as we enter the you know enter that into that strong Q4, so feel very good about the balance there between us.

I think our bra assortment in particular between strapless, a push up bras, we have expanded sizes, we've added to the franchise or modify so there's many different profile of raws in that franchise and then there's also a new proportion change is actually happening in broth as well to a more natural shape whats your finding and on.

David Oliver: The third quarter will continue to be a transition period for White House White Market, but we expect fourth quarter trends will be valid. We will continue to manage expenses and expect cash flow to remain strong as we invest in our long-term growth plan. We will also make prudent investments in our business that will drive traffic, conversion, customer growth, and revenues across all channels for many years to come. Our plan capital expenditures for fiscal 23 are expected to total between 75 to 85 million inclusive of cloud-based investments.

<unk> and then just to bring it all home we have a very balanced panty franchise business two years ago, you couldn't find a song in our assortment and we have a very robust phone business today.

Diversified assortment, so I feel very strong about the balance of the position for the back half of the year for Soma as it relates to White House Black market. We are in a very good position in terms of our suiting them. So you can now come in and be assured that you will find your size and we have the assortment in terms of our pants and our jacket.

David Oliver: As our cash flow and impact all remain very strong, we expect our financial position to continue to strengthen. In addition to funding strategic investments and reducing debt, cash flow will allow us to navigate the macro environment. For the full year, which consists of 53 weeks, we now expect total sales of 2.145 to 2.175 billion. Gross margin rate into 38.5 to 38.8% range, S-GNA rate into 33 to 33.3% range, an effective tax rate of approximately 26%.

So each one of our proven silhouette and proven fabrication is in a great spot position. We are now complementing that with the fashion assortment. We are at the ratio that we wanted to be at now meaning you know right now at the end of August and I think that will continue to give us our dividends as we go into the back half as it were.

Related specifically to address it.

The dress business overall in Chico's and White House, we expect it to continue in Q2, and it's often on so not only you know dressy dresses casual dresses. She quickly moved to this new proportionate and sportswear and you see that in our head to toe dressing and how the consumer was putting herself together so so.

I, we don't have inventory carryover issues as we move into fall and the good thing is that she bet on sportswear and we have is what's our inventory that she's looking for as we move into the back half.

That's great and then can I just do one follow up on the I'm curious if you're seeing any change in the way. Your shoppers is purchasing it seems like they are healthy across all mattresses, you've called out is it different in the outlets versus your full line stores or you're seeing your customer wait to purchase on.

David Oliver: And eluded EPS of 66 to 74 cents. Looking ahead, we are optimistic about the green shoots we are seeing in August and our will position to adjust to react to this ever changing environment. As always, we are focused on controlling what we can control, our inventory assortments, balance sheet and expenses. We continue to make progress on our key strategic initiatives and investments in digital, technology and stores to deliver log term, pop and bottom line growth.

Sal at all or you really just she's more fashion sensitive than she is price sensitive right now.

I'd say right now she's responding to loyalty and the most consistent way that when you look across our four tiers and you look at the behavior of our consumers we are seeing consistency in her frequency and quite honestly.

Operator: Now I'll turn the call back over to the operator. Operator? At this time, we will be happy to take your questions. If you have a question, please press star or the one on your telephone keypad. If you are using the speaker phone, we ask you, please pick up your handset before pressing the keys. To withdraw your question, please press star or the two.

A little overwhelmed by how amazing she is in terms of how often she comes back out in her frequency. So the the new loyalty program now one year no one year old once a year ago, we relieve us continuing to top of our expectations and customer sentiment redemption rate and frequency.

Dana Telsey: Today's first question comes from Dana Telsi at Telsi Group. Please go ahead. Hi, good morning, everyone.

Molly Langenstein: Molly, as you mentioned regarding inventory and prepare for trend change, can you expand on that, what that could mean for the fourth quarter by brand? And could you talk a little bit about on the puts and takes of the gross margin, whether it's straight, whether it's raw material cost, how you're positioning as we go through the back half of the year. And just lastly on the exit rate of the second quarter into the third, what change versus the second quarter by brand?

And the fact that nearly 90% of our apparel customers and 80% of Soma are enrolled in these new programs. You know that was a I beg of PAH.

Bush for us to be able to get her into the new program because she had to enroll them.

Into the program. In addition to our store line people are doing a fantastic job of enrolling not all of our new customers into these programs as well so how I would look at that money is that what we're seeing from a consumer standpoint that the most important conversion is happening in stores because she is being.

Molly Langenstein: What are you saying? Thank you. Thank you, Dana. We did deliver another quarter of strong sales performance, full price sales were healthy, and each of our brand attracted new customers and gained market share. We believe we have compelling momentum as we enter the back half. In regards to inventory, we ended the quarter with total inventory down 11%, and our on-hand inventory was down 0.3, which is appropriately positioned as we entered the back half of the year.

Able to put this new proportionate together when she's helped by a consumer and it is the easiest conversion point on to be able to do that and so that you have someone to help them quit or put yourself together head to toe.

Great. Thanks, guys.

Thank you Marni. Thank you.

And our next question comes from Janet Kloppenburg with JJ could please go ahead.

Molly Langenstein: What I mentioned on the call is the complexity of our inventory as we entered fall is a fresh in terms of fall forward product. So Q2, our spring and summer inventories ended at down 12% to last year, and our new fall fresh inventories were up 12%. So we have a very healthy position in terms of new regular price and no liability inventory as we enter the third quarter. We believe that our back half inventories are planned to fuel our outlook in terms of sales for the quarter.

Hi, everybody.

Morning, Janet.

Hi, I thought a little bit late on them can you talk a little bit about what's going on.

White House Black market.

Did it meet your expectations for the second quarter.

If not you know.

What does that look like as we move into the back half I did hear you say that.

The repositioning will continue in the back half of the year. So I'd love to learn more about that and I also wanted to hear about the promotional environment in the intimates business cause like I hear it's been pretty challenging but it sounds like you guys are doing well. So maybe you could talk me through some of those metrics as well.

Molly Langenstein: When I look at it by brand, I feel very well positioned in terms of the categories that the customer responded to. What we started to see in Chico's in particular in the second quarter is that she shifted into the proportion shift in sportswear very quickly, buying more wider leg bottoms, shorter leg proportions in jackets and tops. And this is where we made our investments in the third quarter and in the back half.

Yeah.

Great. Thank you Janet as it relates to our White house Black market. We did see sales improved sequentially from Q1 with a down five seven versus the 8% decrease in Q1 and that was on top of the 31, 9% in terms of a a two year or a two year stack and we did see that.

Molly Langenstein: So we're very encouraged by that trend change in terms of silhouette and what we're seeing in early August. That also boils well in terms of white health where we started to see that same proportion shift. And in particular, she was buying casual jackets in matching fabrication back to casual pants in that same proportion shift, which again is where our inventories are moving as we move into the back half of the year.

<unk> outpaced digital and that really goes back to being able to put the consumer at White house had to sell it together and be able to make sure that she's leaving with coordinating pieces, whether they'd be nurse or blouses or some of our new yarns and sweaters put back to suiting and responding in in terms of being able to put that to.

Molly Langenstein: And Selma has been continuing on the innovation in terms of bras and panties and we're very encouraged by the selling that we're seeing in the shift in trend change that we started to see later in July and into August in terms of pajamas, which both well for the fourth quarter. So we feel well positioned in the categories that are trending and also the complexity of our inventory in terms of freshness. David?

Our inventory levels have been heavy in meaning as a percentage in basics and we are at that proportion that we would like to be in ratio between fashion and basics now in August so we're well positioned as we move into the back half of the year and we are pleased with me.

Fall selling that we're seeing in fashion in August in the White House brand in terms of our promotion Ality and the the promotional environment. We continue to manage our overall business with hard markdowns versus versus P. O S across categories. We do not want to go back to the days, where the entire brand was promote.

Molly Langenstein: Sure. Thanks, Dana. With respect to the puts in the tags on Gross Margin at our second quarter, you know, the pluses on the plus side, we really had 30 basis points from corporate savings, but minus is included, 70 basis points associated with occupancy costs related to investments in our stores and extend their lease terms, which will pay dividends in the future. That we also had a net 40 basis points related to supply chain, and that reflected higher raw materials all set, but partially all set by lower freight.

At at one time, we don't believe we believe in our product, we don't need to be able to do that for consumers. While we continue to be able to look at strategic category promotions, whether it'd be a net T shirt or items that we have planned into the business and we did that for Q2, and we'll have that for the back half of the year as well and they are planned.

Molly Langenstein: In addition, there was 70 basis points from a normalized semianil cell and a White House, and those are really recapses. But looking for the outlook for the balance of the year, who's a second part of your question, you know, we did adjust our outlook to reflect the first half results. And for the year, you know, we just, we are now seeing flat to those single digit top line growth.

Into the business. So in terms of intimate specifically you know the the category on a macro standpoint is from what we are seeing from zircon of data is a has a little less demand today and so we believe that having the right assortment and remaining less promotional.

And making sure that we are offering to the consumer the right balanced assortment and talking to her regularly through our loyalty program is the best approach and we're seeing that in our market share gains that we've had continually quarter over quarter and in particular in the second quarter. So that's how we're going to continue to manage the Soma intimates business.

David Oliver: And moderate gross margin contraction, along with some SDG and a delivery, but we have made your business strides in our operating performance, and we believe our path ahead is clear and our strategy is the right one. Thank you.

Would you say that overall for Chico's and White house that there was a trend I heard you talk a lot about the silhouette, but it's always trend back towards casual after this sort of catch up on dress up and wear to work.

Jeff Lick: And our next question today, because some Jeff Lick would be Riley financial, please go ahead. Hi, guys. Did you give an update on the outlet trends? I know there was some softness as you exited Q1 curious how that progressed in Q2. And then also, Molly, could you talk, I know you were pretty encouraged about the reactivation of customers. Could you give an update there and how that stands?

No. It's I I'm not seeing is defined as casual or dressy its really the aha.

That's happening so she's buying disproportion change both for you know dress up career as well as we're seeing you know embellished items and things that have three dimension.

Molly Langenstein: Absolutely. Thank you, Jeff. In terms of outlet, yes, we definitely did see the outlet business in particular in stores rebound in the in the second quarter. We did still see some softness and digital in the outlet business, but that's as much smaller penetration and encourage that the footfall and conversion in the outlet centers was positive and a good trend change. In terms of loyalty and what we're seeing in the complexity of the consumers, the you know, the reactivation of customers and the active customers as well as reactivated and existing and new will change over time because we've been reactivating customers mostly last since the pandemic.

Jeff Lick: In terms of outlet, yes, we definitely did see the outlet business in particular in stores rebound in the in the second quarter. We did still see some softness and digital in the outlet business, but that's as much smaller penetration and encourage that the footfall and conversion in the outlet centers was positive and a good trend change. In terms of loyalty and what we're seeing in the complexity of the consumers, the you know, the reactivation of customers and the active customers as well as reactivated and existing and new will change over time because we've been reactivating customers mostly last since the pandemic.

So I I'm not seeing it in in a bucket of casual or career, it's really just a proportion shift Janet that we're saying.

Which is great. So use it do you think that that.

Not bad.

So casual too.

To dress up.

Maybe you could give me sort of historical outlook on that because we know that dress up got very strong last year.

And how do you how do you see it this year compared to last year.

D and I think most important is the ability to be able to have versatility and a wardrobe and I think a woman today once all of her pieces to be able to be multi duty and we try to show that expression in our marketing that here's a great new wide leg and here's how it looks with a fantastic.

Molly Langenstein: That is still a strong number. We've shifted a lot of our investments into upper funnel marketing to continue to feel new and that really is the long term health of continue to make sure that we're feeling the file. So we're very encouraged by what we're seeing in responses to new customer with the new customer growth being up in all three brands and continue to be able to drive that newness for consumers to be able to stay with us.

Jeff Lick: That is still a strong number. We've shifted a lot of our investments into upper funnel marketing to continue to feel new and that really is the long term health of continue to make sure that we're feeling the file. So we're very encouraged by what we're seeing in responses to new customer with the new customer growth being up in all three brands and continue to be able to drive that newness for consumers to be able to stay with us.

Buoy, here's how you can wear with a fantastic sneaker or here's what it looks like a crappy heal and how that same item can translate into many multiple wearing occasions and that to me is the most important to get that versatility across to consumers and then it's not a one.

Molly Langenstein: Because you know, once we get a new customer, they say with us for a long 10 year time. Great. Could you and then I'm so much, you know, you were pretty optimistic with some different internal stats underneath the surface and what you were seeing. I'm just curious how that involved in Q2 as well. Yeah. And in FOMA, we are very encouraged. One, there is a tremendous growth in terms of the margin.

Jeff Lick: Because you know, once we get a new customer, they say with us for a long 10 year time. Great. Could you and then I'm so much, you know, you were pretty optimistic with some different internal stats underneath the surface and what you were seeing. I'm just curious how that involved in Q2 as well. Yeah. And in FOMA, we are very encouraged. One, there is a tremendous growth in terms of the margin.

I'll use item, but it's odd it's items that can be worn across so if you want to dress. It up you can with accessories our heels.

If you want to drop it down you can do the same thing by taking off some accessories or or changing your shoes. So that's our focus to be able to make sure that we're taking care of all of her wearing occasions.

Molly Langenstein: We've been very controlled and how we've been managing the business for the last year. And the fact that we took significant market share in this area both well for the strategy and how the customer is responding to our product. So we continue to see strength in bras and panties. And we are, we had a resurgence in the second quarter in in our payroll categories and sleepwear. And that big season is in front of us as we enter into into Q4.

Jeff Lick: We've been very controlled and how we've been managing the business for the last year. And the fact that we took significant market share in this area both well for the strategy and how the customer is responding to our product. So we continue to see strength in bras and panties. And we are, we had a resurgence in the second quarter in in our payroll categories and sleepwear. And that big season is in front of us as we enter into into Q4.

Okay, great. Thanks, so much.

Thank you Janet.

Thank you.

A question and answer session.

Now I'll turn the call back over to more we weren't going to for closing remarks.

Thank you and before I close I'd like to thank our outstanding stores team for continuing to drive loyalty and create memorable experiences I also want to thank our digital team and our technology teams for their incredible tenacity and dedication as they work to re platform each of our digital site, which will position us for long.

Molly Langenstein: So we feel we have a very balanced position in terms of what the customer has responding to. And also a very healthy balance in terms of promotion that will not only return sales but also mark. I'm just curious to get your point of view. You've been at this business for a while with the transition from Q first half to second half. I'm just wondering this year relative to others, how do you see the fashion trends?

Jeff Lick: So we feel we have a very balanced position in terms of what the customer has responding to. And also a very healthy balance in terms of promotion that will not only return sales but also mark. I'm just curious to get your point of view. You've been at this business for a while with the transition from Q first half to second half. I'm just wondering this year relative to others, how do you see the fashion trends?

Term growth, we continued to deliver strong results and generate meaningful cash flow. We believe we are well positioned for the fall season and are beginning to see a trend change in our business.

First focus on our brand strategy in our four strategic pillars give us confidence in achieving our long term financial targets and further enhancing our operating performance strengthening our balance sheet and increasing shareholder value.

Thank you for your interest and time, we look forward to speaking with you again during our third quarter conference call.

Molly Langenstein: Are there any trends relative that will drive business more or less than a typical year? I'm just curious your point of view there, relative big year experience. Any time you have a proportion change, it is always very good for business. We put wider leg bottoms into our sortment. We tested it last year in the Q4 time period, got a good response from consumers and started to have that trickle into our sortments in the latter half of Q2.

Jeff Lick: Are there any trends relative that will drive business more or less than a typical year? I'm just curious your point of view there, relative big year experience. Any time you have a proportion change, it is always very good for business. We put wider leg bottoms into our sortment. We tested it last year in the Q4 time period, got a good response from consumers and started to have that trickle into our sortments in the latter half of Q2.

Thank you.

Today's conference call. We thank you all for attending today's presentation.

You may now disconnect your lines and have a wonderful day.

[music].

Molly Langenstein: We went strong after these categories because consumers just haven't bought wide legs in a very, very long time. We have many new fabrications that are in that wide leg proportion and that drive every other purchase to change. She needs a smaller proportion top. She needs a less volume shirt and t-shirt. She needs a more controlled volume in terms of a jacket or a shorter proportion. She needs a different pair of shoes.

Jeff Lick: We went strong after these categories because consumers just haven't bought wide legs in a very, very long time. We have many new fabrications that are in that wide leg proportion and that drive every other purchase to change. She needs a smaller proportion top. She needs a less volume shirt and t-shirt. She needs a more controlled volume in terms of a jacket or a shorter proportion. She needs a different pair of shoes.

Molly Langenstein: Her jewelry shift to be more away from the neck and more to the ears. All of that is very encouraged when there's a trend change. If you go into our stores today, you'll see the absorbments reflect that. That gives us the compelling momentum as we enter into the back half of the year. Awesome. Congratulations and look forward to catching up. Thanks, Jeff. Thank you.

Jeff Lick: Her jewelry shift to be more away from the neck and more to the ears. All of that is very encouraged when there's a trend change. If you go into our stores today, you'll see the absorbments reflect that. That gives us the compelling momentum as we enter into the back half of the year. Awesome. Congratulations and look forward to catching up. Thanks, Jeff. Thank you.

Marnie Shapiro: And our next question is, may I come some morning Shapiro with retail tracker? Please go ahead. Hey guys, congratulations.

Marnie Shapiro: I am blown away by how beautiful Chico looks to start the fall season. Congratulations on that. If you wouldn't mind just diving in a little bit on some on White House on a couple of things, you've touched a little bit on some. I think Molly, you just said that you saw resurgence in parallel and sleep in second quarter. So I'm assuming that votes very well for the back half of the year.

Marnie Shapiro: Can you just dig into that a little bit and what should we expect in the back half of the year is that bill goes to holiday. And then the dress business at White House was a bit of an issue in the back half of last year. So I'm curious if you feel comfortable with the assortments today, you know, what the bounce looks like or you still playing catch up there as we head to the back half of the year.

Marnie Shapiro: I know you're still playing catch up on fashion there. Does that include the dresses? Yeah, thank you, Marnie. So to start with us, I feel very good about the sleepwear business. It is diversified in fabrication as we enter the back half of the year, which we have not had that sort of bounce before. We've tested some fabrications and you'll see not only our strong franchise of colonized continue, but also some other fabrications for different consumers for a more diversified approach.

Marnie Shapiro: I also feel very good about the color of expression and the print expression of the brand and anxious to get your point of view as we enter the, you know, enter that into that strong cue for so feel very good about the bounce there between. I think our broad sortment in particular between strapless push up bras. We have expanded sizes. We've added to the franchise of modify. So there's many different profile bras in that franchise.

Mhm.

[music].

Marnie Shapiro: And then there's also a new proportion changes actually happening in bras as well to a more natural shape, which you're finding and online. And then just to bring it all home, we have a very balanced, panty franchise business. Two years ago, you couldn't find a phone in our assortment and we have a very robust phone business today and a diversified assortment. So it's very strong about the balance and the position for the back half of the year, for Salma.

Marnie Shapiro: As it relates to White House Black Market, we are in a very good position in terms of our shooting. So you can now come in and be assured that you will find your size and we have the assortment in terms of our pants and our jacket. So each one of our proven silhouettes and proven fabrication is in a great stock position. We are now complementing that with the fashion assortment. We are at the ratio that we wanted to be at now, meaning right now at the end of all August and think that will continue to give us dividends as we go into the back half.

Marnie Shapiro: As it relates specifically to dresses, the dress business overall in Chico's and in White House, we expect it to continue in Q2 and it's often. So not only, you know, dressy dresses, the casual dresses, she quickly moves to this new proportion in sportswear and you see that in our head to toe dressing and how the consumer was putting herself together. So we don't have inventory carry-over issues as we move into fall and the good thing is that she bet on sportswear and we have the sportswear inventory that she's looking for as we move into the back half.

Marnie Shapiro: That's great. And then can I just do one follow-up on this? I'm curious if you're seeing any change in the way your shoppers is purchasing. It seems like they're healthy across all mattresses, as you've called out. Is it different in the outlets versus your full-line stores or are you seeing your customer wait to purchase on sale at all or you're really just, she's more fashion sensitive than she is price sensitive right now?

Marnie Shapiro: I'd say right now she's responding to loyalty in the most consistent way, that when you look across our four years and you look at the behavior of our consumers, we are seeing consistency in her frequency and quite honestly a little overwhelmed by how amazing she is in terms of how often she comes back in her frequency. So the new loyalty program, now one year old, once a year ago, we leave as continuing to offer expectations and customer sentiment, redemption rate and frequency.

Marnie Shapiro: And the fact that nearly 90% of our apparel customers and 80% of SOMA are enrolled in these new programs, that was a big push for us to be able to get her into the new program because she had to be enrolled. Into the program, in addition to our store line people are doing a fantastic job of enrolling all of our new customers into these programs as well. So how I would look at that morning is that what we're seeing from a consumer standpoint, that the most important conversion is happening in stores because she is being able to put this new proportion together when she's helped by a consumer. And it is the easiest conversion point to be able to do that, so that she has someone to help put herself together head to toe. Great, thanks guys. Thank you morning. Thank you.

Janet Kloppenburg: And our next question today comes from Janet Kloppenberg with JJK, please go ahead. Hi everybody. Morning.

Molly Langenstein: Hi, I said a little bit late, Molly. Can you talk a little bit about what's going on at White House class market? Did it meet your expectations for the second quarter? And if not, you know, what does that look like as we move into the back half? I give you say that the reposition in will continue in the back half of the year. So I'd love to learn more about that. And I also wanted to hear about the promotional environment in the intimate business because I hear it's been pretty challenging but it sounds like you guys are doing well.

Janet Kloppenburg: Hi, I said a little bit late, Molly. Can you talk a little bit about what's going on at White House class market? Did it meet your expectations for the second quarter? And if not, you know, what does that look like as we move into the back half? I give you say that the reposition in will continue in the back half of the year. So I'd love to learn more about that. And I also wanted to hear about the promotional environment in the intimate business because I hear it's been pretty challenging but it sounds like you guys are doing well.

Molly Langenstein: So maybe you could talk me through some of those metrics as well. Thank you. Great. Thank you, Janet. As it relates to White House Black Market, we did see sales improve sequentially from Q1 with down 5.7 versus the 8% decrease in Q1. And that was on top of the 31.9% in terms of a two year stack. We did see that stores outpace digital and that really goes back to being able to put the consumer and White House heads to sell together and be able to make sure that she's leaving with coordinating pieces whether they be myths or blouses or some of our New Yarns and sweaters put back to soothing and responding in terms of being able to put that together.

Janet Kloppenburg: So maybe you could talk me through some of those metrics as well. Thank you. Great. Thank you, Janet. As it relates to White House Black Market, we did see sales improve sequentially from Q1 with down 5.7 versus the 8% decrease in Q1. And that was on top of the 31.9% in terms of a two year stack. We did see that stores outpace digital and that really goes back to being able to put the consumer and White House heads to sell together and be able to make sure that she's leaving with coordinating pieces whether they be myths or blouses or some of our New Yarns and sweaters put back to soothing and responding in terms of being able to put that together.

[music].

Molly Langenstein: Our inventory levels have a heavy in meaning of a percentage in basics and we are at that proportion that we would like to be in ratio between fashion and basics now in August. So we're well positioned as we move into the back half of the year and we are pleased with the sole selling that we are seeing in fashion in August in the White House brand. In terms of promotionality and the promotional environment, we continue to manage our overall business with hard markdowns versus COS across categories.

Janet Kloppenburg: Our inventory levels have a heavy in meaning of a percentage in basics and we are at that proportion that we would like to be in ratio between fashion and basics now in August. So we're well positioned as we move into the back half of the year and we are pleased with the sole selling that we are seeing in fashion in August in the White House brand. In terms of promotionality and the promotional environment, we continue to manage our overall business with hard markdowns versus COS across categories.

Molly Langenstein: We do not want to go back to the days where the entire brand was promoted at one time. We don't believe in our product. We don't need to be able to look at strategic category promotions whether it be a net t-shirt or items that we have planned into the business. We did that for Q2 and we'll have that for the back half of the year as well and they are planned into the business.

Janet Kloppenburg: We do not want to go back to the days where the entire brand was promoted at one time. We don't believe in our product. We don't need to be able to look at strategic category promotions whether it be a net t-shirt or items that we have planned into the business. We did that for Q2 and we'll have that for the back half of the year as well and they are planned into the business.

Molly Langenstein: So in terms of intimate specifically, the category on a macro standpoint is from what we are seeing from Serkana data is a have a little less demand today and so we believe that having the right assortment and remaining less promotional and making sure that we are offering the consumer the right balance assortment and talking to her regularly through our loyalty program is the best approach and we're seeing that in our market share game that we've had continually quarter over quarter and a particular in the second quarter. So that's how we're going to continue to manage the sum of intimate business.

Janet Kloppenburg: So in terms of intimate specifically, the category on a macro standpoint is from what we are seeing from Serkana data is a have a little less demand today and so we believe that having the right assortment and remaining less promotional and making sure that we are offering the consumer the right balance assortment and talking to her regularly through our loyalty program is the best approach and we're seeing that in our market share game that we've had continually quarter over quarter and a particular in the second quarter. So that's how we're going to continue to manage the sum of intimate business.

Molly Langenstein: Would you say that overall for Chico's and White House that there's a trend I heard you talk a lot about the Silhouette but is there a trend back towards casual after this sort of catch up on dress-up and with a world. No, I'm not seeing it defined as casual or dressy. It's really the purple chain that's happening. So she's buying this proportion change both for, you know, dress up career as well as we're seeing, you know, embellished items and things that have three dimensions.

Janet Kloppenburg: Would you say that overall for Chico's and White House that there's a trend I heard you talk a lot about the Silhouette but is there a trend back towards casual after this sort of catch up on dress-up and with a world. No, I'm not seeing it defined as casual or dressy. It's really the purple chain that's happening. So she's buying this proportion change both for, you know, dress up career as well as we're seeing, you know, embellished items and things that have three dimensions. So I'm not seeing it in a bucket of casual or career. It's really just this proportion shift, Janet, that we're seeing. Which is great.

Molly Langenstein: So I'm not seeing it in a bucket of casual or career. It's really just this proportion shift, Janet, that we're seeing. Which is great. So you think that balance of casual to dress up, maybe you could give me sort of historical outlook on that because we know that dress up got very strong last year. And how do you see it this year compared to last year? Yeah, the, I think most important is the ability to be able to have versatility in the wardrobe.

Molly Langenstein: So you think that balance of casual to dress up, maybe you could give me sort of historical outlook on that because we know that dress up got very strong last year. And how do you see it this year compared to last year? Yeah, the, I think most important is the ability to be able to have versatility in the wardrobe. And I think a woman today wants all of her pieces to be able to be multi-duty.

Molly Langenstein: And I think a woman today wants all of her pieces to be able to be multi-duty. And we try to show that expression in our marketing that here's a great new wide leg. And here's how it looks with a fantastic booty. Here's how you can wear it with a fantastic sneaker or here's what it looks like in a crappy heel. And how that same item can translate into many multiple wearing occasions.

Molly Langenstein: And we try to show that expression in our marketing that here's a great new wide leg. And here's how it looks with a fantastic booty. Here's how you can wear it with a fantastic sneaker or here's what it looks like in a crappy heel. And how that same item can translate into many multiple wearing occasions. And that to me is the most important to get that versatility across the consumers. And that it's not a one single use item, but it is items that can be worn across.

Molly Langenstein: And that to me is the most important to get that versatility across the consumers. And that it's not a one single use item, but it is items that can be worn across. So if you want to dress it up, you can with accessories or heels. If you want to dress it down, you can do the same thing by taking off some accessories or changing your shoes. So that's our focus to be able to make sure that we're taking care of all of her wearing occasions. Okay. Great. Thanks so much. Thank you, Janet. Thank you.

Operator: This concludes our question and answer session.

Molly Langenstein: So if you want to dress it up, you can with accessories or heels. If you want to dress it down, you can do the same thing by taking off some accessories or changing your shoes. So that's our focus to be able to make sure that we're taking care of all of her wearing occasions.

Janet Kloppenburg: Okay. Great. Thanks so much. Thank you, Janet. Thank you.

Molly Langenstein: This concludes our question and answer session. Now I'll turn the call back over to Molly. I can see you for closing remarks. Thank you. And before I close, I'd like to thank our outstanding stores team for continuing to drive loyalty and create memorable experiences. I also want to thank our digital team and our technology teams for their incredible tenacity and dedication as they work to re-platform each of our digital sites, which will position us for long term growth.

Molly Langenstein: Now I'll turn the call back over to Molly. I can see you for closing remarks. Thank you.

Molly Langenstein: And before I close, I'd like to thank our outstanding stores team for continuing to drive loyalty and create memorable experiences. I also want to thank our digital team and our technology teams for their incredible tenacity and dedication as they work to re-platform each of our digital sites, which will position us for long term growth. We continue to deliver strong results and generate meaningful cash flow. We believe we are well positioned for the fall season and are beginning to see a trend change in our business.

Molly Langenstein: We continue to deliver strong results and generate meaningful cash flow. We believe we are well positioned for the fall season and are beginning to see a trend change in our business. Our steadfast focus on our brand strategy and our four strategic pillars give us confidence in achieving our long-term financial targets and further enhancing our operating performance, strengthening our balance sheet and increasing shareholder value. Thank you for your interest and time. We look forward to speaking with you again during our third quarter conference call. Thank you.

Molly Langenstein: Our steadfast focus on our brand strategy and our four strategic pillars give us confidence in achieving our long-term financial targets and further enhancing our operating performance, strengthening our balance sheet and increasing shareholder value. Thank you for your interest and time. We look forward to speaking with you again during our third quarter conference call. Thank you.

Operator: This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day. [inaudible] David Oliver, David Oliver, David Oliver, David Oliver, David David Oliver, David Oliver, David Oliver, David Oliver, David[inaudible] David Oliver, David Oliver, David Oliver, David David Oliver, David Oliver, David Oliver, David Oliver, David[inaudible] David Oliver, David Oliver David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan . .

Operator: This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

David Oliver: [inaudible] David Oliver, David Oliver, David Oliver, David Oliver, David David Oliver, David Oliver, David Oliver, David Oliver, David[inaudible] David Oliver, David Oliver, David Oliver, David David Oliver, David Oliver, David Oliver, David Oliver, David[inaudible] David Oliver, David Oliver David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan David Oliver, Dana Telsey, Janet Kloppenburg, David Oliver, Julie MacMedan . .

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