Chico's FAS Inc
AnnuAl Repo Rt 2010 ChicosFAS.com To Our Shareholders:
Our 2010 results built on the financial success we reestablished in the prior year: Net sales increased 11.2 percent to $1.905 billion compared to $1.713 billion for the prior
year;
Comparable sales, including stores and direct-to-consumer, increased 8.3 percent on top of
the 7.6 percent increase for 2009; and
Net income equaled $115.4 million, or $0.64 per diluted share, a 64 percent increase on the
2009 net income of $69.6 million, or $0.39 per diluted share.
Excluding one-time impairment charges in both years, 2010 net income was $116.6 million, or $0.65
per diluted share, compared to net income of $79.2 million, or $0.44 per diluted share for 2009.
We had another positive year in generating cash from operations. In order to return a portion of
our excess cash to shareholders, we initiated the company’s first quarterly cash dividend in March
2010, and raised the annual dividend rate 25 percent to $0.20 per share in February 2011. We also
began a $200 million share repurchase program in August 2010. Nevertheless, we ended fiscal year
2010 with a balance sheet showing $548.7 million in cash and marketable securities, no debt, and
inventories at a level consistent with the pace of our sales growth.
New store growth was a key contributor to our success in 2010. We opened a total of 79 new
stores, including 19 outlets and 2 frontline boutiques under the Chico’s brand, 13 frontline boutiques
and 4 outlets for White House | Black Market and 37 frontline and 4 outlets for Soma Intimates.
This year, we are targeting 100 - 110 net new boutique and outlet openings across our three brands.
The new store openings should include 12 to 15 new Chico’s boutiques, a portion of the estimated
75 potential locations in secondary markets across the U.S. identified for future Chico’s frontline
stores.
Our direct-to-consumer or DTC sales continue to post substantial gains. In 2010, DTC sales
increased 40 percent on top of the 39 percent increase in the prior year. DTC sales have benefitted
from the alignment of our web sites with each brand’s marketing to better drive customer interest
in our fashion apparel and accessories. In 2010, our company, in conjunction with the highly regarded Great
Place to Work® Institute, began transforming into one in which our
associates place confidence in those they work for, have pride in the
work they do and enjoy the people with whom they work. In addition
to interacting with our National Store Support and Distribution
Centers’ associates on this endeavor, we are again conducting, as we
did last spring, our company-wide Most Amazing Store Tour. The Tour
enables our store management and sales associates to meet with
senior corporate management and exchange ideas on how to make
Chico’s FAS, Inc. a great place to work, learn and grow.
In closing, I would like to recognize Jeff Jones, who retired as chief operating officer in March 2011.
Jeff ’s contributions to our success during his two years with the company are immeasurable and
deeply appreciated by all of us who have had the pleasure of working with him.
On behalf of your Board of Directors, officers and the more than 18,900 associates at Chico’s
FAS, we are grateful for your continuing support of our efforts to grow our business and increase
profitability.
Sincerely,
David F. Dyer
President and CEO
March 22, 2011 Reports on Form 10-K
A copy of the Company’s annual report to the
Securities and Exchange Commission on Form 10-K
will be sent to any shareholder without charge upon
written request to Investor Relations at the mailing
address or Web site address below:
Chico’s FAS, Inc. National Store Support
Center
11215 Metro Parkway
Fort Myers, Florida 33966-1206
Web site: www.chicosfas.com
Transfer Agent and Registrar:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Phone 800-368-5848
Web site: www.rtco.com
Legal Counsel:
Trenam, Kemker
Tampa, Florida
Independent Public Accountants:
Ernst & Young LLP
Tampa, Florida
Annual Shareholders Meeting:
Thursday, June 23, 2011 at 9:00 a.m. EDT
Chico’s FAS, Inc. National Store Support Center
Fort Myers, Florida
Brand Web Sites:
www.chicos.com
www.whbm.com
www.soma.com
Executive Officers
David F. Dyer
President and Chief Executive Officer
Donna M. Colaco
Brand President – White House | Black Market
Cynthia S. Murray
Brand President – Chico’s
Laurie Van Brunt
Brand President – Soma Intimates
Lee Eisenberg
Executive Vice President – Chief Creative Officer
Gary A. King
Executive Vice President – Chief Information Officer
Kent A. Kleeberger
Executive Vice President – Chief Operating Officer &
Chief Financial Officer
Mori C. MacKenzie
Executive Vice President – Chief Stores Officer
A. Alexander Rhodes
Executive Vice President – General Counsel,
Chief Compliance Officer & Secretary
Sara K. Stensrud
Executive Vice President – Chief Human Resources Officer
Board of Directors
Ross E. Roeder 1,6,7
Chairman of the Board
Retired Chairman, Smart & Final, Inc.
Betsy S. Atkins
2,8
Chief Executive Officer, Baja Ventures
John W. Burden, III
9
Retailing Consultant
David F. Dyer
10
President and Chief Executive Officer
Verna K. Gibson
3,10
Retailing Consultant
John J. Mahoney
4,7
Vice Chairman and Chief Financial Officer, Staples, Inc.
David F. Walker
5,6,10
Retired Director of the Program of Accountancy,
The University of South Florida
Stephen E. Watson
7,8
Retired President and CEO of Gander Mountain Company
Andrea M. Weiss
8,9
Founder & Chief Executive Officer, Retail Consulting, Inc.
(1) Chairman of the Executive Committee
(2) Chairwoman of the Corporate Governance and Nominating Committee
(3) Chairwoman of the Merchant Committee
(4) Chairman of the Compensation and Benefits Committee
(5) Chairman of the Audit Committee
(6) Member of the Corporate Governance & Nominating Committee
(7) Member of the Audit Committee
(8) Member of the Compensation and Benefits Committee
(9) Member of the Merchant Committee
(10) Member of the Executive Committee
Chico’s FAS had net sales of $1.905 billion compared to $1.713 billion in 2010.
The Chico’s brand had a 9% increase in average transactions per store during 2010.
White House | Black
Market had a 14.3%
increase in net sales to
$590.3 million for 2010.
Soma Intimates opened 41 new frontline and
outlet boutiques in 2010 compared to just 20 in 2009.
Chico’s FAS direct-to-
consumer sales increased 39.7% in 2010.
The Company paid its first quarterly cash dividend
beginning in March 2010. UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
¥ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 2011
nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-16435
Chico’s FAS, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-2389435 (State or other jurisdiction
of incorporation) (IRS Employer
Identification No.)
11215 Metro Parkway,
Fort Myers, Florida 33966
(Address of principal executive offices) (Zip code)
(239) 277-6200 (Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of Exchange on Which Registered
Common Stock, Par Value $.01 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes ¥Non
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes nNo¥
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥Non
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ¥Non
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K n.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¥Accelerated filer nNon-accelerated filer nSmaller Reporting company n
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes nNo¥
State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant:
Approximately $1,655,000,000 as of July 31, 2010 (based upon the closing sales price reported by the NYSE and published
in the Wall Street Journal on July 30, 2010).
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: Common Stock, par value $.01 per share — 176,928,893 shares as of March 14, 2011.
Documents incorporated by reference:
Part III Definitive Proxy Statement for the Company’s Annual Meeting of Stockholders presently scheduled for June 23, 2011. CHICO’S FAS, INC.
ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED JANUARY 29, 2011
TABLE OF CONTENTS
PA RT I
Item 1. Business ................................................................ 2
Item 1A. Risk Factors .............................................................. 9
Item 1B. Unresolved Staff Comments .................................................. 15
Item 2. Properties ............................................................... 15
Item 3. Legal Proceedings ......................................................... 16
Item 4. (Removed and Reserved) .................................................... 16
PA RT I I
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .......................................................... 17
Item 6. Selected Financial Data ..................................................... 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .... 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .......................... 32
Item 8. Financial Statements and Supplementary Data . . ................................... 33
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .... 57
Item 9A. Controls and Procedures ..................................................... 57
Item 9B. Other Information ......................................................... 58
PART III
Item 10. Directors, Executive Officers and Corporate Governance ............................. 59
Item 11. Executive Compensation .................................................... 59
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters................................................................. 59
Item 13. Certain Relationships and Related Transactions, and Director Independence ............... 59
Item 14. Principal Accounting Fees and Services ......................................... 59
PA RT I V
Item 15. Exhibits and Financial Statement Schedules . . . ................................... 60
1 PA RT I
ITEM 1. BUSINESS
General Chico’s FAS, Inc., a Florida corporation, is a national specialty retailer of private branded, sophisticated,
casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items under the
Chico’s, White House yBlack Market (“WH yBM”) and Soma Intimates (“Soma”) brand names. As of January 29,
2011, we operated 1,151 stores across 48 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands
and e-commerce websites for each of our brands.
As used in this report, all references to “we,” “us,” “our,” and “the Company,” refer to Chico’s FAS, Inc. and all
of its wholly-owned subsidiaries.
Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the
fiscal year commences. The periods presented in these financial statements are the fiscal years ended January 29,
2011 (“fiscal 2010”, “2010”, or “current period”), January 30, 2010 (“fiscal 2009”, “2009”, or “prior period”),
January 31, 2009 (“fiscal 2008” or “2008”), February 2, 2008 (“fiscal 2007” or “2007”), and February 3, 2007
(“fiscal 2006 or “2006”). Each of these periods had 52 weeks, except for fiscal 2006, which consisted of 53 weeks.
Our Brands
Chico’sThe Chico’s brand, which began operations in 1983, primarily sells exclusively designed, private branded
clothing focusing on women 35 and over with a moderate to high income level. The styling is chic, unique, and
charismatic with on-trend, expressive, one of a kind designs created to illuminate the women wearing them. Using
generally easy-care fabrics and frequent deliveries of new and distinctive designs, Chico’s emphasizes a com-
fortable relaxed fit in a modern style. Accessories, such as handbags, belts, scarves, earrings, necklaces and
bracelets, are designed to coordinate with the assortment of the clothing, allowing customers to easily individualize
their wardrobe selections. Chico’s controls almost all aspects of the design process, including choices of pattern,
prints, construction, design specifications, fabric, finishes and color through in-house designers, purchased designs,
and independent suppliers.
The distinctive nature of Chico’s clothing is carried through to its sizing. Chico’s uses international sizing,
comprising of sizes 000, 00 (size 0-2), 0 (size 4-6), 1 (size 8-10), 2 (size 12-14), 3 (size 16-18), and 4 (size 20-22)
and will occasionally offer, half-sizes (up to 4.5), one-size-fits-all and small, medium and large sizing for some
items. The relaxed nature of the clothing allows the stores to utilize this kind of sizing and thus offer a wide selection
of clothing without having to invest in a large number of different sizes within a single style.
White House yBlack Market
The WH yBM brand, which began operations in 1985 and we acquired in September 2003, sells fashionable
clothing, bridal merchandise, swimwear, and accessory items, primarily in black and white and related shades, and
more recently, seasonal color splashes, focusing on women who are 25 years old and over with a moderate to high
income level. WH yBM offers a uniquely feminine and affordable alternative to designer fashion selling sophis-
ticated apparel and accessories from everyday basics to elegant fashion. The accessories at WH yBM, such as
handbags, shoes, belts, earrings, necklaces and bracelets, are specifically designed to coordinate with the colors and
patterns of the clothing, allowing customers to easily individualize their wardrobe selections. WH yBM controls
almost all aspects of the design process, including choices of pattern, construction, specifications, fabric, finishes
and color utilizing an in-house design team and also works closely with independent suppliers and agents to select,
modify, and create the brand’s product offerings.
WHyBM uses American sizes in the 00-14 range (with online sizes up to size 16), which we believe is more
appropriate than the Chico’s sizing for the target WHy BM customer. As a result, the fit of the WHyBM clothing
tends to be more styled to complement the figure of a body-conscious woman, while still remaining comfortable.
2 Soma IntimatesThe Soma brand, which began operations in 2004, primarily sells exclusively designed private branded sensual
and luxurious lingerie, loungewear and beauty products. Soma offers trend-right, innovative and expertly fitted
lingerie and loungewear apparel, with designer quality at affordable prices. Soma offerings are broken into three
broad categories: lingerie, loungewear and beauty. The lingerie category includes bras, panties, shapewear and
sleepwear while the loungewear category includes relaxed tops, bottoms and dresses. The sleepwear and lounge-
wear offerings utilize extra small, small, medium, large and extra large sizing, while bras are sized using traditional
American band and cup sizes. In fiscal 2010, Soma Intimates introduced an Oh My Gorgeous line of fine fragrance
perfumes and lotions. The Soma brand product offerings are developed by working closely with a small number of
its independent suppliers to design proprietary products in-house and, in some cases, include designs provided by its
independent suppliers and under labels other than the Soma label.
Our Business Strategy
Our overall growth strategy is focused on a multi-faceted approach to retailing. This approach includes
building our store base, improving store productivity levels, and growing our direct-to-consumer (“DTC”)
channels. We build our store base primarily through the opening of new stores, the expansion of existing stores,
acquisitions, and organic growth across each of our brands. We seek to improve store productivity with our product
offerings and our “Most Amazing Personal Service” and we grow our DTC business through investments in the
people, products, and infrastructure necessary to support our DTC channel.
To support these strategies and the associated increase in revenues and expenses, we have continued to invest in
our infrastructure. This increase in infrastructure included additions of senior and middle management level
associates, including our merchandising and marketing teams, increases in DTC staffing, the roll out of the SAP and
JDA software to all brands (see page 6), expansion of our distribution center facilities, and other infrastructure
initiatives. During fiscal 2010, we focused our infrastructure investments on opening new stores, primarily outlet
stores for the Chico’s brand and new Soma stores, while continuing to improve the functionality and appeal of our
DTC channel.
We will continue to consider the acquisition or organic development of other specialty retail concepts when our
research indicates that the opportunity is appropriate and in the best interest of the shareholders. We will also
continue to explore a number of potential new merchandise opportunities and brand extensions that would both
complement the current brands and provide future growth. Our primary focus, however, remains on the core
Chico’s, WH yBM and Soma brands and we believe we do not need an acquisition to achieve our long-term
operational objectives.
In fiscal 2011, we will continue to focus on 1) building the Chico’s brand into a high performance brand,
2) growing the number of WH yBM and Soma boutiques, 3) accelerating the growth of our DTC sales, and
4) leveraging our cost structure and enhancing our systems. In early 2009, we had announced a stretch goal of
reaching $1.00 in earnings per share for fiscal 2011. Although this goal will be somewhat challenging to achieve,
especially due to the slow economic recovery, we believe it is attainable if we successfully execute to all of our
strategic initiatives.
Our Customers
We believe that our customers deserve outstanding and personalized customer service and we strive to achieve
this through our trademark “Most Amazing Personal Service” standard. We provide store associates with
specialized training in providing customer assistance and advice on their customers’ fashion and wardrobe needs,
including clothing and accessory style and color selection, coordination of complete outfits, and suggestions on
different ways in which to wear the clothing and accessories. Our sales associates are encouraged to know their
regular customers’ preferences and to assist those customers in selecting merchandise best suited to their tastes and
wardrobe needs.
We take pride in empowering our associates to make decisions that best serve our customer. We believe this
sense of empowerment enables our associates to exceed customer expectations. Our associates are expected to keep
3 individual stores open until the last customer in the store has been served. If an item is not available at a particular
store, sales associates can locate the item at our distribution center or another store and arrange for it to be shipped
directly to the customer.Another key success strategy is building customer loyalty through preferred customer programs. The data we
gather from these programs allows us to more sharply focus our design, merchandising and marketing efforts to
better address and define the desires of our target customer.
Chico’s and Soma . Chico’s and Soma’s preferred customer program is known as the “Passport Club” and is
designed to encourage repeat sales and customer loyalty for both brands. Features of the club include
discounts, special promotions, invitations to private sales, and advance notice regarding new Chico’s and
Soma merchandise. A Chico’s or Soma customer signs up to join the Passport Club at no cost, initially as a
“preliminary” member. Once the customer spends a total of $500 over any time frame collectively across the
two brands, the customer becomes a “permanent” member and is entitled to a 5% discount on all apparel and
accessory purchases, advance sale notices and other benefits, subject to certain restrictions. In 2010, we
issued Soma-branded cards to those customers that had entered the program with a Soma purchase (or had
qualified for Passport status based on 100% Soma purchases). We are currently evaluating our Passport Club
in conjunction with our overall customer relationship management and marketing activities to ensure that it
remains a compelling reason for customers to shop at the Chico’s and Soma brands.
WH yBM .WH yBM’s preferred customer program is called “The Black Book.” The purposes, prerequi-
sites, and benefits of The Black Book are identical to the Passport Club except that a customer need only
spend $300 at WH yBM over any time frame to become a “permanent” member. We are currently evaluating
The Black Book in conjunction with our overall customer relationship management and marketing activities
to ensure that it remains a compelling reason for customers to shop at WH yBM.
Our Boutiques Our boutiques are located in upscale outdoor destination shopping areas, lifestyle specialty centers, shopping
malls, and some standalone street front locations. Store locations are determined on the basis of various factors,
including but not limited to: geographic and demographic characteristics of the market, the location of the shopping
venue including the site within the shopping center, proposed lease terms, anchor tenants in a mall location and
convenience.
In response to business conditions over the last few years, we have become more innovative in the way we
execute our real estate strategy. For example, in fiscal 2009 and 2010, we began testing “pop-up” stores. These
stores are designed to take advantage of vacancies in high profile shopping locations. They require minimal
investment and have short or flexible lease terms facilitating our ability to test a brand’s potential for success in a
particular location. The results of the pop-up store strategy have generally been successful as many of these
locations have been or we anticipate will be converted to permanent locations.
In fiscal 2011, we expect an increase in net new stores of approximately 9%, reflecting 24-28 net openings of
Chico’s stores, 23-26 net openings of WH yBM stores, and 53-56 net openings of Soma stores. We also expect to
complete 25-30 relocations or expansions.
Historically, our outlet stores have primarily acted as a channel for selling marked-down merchandise from our
front-line stores. However, during fiscal 2009 and 2010, we increased the penetration of made-for-outlet product,
primarily within the Chico’s brand outlets, which carries a higher margin than the clearance items from our front-
line stores. In addition, much of the clearance is now done through our DTC channel. We believe that this approach
has allowed us to increase outlet store margins and improve profitability. We expect to continue this strategy in
fiscal 2011, and will direct more focus on the WHy BM brand.
4 As of January 29, 2011, we operated 1,151 retail stores in 48 states, the District of Columbia, the U.S. Virgin
Islands and Puerto Rico. The following tables set forth information concerning our retail stores during the past five
fiscal years:
2006 2007 2008 2009 2010 Fiscal Year
Company-Owned Stores
Stores at beginning of year
.............................. 749 907 1,038 1,076 1,080
Opened . ......................................... 157 143 62 40 79
Acquired from franchisees ............................ 1 1 3———
Acquired pursuant to Fitigues transaction . . . . . . . . .......... 12————
Closed . ......................................... (12) (25) (24) (36) (8)
Stores at end of year .................................. 907 1,038 1,076 1,080 1,151
Franchise Stores
Stores at beginning of year .............................. 14 1 3———
Opened . ......................................... — ————
Acquired by Company ............................... (1) (13) — — —
Stores at end of year .................................. 13 ————
Total Stores ........................................ 920 1,038 1,076 1,080 1,151
2006 2007 2008 2009 2010Fiscal Year End
Stores by Brand
Chico’s front-line
............................... 541 604 619 599 597
Chico’s outlet ................................. 34 37 41 44 63
Chico’s franchise ............................... 13 — — — —
Chico’s total .................................. 588 641 660 643 660
WH yBM front-line ............................. 254 309 328 333 342
WH yBM outlet ................................ 16 19 17 17 21
WH yBM total ................................. 270 328 345 350 363
Soma Intimates front-line ......................... 52 68 70 83 120
Soma Intimates outlet ........................... — 1 1 4 8
Soma Intimates total ............................ 52 69 71 87 128
Fitigues front-line .............................. 9 — — — —
Fitigues outlet ................................. 1 — — — —
Fitigues total .................................. 10 — — — —
Total Stores .................................. 920 1,038 1,076 1,080 1,151
Direct-to-Consumer We currently mail a Chico’s, WHy BM and Soma catalog to current and prospective customers approximately
every month. These catalogs are designed to educate our customers about our products and drive customers into the
stores and promote website and catalog sales. We also utilize Soma catalog inserts in selected Chico’s mailings,
where applicable, as efficient customer prospecting tools.
In addition to our stores, we offer two additional ways for our customers to shop with us. Each of our brands has
its own dedicated website,
www.chicos.com, www.whbm.com and www.soma.com, providing customers the
5 ability to order merchandise online. Some items are only available online, such as extended size offerings and some
clearance items. We also sell merchandise for each of our brands through our call centers.Sales through the three websites, together with sales from our call centers’ toll free telephone numbers,
amounted to $137.4 million in 2010 compared to $98.3 million in 2009, and are included in each respective brand’s
total sales.
During fiscal 2010, we believe our DTC sales growth of approximately 40% was a result of our strategy to
invest in this previously underserved revenue channel. For fiscal 2011, we expect to continue to focus on this
channel in order to increase our DTC sales penetration and look for further expansion.
Advertising and Promotion
Our marketing program currently consists of the following integrated components:
Loyalty programs: the Passport Club and The Black Book (see page 4);
Direct marketing activities: direct mail, e-mail, and localized calling campaigns;
E-marketing efforts: paid search, banner marketing, affiliates and search engine optimization;
National print and broadcast advertising;
Social media; and
Public relations and community outreach programs
During fiscal 2010, we continued to actively market our brands through each of these components. We believe
that these marketing campaigns helped acquire new customers, reactivated lapsed customers and were a key factor
in our financial performance in fiscal 2010.
Our direct marketing efforts have been successful in driving traffic into our stores and to the DTC channel.
During 2010, we continued our extensive prospecting efforts across all three brands to identify and motivate new
customers to shop with us. In addition, we focused the circulation of our marketing materials on the more profitable
or potentially profitable customers, which dramatically improved incremental sales and profitability. Also, we
successfully tested a number of new sources for prospects, and as a result, were able to activate a large number of
new customers at a positive return on the investment of our marketing dollars. Lastly, we successfully implemented
a personalized “Lapsed Buyer” program that resulted in a considerable number of lapsed customers shopping with
us again.
Also in fiscal 2010, we expanded our e-marketing efforts for all brands. We made significant investments in
paid search with well-known internet search sites and appeared on banner ads on various highly trafficked websites.
Moreover, we tested mobile marketing in a limited number of markets as we attempt to leverage technology to
optimize communications with our customers. We also use social media websites such as Facebook and Twitter to
connect with our customers. Social media marketing is another strategy by which we can actively engage with
customers to provide them targeted brand messages or news concerning our brands.
Lastly, we place great value on our outreach programs. These outreach programs include editors’ events, VIP
parties, fashion shows and wardrobing parties. As part of these outreach programs, we encourage our managers and
sales associates to become involved in community projects. We believe that these programs, in addition to helping
build and support community and charitable activities, are also effective marketing vehicles in providing intro-
ductions to new customers.
Information Technology
We are committed to having information systems that enable us to obtain, analyze and act upon information on
a timely basis and to maintain effective financial and operational controls. This effort includes testing of new
products and applications to assure that we are able to take advantage of technological developments.
6 We have worked with SAP, a third party vendor, to implement an enterprise resource planning system (“ERP”)
to manage all selling channels. This fully integrated system is expected to support and coordinate most aspects of
product development, merchandising, finance and accounting and to be fully scalable to accommodate rapid
growth.
In fiscal 2007, we completed the first major phase of our multi-year, planned implementation of the new ERP
system by converting Soma to the new merchandising system as well as rolling out the new financial systems at the
same time. The second major phase was completed in early 2010 and we are currently utilizing this system in all of
our brands. The third major phase includes ongoing enhancements and optimization of the new ERP across all three
brands, as well as the deployment of additional functionality across various other functions.
In fiscal 2009, we purchased JDA Enterprise Planning, JDA Assortment Planning and JDA Allocation
software applications and curtailed previously planned implementations of related SAP applications and revised our
roll out plan accordingly. We completed the implementation of the allocation functionality during fiscal 2009,
installed enterprise planning in 2010, and currently are working on implementing additional JDA planning
applications over the next 12-18 months. Additionally, we are developing a product lifecycle management solution
supporting the design and development process.
Merchandise Distribution
Distribution for all brands is handled by our distribution center (“DC”) in Winder, Georgia. New merchandise
is generally received daily at the DC. Merchandise from United States based suppliers arrives in Georgia by truck,
rail, or air, as the circumstances require. A majority of the merchandise from foreign suppliers arrives in this country
at various points of entry by air or sea and is transported via truck or rail to the DC; however, we have recently
increased our transports by sea to better manage shipping costs. After arrival, merchandise is sorted and packaged
for shipment to individual stores or for transfer to our DTC fulfillment center. Merchandise is generally pre-ticketed
with price and related informational tags at the point of manufacture.
During fiscal 2009, we purchased an additional 39 acres of property, including a 300,000 square foot building
close to our existing DC, for $10.4 million. This facility primarily ships orders directly to our DTC customers. We
believe that as a result of this acquisition together with additional infrastructure enhancements, our DC can now
support over $3 billion in aggregate sales.
Product Development/Sourcing
Chico’s, WHy BM, and Soma private branded merchandise is developed through the coordinated efforts of
their respective merchandising, creative and production teams working with their independent suppliers. Style,
pattern, color and fabric for individual items of our private branded clothing are developed based upon perceived
current and future fashion trends that will appeal to each brand’s target customer, anticipated future sales and
historical sales data.
All of our brands purchase a significant percentage of their clothing and accessories from companies that
manufacture merchandise in foreign countries. We may take ownership in the foreign country or at our DC
depending on the specific terms of the sale. We conduct business with all of our foreign suppliers and importers in
United States currency. Approximately 18% of total purchases in fiscal 2010 were made from one supplier,
compared to 13% in fiscal 2009.
During fiscal 2009, we entered into a non-exclusive relationship with a sourcing service company. Acting as an
agent for all three brands, this third party provides us with a number of different merchandise sourcing services.
Aside from identifying key suppliers of apparel and other consumer goods, they are also involved with product
development, quality assurance, negotiation of prices, and product flow tracking within the supply chain. During
fiscal 2010, this relationship continued to grow, specifically as it related to the sourcing of made-for-outlet
merchandise and we expect to expand this arrangement into other categories during fiscal 2011.
In late fiscal 2009, in order to leverage the purchasing power and talent of the Chico’s and WH yBM brands, we
consolidated our sourcing activities previously residing within these brands into one service group to support the
Chico’s and WHy BM brands. The purpose of this consolidation was that this single group working in concert with
7 our key supply chain partners, would deliver higher quality, lower price piece goods and finished merchandise costs
while providing the opportunity to lessen freight costs through consolidation and perform more of the quality
assurance function at the point of manufacture. In addition to these benefits, we believe that the decision to
centralize our sourcing operations has helped us mitigate the impact of higher sourcing costs during fiscal 2010.Because of our initiatives to lower sourcing and merchandise costs, we regularly evaluate where best to have
our goods manufactured and may continue to pursue new supplier relationships throughout the world. During fiscal
2010, in response to decreased capacity and cost of labor increases in China, we began transitioning to suppliers
located in other countries. In fact, for fiscal 2010, China sources accounted for approximately 63% of our
merchandise cost compared to approximately 66% in the prior fiscal year. During fiscal 2011, we anticipate this
trend to continue as we shift more production to other Southeast Asian countries and we have set a goal that by the
end of fiscal 2012, sourcing from China will have decreased to approximately 40% of our merchandise cost.
Competition
The women’s retail apparel business is highly competitive and includes department stores, specialty stores,
local or regional boutique stores, catalog companies, and online retailers. We believe that our distinctively designed
merchandise offerings and emphasis on customer service distinguish us from other retailers. Nevertheless, certain
of these competitors may have greater name recognition as well as greater financial, marketing and other resources
compared to us.
Trademarks and Service Marks
We are the owner of certain registered and common law trademarks and service marks (collectively referred to
as “Marks”).
Marks registered in the United States include, but are not limited to: CHICO’S, NO TUMMY, PASSPORT,
ZENERGY, WHITE HOUSE yBLACK MARKET, and SOMA INTIMATES. We have registered or are seeking to
register a number of these Marks in certain foreign countries as well.
In the opinion of management, our rights in the Marks are important to our business. Accordingly, we intend to
maintain our Marks and the related registrations and applications. We are not aware of any claims of infringement or
other challenges to our rights to use any registered Marks in the United States or any other jurisdiction in which the
Marks have been registered.
Available Information
Our investor relations website is located at
www.chicosfas.com. Through this website, we make available free
of charge our Securities and Exchange Commission (“SEC”) filings including our Annual Report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as soon as
reasonably practicable after those reports are electronically filed with the SEC. This website also includes recent
press releases, corporate governance information, beneficial ownership reports, institutional presentations, quar-
terly and institutional conference calls and other quarterly financial data such as historical store square footage.
Our Code of Ethics, which is applicable to all of our associates, including the principal executive officer, the
principal financial officer and the Board of Directors, is posted on our investor relations website. We intend to post
amendments to or waivers from our Code of Ethics on this website. Copies of the charters of each of the Audit
Committee, Compensation and Benefits Committee, Corporate Governance and Nominating Committee and
Executive Committee as well as the Corporate Governance Guidelines, Code of Ethics, Terms of Commitment to
Ethical Sourcing, and Stock Ownership Guidelines are available on this website or in print upon written request by
any shareholder.
Employees
As of January 29, 2011, we employed approximately 18,900 people, approximately 25% of whom were full-
time associates and approximately 75% of whom were part-time associates. The number of part-time associates
fluctuates during peak selling periods. As of the above date, approximately 90% of our associates worked in our
front-line and outlet stores. We have no collective bargaining agreements covering any of our associates, have never
8 experienced any material labor disruption and are unaware of any efforts or plans to organize our associates. We
currently contribute a significant portion of the cost of medical, dental and vision coverage for eligible associates
and also maintain a 401(k) accompanied by an employer matching contribution, stock incentive and stock purchase
plans. All associates are also eligible to receive substantial discounts on our merchandise. We consider relations
with our associates to be good.
Executive Officers of the RegistrantSet forth below is certain information regarding our executive officers:
David F. Dyer, 61, is our President and Chief Executive Officer and joined us in January 2009. He is also a
member of our Board of Directors having joined the Board in March 2007.
Donna M. Colaco, 52, is our Brand President — White House yBlack Market and joined us in August 2007.
Cynthia S. Murray, 53, is our Brand President — Chico’s and joined us in February 2009.
Laurie Van Brunt, 53, is our Brand President — Soma Intimates and joined us in May 2010.
Lee Eisenberg, 64, is our Executive Vice President — Chief Creative Officer and joined us in February 2009.
Gary A. King, 53, is our Executive Vice President — Chief Information Officer and joined us in October 2004.
Kent A. Kleeberger, 58, is our Executive Vice President — Chief Operating Officer and Chief Financial
Officer and joined us in November 2007.
Mori C. MacKenzie, 60, is our Executive Vice President — Chief Stores Officer and joined us in October
1995.
A. Alexander Rhodes, 52, is our Executive Vice President — General Counsel, Chief Compliance Officer and
Secretary and joined us in January 2003.
Sara K. Stensrud, 43, is our Executive Vice President — Chief Human Resources Officer and joined us in July
2010.
All of the above officers serve at the discretion of our Board of Directors.
ITEM 1A. RISK FACTORS We make forward-looking statements in our filings with the SEC and in other oral or written communications.
Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different
from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to,
the risks described below. We undertake no obligation to update any forward-looking statements, whether as a result
of new information, future events or otherwise.
There can be no assurance that we have correctly identified, assessed and appropriately addressed all
risks affecting our business operations or that the publicly available and other information with respect to
these matters is complete and correct. Thus, these and other risks may occur adversely impacting our
business.
There can also be no assurance that the actual future results, performance, benefits, or achievements
that we expect from our strategies, systems, initiatives, or products will occur.
Our results of operations depend on the effective management of our growth strategies.
Our growth strategies are dependent upon a number of factors, including: testing of new products, locating
suitable store sites, negotiating favorable lease terms, having the infrastructure to address the increased number of
stores and the increased demands of a DTC business, sourcing sufficient levels of inventory, hiring and training
qualified management level and other associates, generating sufficient operating cash flows to fund expansion
plans, and integrating new stores and a larger DTC business into existing operations. The inability to properly
manage our growth strategies could place increased demands on operational, managerial and administrative
9 resources and may result in us operating the business less effectively, which in turn could cause deterioration in the
financial performance of individual stores and/or our DTC business as well as our overall operating performance.Effective management of the performance of our stores is a key factor in the success of our business.
We cannot be assured that any new store that opens will have similar operating results to those of prior stores.
New stores may take up to two or three years to reach planned operating levels due to inefficiencies typically
associated with new stores, including demands on operational, managerial and administrative resources. The failure
of existing or new stores to perform as predicted could negatively impact our net sales and results of operations and
may result in impairment of long-lived assets at our stores.
Our ability to develop new concepts and brand extensions is a significant component of our long-term
business strategy.
Our longer term business strategy involves the strategic acquisition or organic development and growth of new
concepts and brand extensions. Each of these may require significant capital expenditures and management
attention. Additionally, any new concept is subject to certain risks including customer acceptance, competition,
product differentiation, challenges to economies of scale in merchandise sourcing, and the ability to attract and
retain qualified personnel.
For example, we continue to expand our Soma target customer audience and continue to invest in development
of the brand through marketing, new product launches and the opening of new Soma stores in order to create and
maintain brand awareness and create economies of scale, which are integral factors in the success of the brand.
If we cannot successfully execute our growth strategies, our financial condition and results of operations may
be adversely impacted.
Our results of operations are sensitive to, and may be adversely affected by, general economic conditions
and overall consumer confidence.
Certain economic conditions affect the level of consumer spending on the merchandise that we offer,
including, among others, unemployment levels, availability of consumer credit, inflation, interest rates, reces-
sionary pressures, gas and other energy costs, taxation, and consumer confidence in future economic conditions.
Disruptions in the overall economy and financial markets tend to reduce consumer confidence in the economy and
negatively affect consumers’ spending patterns, which could be harmful to our financial position and results of
operations, and may lead us to decelerate the number and timing of new store openings, relocations, or expansions.
Furthermore, declines in consumer spending patterns due to economic downturns may have a more negative effect
on apparel retailers than other retailers, particularly in our competitive space, and can negatively affect net sales and
profitability.
Our comparable store sales and operating results may fluctuate.
Our comparable store sales and overall operating results have fluctuated in the past and are expected to
continue to fluctuate in the future. A variety of factors affect comparable store sales and operating results, including
changes in fashion trends, changes in our merchandise mix, customer acceptance of merchandise offerings, timing
of catalog mailings, expansion of our DTC business, calendar shifts of holiday periods, actions by competitors, new
store openings, weather conditions, and general economic conditions. Past comparable store sales or operating
results are not an indicator of future results.
Our gross margin and profitability may be impacted by the sales mix between our brands or within
product categories.
Gross margins are impacted by the sales mix from both merchandise sales mix within a particular brand and
relative sales volumes of the different brands. Certain categories of apparel, accessories and lingerie tend to
generate somewhat higher margins than others within each brand. Thus, a shift in sales mix within a brand can
create a significant impact on our overall gross margins and consolidated earnings.
10 Our business may be adversely affected by pricing pressures including fluctuations in energy and/or
commodity costs.
Fluctuations in the price, availability and quality of fabrics and other raw materials used to manufacture our
products, as well as the price for labor and transportation have contributed to, and may continue to contribute to,
ongoing pricing pressures throughout our supply chain. The price and availability of such inputs to the manu-
facturing process may fluctuate significantly, depending on several factors, including commodity costs, such as
higher cotton prices, energy costs, such as fuel, inflationary pressures from emerging markets, increased labor costs,
weather conditions and currency fluctuations. Any or all of these impacts could have a material adverse impact on
our business, financial condition and results of operations. In addition, the increase in energy and commodity costs
could adversely affect consumer spending and demand for our products.
Our DTC operations include risks that could have a material adverse effect on our financial condition or
results of operations.
Our DTC operations are subject to numerous risks, including unanticipated operating problems, reliance on
third party computer hardware and software providers, system failures, natural disasters, call center disruptions, and
the need to invest in additional infrastructure. The DTC operations also involve other risks including increased
postage or printing costs, rapid technological change, liability for online content, credit card fraud, risks related to
the possible failure of the systems that operate the website and its related support systems, including computer
viruses, telecommunication failures and electronic break-ins and similar disruptions. Given our business strategy to
target sustained growth and increased sales penetration in the DTC area, the risks associated with DTC operations
are likely to be of greater significance in fiscal 2011 and future years than in prior years.
We significantly rely on our ability to implement and maintain our information technology systems.
We rely on various information technology systems to manage our operations and regularly make investments
to upgrade, enhance or replace such systems. Any delays or difficulties in transitioning or in integrating new
systems with our current systems, or any other disruptions affecting our information technology systems could have
a material adverse impact on the business. We also use information technology systems for individually identifiable
data, which is regulated at the international, federal and state levels. Privacy and information security laws and
regulation changes, and compliance with them, may result in cost increases due to system changes and the
development of new administrative processes. If we or our associates fail to comply with these laws and regulations
or experience a data security breach, our reputation could be damaged, possibly resulting in lost future business, and
we could be subjected to fines, penalties, administrative orders and other legal risks as a result of non-compliance.
We also expect to continue making modifications and upgrades to our information technology systems to
support our business strategies and provide business continuity. Modifications include replacing legacy systems
with successor systems, making changes to existing systems or acquiring new systems with new functionality.
There are inherent risks associated with replacing these systems, including accurately capturing data and system
disruptions and we believe we are taking appropriate action to mitigate these risks through testing, training and
staging implementation. Information technology system disruptions, if not anticipated and appropriately mitigated,
could have a material adverse effect on our operations.
We rely on one location to distribute goods to our stores and fulfill DTC orders.
The distribution functions for all of our stores and for our DTC sales are handled from our DC in Winder,
Georgia. Any significant interruption in the operation of the facilities at the DC due to natural disasters, accidents,
system failures or other unforeseen causes could delay or impair our ability to distribute merchandise to our stores
and/or fulfill DTC orders, which could cause sales to decline. We regularly review our options to mitigate these risks
including contingency plans and back-up relationships with outside providers of distribution services.
Our success depends on a high volume of traffic to our stores and the availability of suitable store
locations.
In order to generate customer traffic, we locate many of our stores in prominent locations within shopping
centers that have been or are expected to be successful. We cannot control the development of new shopping centers,
the availability or cost of appropriate locations within existing or new shopping centers, or the success of individual
11 shopping centers. Furthermore, factors beyond our control impact shopping center traffic, such as general economic
conditions, weather conditions, consumer acceptance of new or existing shopping centers, regional demographic
shifts, and consumer spending levels. Our sales are partly dependent on a high volume of shopping center traffic and
any decline in such shopping center traffic, whether because of the slowdown in the economy, a falloff in the
popularity of shopping centers among our target customers, or otherwise, could have a material adverse effect on
our business.Our business fluctuates on a seasonal basis.
Our business is comprised of two distinct selling seasons: spring and fall. During the peaks of these seasons,
higher inventory levels, increased marketing costs, availability of temporary personnel, and other factors may
impact our results. Lower than expected sales or profit margins during these periods could materially affect our
financial condition or results of operations.
Our inability to remain current with fashion trends and introduce new products successfully could
negatively impact our financial results.
Our success is principally dependent upon our ability to gauge the fashion tastes of our customers and to
provide merchandise that is on-trend and satisfies customer demand in a timely manner. Misjudgments or
unanticipated fashion changes could have a material adverse impact on our business, results of operations and
financial condition. The failure to anticipate, identify or react appropriately and in a timely manner to changes in
fashion trends or demands, could lead to lower sales, excess inventories and more frequent markdowns or inventory
write-downs, which could have a material adverse impact on our financial results.
Our inability to maintain proper inventory levels could have a negative effect on our results of
operations.
We maintain inventory levels in our stores and distribution center that we anticipate will be in line with
projected demand. Inventory levels in excess of customer demand may result in inventory write-downs or the sale of
excess inventory at discounted or closeout prices. These events could significantly harm our operating results and
impair the image of one or more of our brands. Conversely, if we underestimate consumer demand for our
merchandise, particularly higher volume styles, or if our suppliers fail to supply quality products in a timely manner,
we may experience inventory shortages, which might result in missed sales, negatively impact customer relation-
ships, diminish brand loyalty and result in lost revenues, any of which could harm our business.
Our suppliers may not be able to provide goods in a timely manner and meet quality standards.
A key supplier may become unable to address our merchandising needs due to payment terms, cost of
manufacturing, adequacy of manufacturing capacity, quality control, or timeliness of delivery. If we were
unexpectedly required to change suppliers or if a key supplier was unable to supply acceptable merchandise in
sufficient quantities on acceptable terms, we could experience a significant disruption in the supply of merchandise.
We could also experience operational difficulties with our suppliers, such as reductions in the availability of
production capacity, supply chain disruptions, errors in complying with merchandise specifications, insufficient
quality control, shortages of fabrics or other raw materials, failures to meet production deadlines or increases in
manufacturing costs.
Furthermore, many of our suppliers rely on working capital financing to finance their operations. Although the
credit market has improved since 2008, lenders have still maintained tightened credit standards and terms. To the
extent any of our suppliers are unable to obtain adequate credit or their borrowing costs increase, we may experience
delays in obtaining merchandise, the suppliers increasing their prices or the suppliers modifying payment terms in a
manner that is unfavorable to us.
A significant portion of our merchandise is received from one supplier.
We have no material long-term or exclusive contract with any apparel or accessory manufacturer or supplier.
Our business depends on our network of suppliers and our continued good relations with them. However,
approximately 18% of total purchases in fiscal 2010 and 13% of total purchases in 2009 were made from one
supplier. We cannot guarantee that this relationship will be maintained in the future or that the supplier will continue
12 to be available to supply merchandise. A significant disruption in the supply of merchandise from this, or any other
key supplier, could have a material adverse impact on our operations.Competition could negatively impact our results.
We compete with national, international and local department stores, specialty and discount store chains,
independent retail stores, and catalog and online businesses that market and sell similar lines of merchandise. Many
competitors are significantly larger and have greater financial, marketing and other resources and enjoy greater
national, regional and local name recognition. In addition to competing for sales, we compete for favorable store
locations, lease terms and qualified associates. Increased competition could result in price reductions, increased
marketing expenditures and loss of market share, any of which could have a material adverse effect on our financial
condition and results of operations. The recent recessionary conditions have resulted in more significant com-
petition as our competitors have lowered prices and engaged in more promotional activity.
We rely significantly on foreign sources of production.
The majority of our clothing and accessories is produced outside the United States, the percentage has been
growing, and this trend may continue. As a result, our business remains subject to the various risks of doing business
in foreign markets and importing merchandise from abroad, such as: (i) geo-political instability; (ii) imposition of
new legislation relating to import quotas that may limit the quantity of goods that may be imported into the
United States from countries in which we do business; (iii) imposition of new or increased duties, taxes, and other
charges on imports; (iv) foreign exchange rate challenges and pressures presented by implementation of U.S. mon-
etary policy; (v) local business practice and political issues, including issues relating to compliance with our Terms
of Commitment to Ethical Sourcing and domestic or international labor standards; (vi) transportation disruptions;
(vii) natural disasters; (viii) delays in the delivery of cargo due to port security considerations; and (ix) seizure or
detention of goods by U.S. Customs authorities. In particular, we continue to source a substantial portion of our
merchandise from China. A change in the Chinese currency, other policies affecting labor laws or the costs of goods
in China could negatively impact our merchandise costs. Additionally, due to recent inflationary pressures we have
needed to reserve fabric with our suppliers further in advance of our normal production process. This results in
additional risks, including forecasting of anticipated demand over a longer period, which could adversely impact
our results of operations.
We cannot predict whether or not any of the foreign countries in which our clothing and accessories are
currently, or in the future may be produced, will be subject to import restrictions by the United States government,
including the likelihood, type or effect of any trade retaliation. Trade restrictions, including increased tariffs, or
more restrictive quotas, including safeguard quotas, or anything similar, applicable to apparel items could affect the
importation of apparel generally and, in that event, could increase the cost, or reduce the supply, of apparel available
to us and adversely affect our business, financial condition and results of operations.
In addition, the laws and customs protecting intellectual property rights in many foreign countries can be
substantially different and potentially less protective of intellectual property than those in the United States. We
have taken numerous steps to protect our intellectual property overseas, but cannot guarantee that such rights are not
infringed. The intentional or unintentional infringement on our intellectual property rights by one of our suppliers or
any other person or entity, could diminish the uniqueness of our products, tarnish our trademarks, or damage our
reputation.
Our business could be negatively impacted if a supplier fails to implement acceptable labor practices.
Although we have adopted our Terms of Commitment to Ethical Sourcing and use the services of third party
audit firms to be diligent in our monitoring of compliance with these terms, we do not have absolute control over the
ultimate actions or labor practices of our independent suppliers. Furthermore, we are attempting to lower our
reliance on suppliers located in China. As a result, we may do business with suppliers that are not as familiar with
our supplier guidelines which may result in temporary noncompliance.
13 The violation of labor or other laws by any of our key independent suppliers or the divergence of an
independent supplier’s labor practices from those generally accepted by us as ethical could interrupt or otherwise
disrupt the shipment of finished merchandise or damage our reputation.
Failure to comply with applicable laws and regulations could adversely impact our business.
Our policies and procedures are designed to comply with all applicable laws, accounting and reporting
requirements, regulations and tax requirements, including those imposed by the Sarbanes-Oxley Act of 2002, the
SEC and the New York Stock Exchange (“NYSE”). Failure to comply with the various laws and regulations as well
as changes in laws and regulations could have an adverse impact on our reputation, financial condition or results of
operations.
We may be subject to adverse outcomes of litigation matters.
We are involved from time to time in litigation and other claims against our business. These matters arise
primarily in the ordinary course of business but could raise complex, factual and legal issues, which are subject to
multiple risks and uncertainties and could require significant management time. We believe that our current
litigation matters will not have a material adverse effect on the results of operations or financial condition. However,
our assessment of current litigation could change in light of the discovery of facts with respect to legal actions
pending against us, not presently known to us, or determinations by judges, juries or other finders of fact which do
not accord with our evaluation of the possible liability or outcome of such litigation and additional litigation that is
not currently pending could have a more significant impact on our business and operations.
We may be unable to retain or recruit key personnel.
Our success and ability to properly manage our growth depends to a significant extent both upon the
performance of our current executive and senior management team and our ability to attract, hire, motivate, and
retain additional qualified personnel in the future. If we cannot recruit and retain such additional personnel or we
lose the services of any of our executive officers without appropriate succession planning, it could have a material
adverse impact on our business, financial condition and results of operations.
In addition, our success also depends in part upon our ability to attract, develop and retain a sufficient number
of qualified employees, including store associates and talented merchants. If we are unable to identify, hire,
develop, retain and motivate associates sufficiently in order to maintain our current business and support our growth
strategies, our business could be adversely impacted.
War, terrorism or other catastrophes may negatively impact our results.
In the event of war, acts of terrorism or the threat of terrorist attacks, customer traffic in shopping centers and
consumer spending could significantly decrease. In addition, local authorities or shopping center management
could close in response to any immediate security concern or weather catastrophe such as hurricanes, earthquakes,
or tornadoes. Similarly, war, acts of terrorism, threats of terrorist attacks, or a weather catastrophe could severely
and adversely affect our National Store Support Center (“NSSC”) campus or distribution center which, in turn,
could have a material adverse impact on our business.
Impairment charges could have a material impact on our results of operations and financial condition.
Periodically, we review our long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. We also test our goodwill and intangible assets
for impairment at least annually or more frequently if impairment indicators arise. Significant negative industry or
economic trends, disruptions to our business and unexpected significant changes or planned changes in use of the
assets may result in impairments to goodwill and other long-lived assets. Future impairment charges could
significantly affect our results of operations in the periods recognized.
Our failure to protect our brands’ reputation and/or intellectual property could have an adverse effect
on our brand images.
Our ability to protect our brands’ reputation is an integral part of our general success strategy and is critical to
the overall value of the brands. Maintaining and positioning these brands is an ongoing investment for us and our
14 continued investment in customer research and promotional venues will be essential. Additionally, if we fail to
maintain high standards for merchandise quality and integrity, such failures could jeopardize the brands’ reputation
and have a negative effect on our business. Damage to our reputation as a whole could also cause a loss of consumer
and investor confidence and could have a material effect on our business.In addition, our trademarks, copyrights, and other intellectual and proprietary rights are important to our
success. Even though we take action to protect all of our intellectual property and other proprietary rights, others
may attempt to imitate our products or obtain or infringe upon our intellectual property rights. Other parties may
also claim that some of our products infringe on their trademarks, copyrights, or other intellectual property rights.
To the extent such claims are successful, sales could decline and our business and results of operations could be
adversely affected.
Our stock price may be volatile.
The market price of our common stock has fluctuated substantially in the past and may continue to do so in the
future. Future announcements or management discussions concerning us or our competitors, sales and profitability
results, quarterly variations in operating results or comparable store net sales, or changes in earnings estimates by
analysts, among other factors, could cause the market price of the common stock to fluctuate substantially. In
addition, stock markets, in general, have experienced extreme price and volume volatility in recent years. This
volatility has had a substantial effect on the market prices of securities of many public companies for reasons
frequently unrelated to the operating performance of the specific companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Stores As a matter of policy, all of our stores are currently leased. As of January 29, 2011, our 1,151 stores were
located in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico, as follows:
Alabama 17 Louisiana 17 Ohio 31
Arizona 27 Maine 1 Oklahoma9
Arkansas 8 Maryland 33 Oregon 17
California 138 Massachusetts 32 Pennsylvania48
Colorado 23 Michigan 27 Rhode Island 6
Connecticut 20 Minnesota 20 South Carolina 20
Delaware 7 Mississippi 4 South Dakota 1
District of Columbia 2 Missouri 22 Tennessee 23
Florida 109 Montana 2 Texas106
Georgia 40 Nebraska 6 Utah9
Hawaii 6 Nevada 16 Vermont 1
Idaho 2 New Hampshire 3 Virginia 30
Illinois 47 New Jersey 49 Washington 23
Indiana 18 New Mexico 9 West Virginia2
Iowa 6 New York 41 Wisconsin 13
Kansas 9 North Carolina 33 U.S. Virgin Islands 1
Kentucky 13 North Dakota 1 Puerto Rico3
15 NSSC and Distribution CenterOur NSSC is located on approximately 58 acres in Fort Myers, Florida and consists of approximately
364,000 square feet of office space. In fiscal 2009, we completed the purchase of 39 acres of property in close
proximity to our existing DC in Winder, Georgia including an approximately 300,000 square foot building for
approximately $10.4 million. This acquisition, combined with our existing 233,000 square foot retail distribution
center and 50,000 square foot call and data center, results in a total of 583,000 square feet on a combined 110 acres
in Winder, Georgia for our distribution and fulfillment operations.
ITEM 3. LEGAL PROCEEDINGS
The Company was named as a defendant in a putative class action filed in February 2011 in the Superior Court
of the State of California for the County of Orange,
Lorraine V. Garcia v. Chico’s FAS, Inc. The Complaint alleges
that the Company, in violation of California law, requested or required customers to provide personal information as
a condition of accepting payment by credit card. The Company denies the material allegations of the Complaint and
will file its response by the required deadline. The Company believes that the case is wholly without merit and, thus,
does not believe that the case should have any material adverse effect on the Company’s financial condition or
results of operations.
The Company was named as a defendant in a putative class action filed in March 2011 in the Superior Court of
the State of California for the County of Los Angeles,
Eileen Schlim v. Chico’s FAS, Inc. The Complaint attempts
to allege numerous violations of California law related to wages, meal periods, rest periods, and vacation pay,
among other things. The Company denies the material allegations of the Complaint and will file its response by the
required deadline. The Company believes that its policies and procedures for paying its associates comply with all
applicable California laws. As a result, the Company does not believe that the case should have a material adverse
effect on the Company’s financial condition or results of operations.
Other than as noted above, we are not currently a party to any legal proceedings, other than various claims and
lawsuits arising in the normal course of business, none of which we believe should have a material adverse effect on
our financial condition or results of operations.
ITEM 4. (REMOVED AND RESERVED)
16 PA RT I I
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock trades on the NYSE under the symbol “CHS”. On March 14, 2011, the last reported sale
price of the Common Stock on the NYSE was $13.51 per share. The number of holders of record of common stock
on March 14, 2011 was 1,848.
The following table sets forth, for the periods indicated, the range of high and low sale prices for the Common
Stock, as reported on the NYSE:
For the Fiscal Year Ended January 29, 2011 High Low
Fourth Quarter (October 31, 2010 - January 29, 2011).....................$12.91 $ 9.60
Third Quarter (August 1, 2010 - October 30, 2010) .......................11.50 8.22
Second Quarter (May 2, 2010 - July 31, 2010) . . . ........................15.62 8.91
First Quarter (January 31, 2010 - May 1, 2010) . . ........................16.57 12.78
For the Fiscal Year Ended January 30, 2010 High Low
Fourth Quarter (November 1, 2009 - January 30, 2010)....................$15.43 $11.95
Third Quarter (August 2, 2009 - October 31, 2009) .......................14.14 11.03
Second Quarter (May 3, 2009 - August 1, 2009) . ........................11.69 7.17
First Quarter (February 1, 2009 - May 2, 2009) . . ........................8.05 3.40
In fiscal 2010, we declared four cash dividends of $0.04 per share resulting in an annual dividend of
$0.16 per share. There were no cash dividends declared in fiscal 2009.
On February 23, 2011, we announced that the Board of Directors approved an increase in the quarterly
dividend to $0.05 per common share (previously $0.04) and will be payable on March 28, 2011 to Chico’s FAS
shareholders of record at the close of business on March 14, 2011.
In fiscal 2010, we repurchased 70,642 restricted shares in connection with employee tax withholding
obligations under employee compensation plans, of which 45,859 were repurchased in the fourth quarter as set
forth in the following chart:
Period Total Number
of Shares
Purchased Average
Price Paid per Share Total
Number of
Shares
Purchased as Part of
Publicly
Announced Plans Approximate
Dollar Value
of Shares that
May Yet BePurchasedUnder the Publicly
Announced Plans
October 31, 2010 - November 27, 2010 ..........38,130 $12.05 — $181,661,748
November 28, 2010 - January 1, 2011 ...........7,729 $12.31 — 181,661,748
January 2, 2011 - January 29, 2011 ............. — — — 181,661,748
Total .................................. 45,859 $12.09 — $181,661,748
17 Five Year Performance Graph
The following graph compares the cumulative total return on our common stock with the cumulative total
return of the companies in the Standard & Poor’s (“S&P”) 500 Index and the Standard & Poor’s 500 Apparel Retail
Index. Cumulative total return for each of the periods shown in the Performance Graph is measured assuming an
initial investment of $100 on January 28, 2006 and the reinvestment of dividends.
1/29/2011
1/30/2010
1/31/2009
2/02/2008
2/03/2007
1/28/2006
DOLLARS
Chico’s FAS, Inc.
S&P 500 Index
S&P 500 Apparel Retail Index
0
100
50
150 200
1/28/06 2/3/07 2/2/08 1/31/09 1/30/10 1/29/11
Chico’s FAS, Inc.
$100 $ 52 $ 25 $ 9 $ 30 $ 27
S&P 500 Index $100 $115 $113 $68 $ 91 $111
S&P 500 Apparel Retail Index $100 $119 $115 $58 $114 $150
18 ITEM 6. SELECTED FINANCIAL DATASelected Financial Data at the dates and for the periods indicated should be read in conjunction with, and is
qualified in its entirety by reference to the financial statements and the notes thereto referenced in this Annual
Report on Form 10-K. Amounts in the following tables are in thousands, except per share data, number of stores
data, net sales and inventory per square foot, and number of associates.
2010 2009 2008 2007 2006 Fiscal Year
Summary of operations:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,904,954 $1,713,150 $1,582,405 $1,714,326 $1,640,927
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . $1,068,575 $ 959,741 $ 819,492 $ 969,061 $ 967,185
Gross margin as a percent of net sales . . . . .
56.1% 56.0% 51.8% 56.5% 58.9%
Income (loss) from operations . . . . . . . . . . . $ 177,082 $ 108,153 $ (39,594) $ 121,458 $ 263,700
Income (loss) from operations as a percent of net sales . . . . . . . . . . . . . . . . . . . . . . . 9.3% 6.3% (2.5)% 7.1% 16.1%
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 115,394 $ 69,646 $ (19,137) $ 88,875 $ 166,636
Net income (loss) as a percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1% 4.1% (1.2)% 5.2% 10.2%
Per share results:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.65 $ 0.39 $ (0.11) $ 0.51 $ 0.94
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.64 $ 0.39 $ (0.11) $ 0.50 $ 0.93
Weighted average shares outstanding-basic . . 176,778 177,499 176,606 176,082 177,627
Weighted average shares outstanding- diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,034 178,858 176,606 176,735 178,679
Cash dividends per share . . . . . . . . . . . . . . . $ 0.16 — — — —
Balance sheet data (at year end):
Cash and marketable securities . . . . . . . . . . . $ 548,714 $ 423,543 $ 268,702 $ 274,270 $ 275,539
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,416,021 1,318,803 1,226,183 1,250,126 1,060,627
Working capital . . . . . . . . . . . . . . . . . . . . . . 535,488 405,274 322,728 305,540 334,513
Stockholders’ equity . . . . . . . . . . . . . . . . . . 1,064,907 981,918 902,196 912,516 803,931
Other selected operating data:
Percentage increase (decrease) in comparable store net sales . . . . . . . . . . . . 6.3% 6.1% (15.1)% (8.1)% 2.1%
Percentage increase (decrease) in comparable sales including DTC . . . . . . . . . . . . . . . . . 8.3% 7.6% (14.5)% (6.5)% 3.1%
Capital expenditures . . . . . . . . . . . . . . . . . . $ 73,045 $ 67,920 $ 104,615 $ 202,223 $ 218,311
Total depreciation and amortization . . . . . . . $ 94,113 $ 96,372 $ 97,572 $ 91,979 $ 69,404
Total inventory per selling square foot . . . . . $ 57 $ 53 $ 51 $ 60 $ 57
Total stores at period end . . . . . . . . . . . . . . . 1,151 1,080 1,076 1,038 920
Total selling square feet . . . . . . . . . . . . . . . . 2,785 2,619 2,596 2,405 1,954
Average net sales per selling square foot at stores: *
Chico’s . . . . . . . . . . . . . . . . . . . . . . . . $ 634 $ 606 $ 598 $ 792 $ 961
WHy BM . . . . . . . . . . . . . . . . . . . . . . . 739 682 656 804 1,040
Total number of associates (rounded) . . . . . . 18,900 16,200 14,500 14,300 12,500
* Average net sales per selling square foot at our stores are based on net sales of stores that have been operated by us for the full year. For fiscal 2006, average net sales per selling square foot at our stores have been adjusted to exclude the effect of the fifty-third week.
19 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements
and notes thereto.
Executive Overview
We are a national specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates,
complementary accessories, and other non-clothing gift items operating under the Chico’s, White House yBlack
Market, and Soma Intimates brand names. We earn revenues and generate cash through the sale of merchandise in
our retail stores, on our various websites and through our call centers, which take orders for all brands.
Results of 2010 Initiatives
Fiscal 2010’s results are a reflection of our continued progress in executing the goals that we have established
as being vital to the performance of our company. These goals were and continue to be:
Improving the performance of the Chico’s brand
Investing in the growth potential of the WH yBM and Soma brands
Accelerating the investment in and growth of the direct-to-consumer (“DTC”) channel
Controlling expenses and rationalizing the expense structure
Improving inventory control
Chico’s — The performance of the Chico’s brand during fiscal 2010 was a clear indication that we have made
significant progress in our turnaround efforts. Chico’s had its best comparable store sales performance since fiscal
2005. We believe this is attributable to our ability to provide customers with fresh and trend-right merchandise
offerings supported by novel and timely marketing campaigns as well as personalized customer service. In fiscal
2010, the Chico’s brand also focused on increasing the penetration of its made-for-outlet product which resulted in
improved profitability for our stores in the outlet channel.
WH yBM — The WH yBM brand had another successful year in fiscal 2010 with total sales reaching
$590 million, an increase of 14.3% over last year. WHy BM added touches of bright and vibrant color accents
to its fashion selection at various times, which proved to be a big hit with our customer and a significant driver
behind the brand’s improved results over fiscal 2009.
Soma — We continue to believe in the growth potential of the Soma brand and are encouraged by its progress
in fiscal 2010. During 2010, Soma introduced its first television advertising campaign since 2007, which served to
attract new customers and reactivate lapsed customers.
Direct-to-consumer — In fiscal 2010, net sales for the DTC channel increased 39.7% to $137.4 million. This
39.7% increase in fiscal 2010 follows a similar 39.3% increase in 2009.
Expense Structure — Selling, general and administrative (“SG&A”) expenses during fiscal 2010 increased
over fiscal 2009 mostly as a result of costs associated with operating 71 net, new stores opened since the end of fiscal
2009 and planned increases in marketing expenses. However, as a percentage of net sales, SG&A for fiscal 2010
decreased by over 200 basis points compared to fiscal 2009.
Inventory Management — Effective inventory management is essential in enabling us to offer our customers
an appropriate selection of current merchandise. During fiscal 2010, we believe that we improved our in-stock
levels and inventory turnover in an effort to limit the markdowns needed to clear merchandise. Furthermore, we
believe our inventory balance at year end is in line with our current sales trend.
20 Financial Highlights for Fiscal 2010 Net sales increased 11.2% to $1.905 billion, the highest in our history, compared to $1.713 billion in 2009,and consolidated comparable store sales increased 6.3% following a 6.1% increase last year. Including DTC
sales, consolidated comparable sales increased 8.3% in 2010 on top of a 7.6% increase last year.
Income from operations, as a percentage of net sales, was 9.3% compared to 6.3% in 2009, or an increase of 300 basis points over last year.
Net income was $115.4 million compared to $69.6 million in 2009, and earnings per diluted share increased 64% to $0.64 compared to $0.39 last year. Net income for 2010 and 2009 included $1.9 million and
$15.0 million of pre-tax non-cash impairment charges, respectively.
Cash and marketable securities ended the year at $548.7 million, an increase of 29.6% over last year, after considering that we paid $28.5 million of dividends and repurchased and retired $18.3 million of our
common stock through our share repurchase program announced in August 2010.
Cash flows from operations for 2010 were $239.6 million compared with $215.4 million in 2009, an increase of 11.2%.
Key Performance Indicators In order to monitor our success, we review certain key performance indicators, including:
Comparable sales growth — In 2010, our comparable store sales (sales from stores open for at least twelve
full months, including stores that have been expanded or relocated within the same general market)
improved across all three brands. Beginning in fiscal 2011, we will report comparable sales inclusive of
DTC. We are channel-agnostic when it comes to sales and it has become increasingly apparent that store
sales and DTC sales are intertwined. Since we have moved to a pooled inventory effort to support stores and
DTC accompanied by cross-channel marketing initiatives, it is difficult to discern a portion of our sales that
should be credited to the appropriate channel. We believe that our ability to deliver consistent increases in
comparable sales will be a key factor in determining our future levels of success.
Positive operating cash flow and capital expenditures — Historically, a key strength of the business has been
the ability to consistently generate cash flow from operations. We believe the consistent generation of cash
flows sufficient to fund operations and capital expenditures is and will be a key performance indicator for us.
Store productivity — We consistently monitor various key performance indicators of store productivity
including sales per square foot, store operating contribution margin and store cash flow in order to assess our
performance.
Inventory management — We actively manage our inventories based on seasonal trends, store productivity
results and anticipated sales volumes, which may lead to increased or decreased inventory levels. We believe
that constant monitoring of our inventories on a per square foot basis assists us in planning future sales,
determining markdowns and assessing our customer’s response to the merchandise.
Future Outlook For fiscal 2011, we are currently forecasting a low-to-mid single digit increase in comparable sales inclusive of
DTC with slight improvement expected in our gross margin rate as a percentage of net sales. Although we expect
our SG&A expenses as a percentage of net sales to decrease reflecting leverage based on the forecasted comparable
sales increase, we anticipate approximately $8.0 million of incremental marketing costs over last year as well as the
costs associated with opening 100 to 110 net, new stores.
Capital expenditures for fiscal 2011 are expected to range between $110 million to $120 million, which
contemplates the opening of approximately 100 to 110 net new stores as well as continued enhancements of our
information technology systems and other infrastructure costs including DTC automation projects.
21 Results of OperationsNet Sales The following table depicts net sales by Chico’s/Soma and WH yBM in dollars and as a percentage of total net
sales for fiscal 2010 (“current period”), fiscal 2009 (“prior period”), and fiscal 2008 (dollar amounts in thousands):
Net sales: Fiscal 2010 % Fiscal 2009 % Fiscal 2008 %
Chico’s/Soma
.................. $1,314,649 69.0% $1,196,729 69.9% $1,127,988 71.3%
WH yBM ..................... 590,305 31.0 516,421 30.1 454,417 28.7
Total net sales ............... $1,904,954 100.0% $1,713,150 100.0% $1,582,405 100.0%
Net sales by Chico’s/Soma and WH yBM increased from the prior period primarily due to positive comparable
sales (including DTC sales) for all three brands as well as new store openings. A summary of the factors impacting
year-over-year sales increases is provided in the table below (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Comparable store sales increases (decreases) ..............$100,504 $89,698 $(242,407)
Comparable store sales % ............................ 6.3% 6.1% (15.1)%
Comparable sales % (including DTC) ...................8.3% 7.6% (14.5)%
Net non-comp store sales increase ..................... $52,260 $13,311 $ 112,103
Direct-to-consumer sales increases (decreases) ............ $39,040 $27,736 $ (1,502)
Consolidated comparable sales increased in fiscal 2010 and were driven by an approximate 7% increase in
transactions at Chico’s front-line stores, which was partially offset by a slight decrease in units per transaction. In
addition, WH yBM stores experienced an increase in both transactions and units per transaction in fiscal 2010. The
increase in consolidated comparable sales is also attributable to a 39.7% increase in net DTC sales in fiscal 2010
over fiscal 2009 due to enhanced website functionality, increased DTC promotions and expanded online product
offerings, including clearance items. Comparable store sales excluding DTC sales for the Chico’s/Soma brands’
increased by 5.4% while the WHy BM brand’s comparable store sales increased by 8.4% over last year.
The consolidated comparable store sales increase of 6.1% in fiscal 2009 was driven primarily by an
approximate 8% increase in the Chico’s average unit retail price, which was partially offset by a slight decrease
in units per transaction at Chico’s front-line stores. Comparable store sales results also benefited from an increase in
both the average unit retail price as well as total transactions at the WH yBM brand compared to the like period in
fiscal 2008. The Chico’s/Soma brands’ comparable store sales increased by approximately 4% and the WH yBM
brand’s comparable store sales increased by approximately 11% compared to the like period in fiscal 2008. Net
sales by the DTC for fiscal 2009 increased by $27.7 million, or 39.3%, compared to fiscal 2008 due to enhanced
functionality on our websites and improved online assortments. Consolidated comparable sales, which include
DTC sales, increased in fiscal 2009 by 7.6% over fiscal 2008.
Cost of Goods Sold/Gross Margin The following table depicts cost of goods sold and gross margin in dollars and gross margin as a percentage of
net sales for fiscal 2010, 2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Cost of goods sold ................................ $ 836,379 $753,409 $762,913
Gross margin .................................... $1,068,575 $959,741 $819,492
Gross margin percentage ............................ 56.1% 56.0% 51.8%
As a percentage of net sales, gross margin increased by only 10 basis points in fiscal 2010 compared to fiscal
2009. This increase was mainly attributable to improved merchandise margins at outlet stores due to increased
penetration of made-for-outlet product but offset, for the most part, by a slight decrease in merchandise margins at
Chico’s front-line stores. This decrease in merchandise margins was primarily driven by increases in markdowns for
fiscal 2010, partially offset by slightly higher initial markups for the Chico’s brand.
22 Gross margin percentage increased by 420 basis points in fiscal 2009 compared to fiscal 2008. The gross
margin increase was attributable to significant improvements in the merchandise margins at both the Chico’s and
WH yBM brands. Both brands benefited from substantially lower markdowns and, to a lesser extent, higher initial
markups. These improvements in gross margin were slightly offset by continued investment in merchandise and
product development including technology initiatives.
Store and Direct Operating Expenses The following table depicts store and direct operating expenses in dollars and as a percentage of total net sales
for fiscal 2010, 2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Store and direct operating expenses .....................$673,142 $647,040 $645,352
Percentage of total net sales .......................... 35.3% 37.8% 40.8%
Store and direct operating expenses include store and DTC operational expenses, and reflect such items as
personnel, occupancy, credit card fees, depreciation and supplies, incurred to operate each of our stores and the
DTC channel. In addition, store and direct operating expenses include support expenditures for district and regional
management expenses and other store support functions. Store and direct operating expenses increased by
$26.1 million over fiscal 2009 primarily due to increased store labor costs and occupancy expense associated
with 71 net new stores over last year, accompanied by increased in-store promotions and higher credit card fees due
to higher sales volume compared to last year. Store operating expenses as a percentage of net sales decreased by
250 basis points in fiscal 2010 due to the leverage associated with positive comparable store sales.
In fiscal 2009, store operating expenses increased slightly in dollars due to higher occupancy costs but, as a
percentage of net sales, decreased by 300 basis points due to the leverage from positive comparable store sales as
well as effective implementation of ongoing cost saving initiatives at the store level.
Marketing The following table depicts marketing expenses in dollars and as a percentage of total net sales for fiscal 2010,
2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Marketing ........................................ $102,481 $78,075 $80,326
Percentage of total net sales .......................... 5.4% 4.6% 5.1%
Marketing expenses include marketing programs such as direct marketing efforts, national advertising
expenses via various media and related support costs. Marketing expenses increased in fiscal 2010 by $24.4 million
compared to fiscal 2009 mainly due to planned increases in marketing initiatives across all three brands, particularly
with television advertising and e-marketing initiatives. As a percentage of net sales, marketing expenses increased
80 basis points in fiscal 2010 compared to fiscal 2009.
Marketing expenses decreased as a percentage of net sales by approximately 50 basis points in fiscal 2009
compared to fiscal 2008 mainly due to the leverage from positive comparable store sales. In addition, marketing
expenses in dollars decreased due to savings in direct mailing costs attributable to both decreased materials costs
and circulations, partially offset by an increase in broadcast and print advertisement.
23 National Store Support CenterThe following table depicts NSSC expenses in dollars and as a percentage of total net sales for fiscal 2010,
2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
NSSC ........................................... $114,002 $111,447 $109,744
Percentage of total net sales .......................... 6.0% 6.5% 6.9%
NSSC expenses consist of corporate level functions including executive management, human resources,
management information systems and finance, among others. In fiscal 2010, NSSC expenses increased slightly
mainly due to increased recruiting and relocation costs. However, as a percentage of net sales, NSSC expenses
decreased by 50 basis points due to the leverage associated with positive comparable store sales for the year.
NSSC expenses in fiscal 2009 increased slightly in dollars mainly due to increased incentive compensation
costs, offset by back office cost reduction initiatives. However, as a percentage of net sales, NSSC expenses
decreased by 40 basis points due to the leverage associated with the positive comparable store sales.
Impairment and Restructuring Charges The following table depicts impairment and restructuring charges in dollars and as a percentage of total net
sales for fiscal 2010, 2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Impairment and restructuring charges ...................$1,868 $15,026 $23,664
Percentage of total net sales .......................... 0.1% 0.9% 1.5%
The impairment charges recognized in fiscal 2010 include non-cash impairment charges incurred in the first
and fourth quarters of the year. An evaluation of long-lived assets at certain underperforming stores for indicators of
impairment was performed and, as a result, we determined that the carrying values of certain assets exceeded their
future undiscounted cash flows. The fair value of these assets was determined by discounting their future cash flows
using a rate approximating our cost of capital, which resulted in an impairment charge of approximately $0.8 million
and $1.1 million in the first and fourth quarters, respectively.
The impairment charges recognized in fiscal 2009 include non-cash impairment charges incurred in the first,
second and fourth quarters of the year. During the first quarter of fiscal 2009, an impairment charge totaling
$8.1 million was recorded related to the write-off of development costs for software applications. During the second
quarter of fiscal 2009, a non-cash charge totaling $3.8 million was incurred related to the partial write-off of a note
receivable and $1.1 million in non-cash impairment charges related to the write-off of fixed assets at certain
underperforming stores. During the fourth quarter, an additional non-cash impairment charge of $2.0 million was
taken on the aforementioned note receivable based on a further evaluation of the underlying collateral.
The impairment and restructuring charges recognized in fiscal 2008 consisted of non-cash impairment charges
totaling $13.7 million related to the write-off of fixed assets at certain underperforming stores, and severance and
workforce reduction costs totaling $10.0 million related to the elimination of approximately 11% of the NSSC
employee base and charges associated with the separation agreement with our former Chief Executive Officer.
Virtually all payments related to the severance and workforce reduction action were completed in fiscal 2009.
Interest Income, net The following table depicts interest income, net in dollars and as a percentage of total net sales for fiscal 2010,
2009 and 2008 (dollar amounts in thousands):
Fiscal 2010 Fiscal 2009 Fiscal 2008
Interest income, net ................................. $1,712 $1,693 $7,757
Percentage of total net sales .......................... 0.1% 0.1% 0.5%
24 In fiscal 2010, interest income, net, was flat in total dollars and as a percentage of net sales compared to fiscal
2009.
In fiscal 2009, interest income, net, decreased in total dollars and as a percentage of net sales compared to fiscal
2008 primarily due to lower interest rates on our investments and, to a lesser extent, due to the reversal and non-
accrual of interest income in fiscal 2009 on a note receivable for which interest was deemed uncollectible.
Provision for Income Taxes Our effective tax rate was 35.5%, 36.6% and 39.9%, for fiscal 2010, 2009 and 2008, respectively. The decrease
in the effective tax rate for fiscal 2010 from fiscal 2009 was primarily due to the favorable settlement of certain state
tax examinations. The decrease in the effective tax rate for fiscal 2009 from fiscal 2008 was primarily due to the
favorable settlement of certain state tax examinations and the expiration of various statutes of limitation relating to
certain state tax accruals.
Liquidity and Capital Resources
Overview Our ongoing capital requirements have been and are for funding capital expenditures for new, expanded,
relocated and remodeled stores, the continued improvement in information technology tools, and our distribution
center and other central support facilities.
The following table depicts our capital resources at the end of fiscal year 2010 and 2009 (amounts in
thousands):
Fiscal 2010 Fiscal 2009
Cash and cash equivalents ..................................... $ 14,695 $ 37,043
Marketable securities ......................................... 534,019 386,500
Working capital ............................................. 535,488 405,274
Working capital increased from fiscal 2009 to fiscal 2010 primarily due to an increase in marketable securities
resulting from a higher cash flow from operations. The significant components of working capital are cash and cash
equivalents, marketable securities and inventories, reduced by accounts payable and accrued liabilities.
Based on past performance and current expectations, we believe that our cash and cash equivalents, marketable
securities and cash generated from operations will satisfy working capital needs, future capital expenditures (see
“New Store Openings and Infrastructure Investments”), commitments, dividend payments, potential share repur-
chases and other liquidity requirements associated with our operations through at least the next 12 months.
Furthermore, while it is our intention to pay a quarterly cash dividend for fiscal 2011 and beyond, any determination
to pay future dividends will be made by the Board of Directors and will depend on future earnings, financial
conditions and other factors.
Operating Activities Net cash provided by operating activities in fiscal 2010 was $239.6 million, an increase of approximately
$24.2 million from fiscal 2009 primarily due to higher net income, mainly as a result of increased sales, and
accounts payable leverage partially offset by an increase in inventory investment.
Net cash provided by operating activities in fiscal 2009 was $215.4 million, an increase of approximately
$116.0 million from fiscal 2008, and resulted primarily from higher net income and increases in accounts payable.
In fiscal 2008, net cash from operating activities was $99.4 million, and was due primarily to non-cash
adjustments which served to offset the net loss from operations. These adjustments included depreciation and
amortization expense, deferred tax benefits, stock-based compensation, and an impairment of long-lived assets, as
well as changes in accounts receivables, payables and inventory.
25 Investing ActivitiesNet cash used in investing activities was $220.6 million and $212.0 million for fiscal 2010 and 2009,
respectively. We had net purchases of $147.5 million of marketable securities in the current year compared to
$144.1 million of net purchases in fiscal 2009.
Our approximate $5.1 million increased investment in capital expenditures when compared to the prior year
was primarily related to costs associated with new, relocated, remodeled and expanded Chico’s, Soma and WH yBM
stores offset slightly by a decrease in distribution center investments.
Financing Activities Net cash used in financing activities was $41.4 million in fiscal 2010 compared to net cash provided by
financing activities of $7.1 million in fiscal 2009. In fiscal 2010, we declared and paid four quarterly $0.04 per share
cash dividends on our common stock totaling $28.5 million and repurchased $18.3 million of our common stock
through the share repurchase program announced in August 2010. In the current and prior fiscal years, we received
proceeds from both the issuance of common stock related to option exercises and employee participation in our
employee stock purchase plan.
During fiscal 2010, 2009 and 2008, we repurchased 70,642, 76,479 and 60,168 shares, respectively, of
restricted stock in connection with employee tax withholding obligations under employee compensation plans,
which are not purchases under any publicly announced plan.
New Store Openings and Infrastructure Investments We expect our new stores in fiscal 2011 to increase approximately 9%, reflecting 24-28 net openings of
Chico’s stores, 23-26 net openings of WH yBM stores, and 53-56 net openings of Soma stores. We also expect to
complete 25-30 relocations or expansions. We continuously evaluate the appropriate new store growth rate in light
of economic conditions and may adjust the growth rate as conditions require or as opportunities arise.
We believe that the liquidity needed for new stores, including the continued investment associated with the
Soma brand, our continuing store remodel/expansion program, the investments required for our distribution center,
our continued installation and upgrading of new and existing software packages, and investment in inventory levels
associated with this growth will be funded primarily from cash flow from operations and our existing cash and
marketable securities balances, and, if necessary, the capacity included in our bank credit facility.
At the beginning of fiscal 2010, we completed the second major phase of our multi-year, planned imple-
mentation of our enterprise resource planning (“ERP”) system and we are currently utilizing this system in all of our
brands. The third major phase includes ongoing enhancements and optimization of the new ERP across all three
brands, as well as the deployment of additional functionality across various other functions.
In fiscal 2009, we purchased JDA Enterprise Planning, JDA Assortment Planning and JDA Allocation
software applications and curtailed the previously planned implementations of related SAP applications and revised
our roll out plan accordingly. We completed the implementation of the allocation functionality during fiscal 2009,
installed enterprise planning in 2010, and are currently working on implementing the additional JDA planning
applications over the next 12-18 months. Additionally, we are developing a product lifecycle management solution
supporting the design and development process.
Given our existing cash and marketable securities balances and the capacity included in our bank credit
facility, we do not believe that we will need to seek other sources of financing to conduct our operations, pay future
dividends or pursue our expansion plans even if cash flow from operations should prove to be less than anticipated,
or if there should arise a need for additional letter of credit capacity due to establishing new and expanded sources of
supply, or if we were to increase the number of new stores planned to be opened in future periods.
26 Contractual ObligationsThe following table summarizes our contractual obligations at January 29, 2011 (amounts in thousands):
Total Less than
1 year 1-3 years 4-5 years After
5 years
Operating leases ............... $ 685,400 133,195 222,745 179,492 149,968
Non-cancelable purchase commitments ................ 326,651 326,651 — — —
Total ...................... $1,012,051 $459,846 $222,745 $179,492 $149,968
As of January 29, 2011, our contractual obligations consisted of amounts outstanding under operating leases
and non-cancelable purchase commitments. Amounts due under non-cancelable purchase commitments consist of
amounts to be paid under agreements to purchase inventory.
Until formal resolutions are reached between us and the relevant taxing authorities, we are unable to estimate a
final determination related to our uncertain tax positions and therefore, we have excluded the uncertain tax
positions, totaling $3.6 million at January 29, 2011 from the above table.
On November 24, 2008, we entered into a $55 million Senior Secured Revolving Credit Facility (the “Credit
Facility”) with SunTrust Bank, as administrative agent and lender and SunTrust Robinson Humphrey, Inc. as lead
arranger.
The Credit Facility provides a $55 million revolving credit facility that matures on November 24, 2011. The
Credit Facility provides for swing advances of up to $5 million and issuance of letters of credit up to $10 million.
The Credit Facility also contains a feature that provides us the ability, subject to satisfaction of certain conditions, to
increase the commitments available under the Credit Facility from $55 million up to $100 million through
additional syndication. The proceeds of any borrowings under the Credit Facility may be used to fund future
permitted acquisitions, to provide for working capital and for other general corporate purposes.
Off-Balance Sheet Arrangements At January 29, 2011 and January 30, 2010, we did not have any relationship with unconsolidated entities or
financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually
narrow or limited purposes. Therefore, we are not materially exposed to any financing, liquidity, market or credit
risk that could arise if we had engaged in such relationships.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon the consol-
idated financial statements, which have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. Management has discussed the development
and selection of these critical accounting policies and estimates with the Audit Committee of our Board of
Directors, and believes the following assumptions and estimates are significant to reporting our results of operations
and financial position.
Inventory Valuation and Shrinkage
We identify potentially excess and slow-moving inventories by evaluating turn rates and inventory levels in
conjunction with our overall sales trend. Excess quantities of inventory are identified through evaluation of
inventory aging, review of inventory turns and historical sales experiences, as well as specific identification based
27 on fashion trends. Further, exposure to inadequate realization of carrying value is identified through analysis of
gross margins and markdowns in combination with changes in current business trends. We provide lower of cost or
market adjustments for such identified excess and slow-moving inventories. Historically, the variation of those
estimates to observed results has been insignificant and, although possible, significant variation is not expected in
the future. If, however, our markdown rate and cost percentage estimates varied by 10% of their values, the carrying
amount of inventory would have changed by approximately $0.2 million.We estimate our expected shrinkage of inventories between our physical inventory counts by applying the most
recent average store shrinkage experience. These rates are updated to reflect the most recent physical inventory
shrinkage experience. Historically, the variation of those estimates to observed results has been insignificant and,
although possible, significant variation is not expected in the future. If, however, our estimated shrinkage
percentages increased by 10%, we would have incurred approximately $0.9 million in additional expense and
the carrying amount of inventory would have changed by approximately $0.5 million.
Revenue Recognition
Although our recognition of revenue does not involve significant judgment, revenue recognition represents an
important accounting policy. Retail sales at our stores are recorded at the point of sale and are net of estimated
customer returns, sales discounts under the “Passport Club” and “The Black Book” loyalty programs and company
issued coupons, promotional discounts and associate discounts. We record DTC revenue based on the estimated
receipt date of the product by our customers.
Under our current program, gift cards do not have expiration dates. We account for gift cards by recognizing a
liability at the time the gift card is sold. The liability is relieved and revenue is recognized for gift cards upon
redemption. In addition, we recognize revenue on unredeemed gift cards based on determining that the likelihood of
the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to
relevant jurisdictions (commonly referred to as gift card breakage). We recognize gift card breakage under the
redemption recognition method. This method records gift card breakage as revenue on a proportional basis over the
redemption period based on our historical gift card breakage rate. We determine the gift card breakage rate based on
our historical redemption patterns.
As part of the normal sales cycle, we receive customer merchandise returns related to store and DTC sales. To
account for the financial impact of this process, we estimate future returns on previously sold merchandise.
Reductions in sales and gross margin are recorded for estimated merchandise returns based on return history,
current sales levels and projected future return levels.
Evaluation of Long-Lived Assets
Long-lived assets are reviewed periodically for impairment if events or changes in circumstances indicate that
the carrying amount may not be recoverable. If future undiscounted cash flows expected to be generated by the asset
are less than its carrying amount, an asset is determined to be impaired, and a loss is recorded for the amount by
which the carrying value of the asset exceeds its fair value. The fair value of an asset is estimated using estimated
future cash flows of the asset discounted by a rate commensurate with the risk involved with such asset while
incorporating marketplace assumptions. The estimate of future cash flows requires management to make certain
assumptions and to apply judgment, including forecasting future sales and the useful lives of the assets. We exercise
our best judgment based on the most current facts and circumstances surrounding our business when applying these
impairment rules. We establish our assumptions and arrive at the estimates used in these calculations based upon our
historical experience, knowledge of the retail industry and by incorporating third-party data, which we believe
results in a reasonably accurate approximation of fair value. Nevertheless, changes in the assumptions used could
have an impact on our assessment of recoverability. For example, as it relates to the $1.9 million write-off of fixed
assets for certain underperforming stores in fiscal 2010, if we had decreased our forecast of future sales by 1%
throughout the forecast period or increased our discount rate by 1%, our write-off would have increased by less than
$0.1 million.
28 We evaluate the recoverability of goodwill at least annually based on a two-step impairment test. The first step
compares the fair value of our reporting units with their carrying amounts, including goodwill. If the carrying
amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any
impairment loss. Fair value is determined based on estimated future cash flows, discounted at a rate that
approximates our cost of capital.
There are several significant assumptions and estimates used in the discounted cash flow model. Included
among these are the estimates used to forecast cash flows over a 10-year forecast period, including an estimate for
overall sales growth based on assumptions with respect to future comparable store sales growth, changes in store
counts and square footage growth rates. We also estimate future gross margin and operating margin percentages.
The discount rate is estimated based on an approximation of our weighted average cost of capital formulated by
reviewing assumptions used by marketplace participants, in order to calculate the present value of forecasted future
cash flows. Lastly, our discounted cash flow model estimates future cash flows where appropriate beyond the
10-year forecast period for purposes of the present value computation by applying a long-term growth rate
commensurate with an estimate of overall U.S. economic growth.
With regard to the goodwill impairment test completed during the fourth quarter of fiscal 2010, if we had
assumed a weighted average cost of capital 1% higher than the rate used in the goodwill impairment test, the
estimated fair value of the Chico’s and WH yBM reporting units would have decreased by approximately
$173.2 million and $59.1 million, respectively. Nevertheless, even such reduced fair value amounts still would
be greater than the respective carrying values of the respective reporting units and thus the second step of the
goodwill impairment test still would not have been triggered.
Conversely, if we had assumed a sales growth estimate 1% lower throughout the forecast period than the rate
used in our goodwill impairment test, the fair value of the Chico’s and WH yBM reporting units would have
decreased by approximately $227.5 million and $122.8 million, respectively. Again, however, even such reduced
fair value amounts still would be greater than the respective carrying values of the respective reporting units and
thus the second step of the goodwill impairment test still would not have been triggered. Currently, we believe that
neither of our reporting units is at risk of failing the first step of goodwill impairment testing.
We evaluate our other intangible assets for impairment on an annual basis by comparing the fair value of the
asset with its carrying value. Such estimates are subject to change and we may be required to recognize impairment
losses in the future. For example, with regard to our annual impairment test of the WH yBM trademark intangible
asset, if we had assumed a sales growth estimate 1% lower throughout the forecast period than the rate used in its
trademark impairment test, the fair value of the WH yBM trademark would have decreased by approximately
$7.8 million. Conversely, an increase of 1% in the discount rate would have decreased the fair value by
approximately $9.4 million. In either case, the fair value of the WHy BM trademark still would be greater than
its carrying value and no impairment charge would have been recognized.
Operating Leases
Rent expense under store operating leases is recognized on a straight-line basis over the term of the leases.
Landlord incentives, “rent-free” periods, rent escalation clauses and other rental expenses are also amortized on a
straight-line basis over the terms of the leases, which includes the construction period and which is generally 60 —
90 days prior to the store opening date when we generally begin improvements in preparation for our intended use.
Tenant improvement allowances are recorded as a deferred lease credit within deferred liabilities and amortized as a
reduction of rent expense over the term of the lease, which includes the construction period and one renewal when
there is a significant economic penalty associated with non-renewal.
Income Taxes
Income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset
and liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Inherent in the
measurement of deferred balances are certain judgments and interpretations of existing tax law and published
29 guidance as applicable to our operations. No valuation allowance has been provided for deferred tax assets, since
management anticipates that the full amount of these assets should be realized in the future. Our effective tax rate
considers management’s judgment of expected tax liabilities within the various taxing jurisdictions in which we are
subject to tax. Due to the substantial amounts involved and judgment necessary, we deem this policy could be
critical to our financial statements.We record amounts for uncertain tax positions that management believes are supportable, but are potentially
subject to successful challenge by the applicable taxing authority. Consequently, changes in our assumptions and
judgments could materially affect amounts recognized related to income tax uncertainties and may affect our results
of operations or financial position. Historically, the variation of those estimates to observed results has been
insignificant and, although possible, significant variation is not expected in the future. We believe our assumptions
for estimates continue to be reasonable, although actual results may have a positive or negative material impact on
the balances of such tax positions. At January 29, 2011 and January 30, 2010, we had approximately $3.6 million
and $6.9 million reserved for uncertain tax positions, respectively. A 5% difference in the ultimate settlement
amount of our uncertain tax positions versus our tax reserves recorded on January 29, 2011 would have affected net
income and the related reserves by approximately $0.1 million. See Note 6 to the consolidated financial statements
for further discussion of our uncertain tax positions.
Stock-Based Compensation Expense
The calculation of stock-based employee compensation expense involves estimates that require management’s
judgment. These estimates include the fair value of each of the stock option awards granted, which is estimated on
the date of grant using the Black-Scholes option pricing model. There are two significant inputs into the Black-
Scholes option pricing model: expected volatility and expected term. We estimate expected volatility based on the
historical volatility of our stock over a term equal to the expected term of the option granted. The expected term of
stock option awards granted is derived from historical exercise experience under our stock option plans and
represents the period of time that stock option awards granted are expected to be outstanding. The assumptions used
in calculating the fair value of stock-based payment awards represent management’s best estimates, but these
estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors
change and we use different assumptions, stock-based compensation expense could be materially different in the
future. However, a change of 5% in the assumptions for expected volatility and expected term used to calculate the
fair value of stock options granted during the fiscal year ended January 29, 2011 would have affected net income by
approximately $0.1 million for fiscal 2010.
In addition, we are required to estimate the expected forfeiture rate, and only recognize expense for those
shares expected to vest. In determining the portion of the stock-based payment award that is ultimately expected to
be earned, we derive forfeiture rates based on historical data. In accordance with the authoritative guidance, we
revise our forfeiture rates, when necessary, in subsequent periods if actual forfeitures differ from those originally
estimated. As a result, in the event that a grant’s actual forfeiture rate is materially different from its estimate at the
completion of the vesting period, the stock-based compensation expense could be significantly different from what
we record in the current and prior periods. See Note 9 to the consolidated financial statements for further discussion
on stock-based compensation.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06
(“ASU 2010-06”) which amends Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measures and
Disclosures. ASU 2010-06 amends the ASC to require disclosure of transfers into and out of Level 1 and Level 2 fair
value measurements, and also require more detailed disclosure about the activity within Level 3 fair value
measurements. This guidance is effective for annual and interim reporting periods beginning after December 15,
2009, except for requirements related to Level 3 disclosures, which are effective for annual and interim periods
beginning after December 15, 2010. We do not expect that adoption of the remaining provisions of ASU 2010-06
will have a material impact on our consolidated financial statements.
30 Quarterly Results and SeasonalityOur quarterly results may fluctuate significantly depending on a number of factors including timing of new
store openings, adverse weather conditions, the spring and fall fashion lines and shifts in the timing of certain
holidays. In addition, our periodic results can be directly and significantly impacted by the extent to which new
merchandise offerings are accepted by customers, the timing of the introduction of such merchandise and the timing
of marketing initiatives.
Certain Factors That May Affect Future Results
This Form 10-K may contain certain “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which
reflect our current views with respect to certain events that could have an effect on our future financial performance,
including but without limitation, statements regarding future growth rates of our store concepts. The statements may
address items such as future sales, gross margin expectations, operating margin expectations, earnings per share
expectations, planned store openings, closings and expansions, future comparable store sales, future product
sourcing plans, inventory levels, planned marketing expenditures, planned capital expenditures and future cash
needs. In addition, from time to time, we may issue press releases and other written communications, and our
representatives may make oral statements, which contain forward-looking information.
These statements, including those in this Form 10-K and those in press releases or made orally, may include the
words “expects,” “believes,” and similar expressions. Except for historical information, matters discussed in such
oral and written statements, including this Form 10-K, are forward-looking statements. These forward-looking
statements are subject to various risks and uncertainties that could cause actual results to differ materially from
historical results or those currently anticipated. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and in Item 1A, “Risk Factors” of this Form 10-K.
These potential risks and uncertainties include the financial strength of retailing in particular and the economy
in general, the extent of financial difficulties that may be experienced by customers, our ability to secure and
maintain customer acceptance of styles and store concepts, the propriety of inventory mix and sizing, the quality of
merchandise received from suppliers, the extent and nature of competition in the markets in which we operate, the
extent of the market demand and overall level of spending for women’s private branded clothing and related
accessories, the adequacy and perception of customer service, the ability to coordinate product development with
buying and planning, the ability to efficiently, timely and successfully execute significant shifts in the countries
from which merchandise is supplied, the ability of our suppliers to timely produce and deliver clothing and
accessories, the changes in the costs of manufacturing, labor and advertising, the rate of new store openings, the
buying public’s acceptance of any of our new store concepts, the performance, implementation and integration of
management information systems, the ability to hire, train, energize and retain qualified sales associates and other
employees, the availability of quality store sites, the ability to expand our distribution center and other support
facilities in an efficient and effective manner, the ability to hire and train qualified managerial employees, the ability
to effectively and efficiently establish and operate DTC sales, the ability to secure and protect trademarks and other
intellectual property rights, the ability to effectively and efficiently operate the Chico’s, WHy BM, and Soma
merchandise brands, risks associated with terrorist activities, risks associated with natural disasters such as
hurricanes and other risks. In addition, there are potential risks and uncertainties that are peculiar to our reliance on
sourcing from foreign suppliers, including the impact of work stoppages, transportation delays and other inter-
ruptions, political or civil instability, imposition of and changes in tariffs and import and export controls such as
import quotas, changes in governmental policies in or towards foreign countries, currency exchange rates and other
similar factors.
The forward-looking statements included herein are only made as of the date of this Annual Report on
Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
31 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe market risk of our financial instruments as of January 29, 2011 has not significantly changed since
January 30, 2010. We are exposed to market risk from changes in interest rates on any future indebtedness and our
marketable securities.
Our exposure to interest rate risk relates in part to our revolving line of credit with our bank; however, as of
January 29, 2011, we did not have any outstanding borrowings on our line of credit and, given our current liquidity
position, do not expect to utilize our line of credit in the foreseeable future except for the continuing use of the letter
of credit facility portion thereof.
Our investment portfolio is maintained in accordance with our investment policy which identifies allowable
investments, specifies credit quality standards and limits the credit exposure of any single issuer. Our investment
portfolio consists of cash equivalents and marketable securities, including variable rate demand notes, which are
considered highly liquid, variable rate municipal debt securities, municipal bonds, asset-backed securities,
corporate bonds, and U.S. treasury securities. Although the variable rate demand notes, totaling $319.2 million,
have long-term maturity dates ranging from 2011 to 2049, the interest rates generally reset weekly. Despite the
long-term nature of the underlying securities of the variable rate demand notes, we have the ability to quickly
liquidate or put back these securities. The remainder of the portfolio, as of January 29, 2011 consisted of
$117.7 million of securities with maturity dates less than one year and $97.1 million with maturity dates over one
year and less than two years. We consider all available-for-sale securities, including those with maturity dates
beyond 12 months, as available to support current operational liquidity needs and therefore classify these securities
as short-term investments within current assets on the consolidated balance sheets. As of January 29, 2011, an
increase of 100 basis points in interest rates would reduce the fair value of our marketable securities portfolio by
approximately $1.9 million. Conversely, a reduction of 100 basis points in interest rates would increase the fair
value of our marketable securities portfolio by approximately $1.0 million.
32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAREPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Chico’s FAS, Inc. We have audited the accompanying consolidated balance sheets of Chico’s FAS, Inc. and subsidiaries (the
Company) as of January 29, 2011 and January 30, 2010, and the related consolidated statements of operations,
stockholders’ equity and comprehensive income, and cash flows for each of the three fiscal years in the period
ended January 29, 2011. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Chico’s FAS, Inc. and subsidiaries at January 29, 2011 and January 30,
2010, and the consolidated results of their operations and their cash flows for each of the three fiscal years in
the period ended January 29, 2011, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Chico’s FAS, Inc. and subsidiaries’ internal control over financial reporting as of January 29, 2011,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 22, 2011 expressed an unqualified opinion
thereon.
/s/ ERNST & YOUNG LLP
Tampa, Florida
March 22, 2011
33 CHICO’S FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
January 29,2011 January 30,
2010 January 31,
2009
Fiscal Year Ended
Net sales:
Chico’s/Soma Intimates
................................. $1,314,649 $1,196,729 $1,127,988
White House yBlack Market ............................. 590,305 516,421 454,417
Total net sales ...................................... 1,904,954 1,713,150 1,582,405
Cost of goods sold ..................................... 836,379 753,409 762,913
Gross margin ...................................... 1,068,575 959,741 819,492
Selling, general and administrative expenses:
Store and direct operating expenses . . .......................673,142 647,040 645,352
Marketing ........................................... 102,481 78,075 80,326
National Store Support Center ............................. 114,002 111,447 109,744
Impairment and restructuring charges .......................1,868 15,026 23,664
Total selling, general and administrative expenses ..........891,493 851,588 859,086
Income (loss) from operations .......................... 177,082 108,153 (39,594)
Interest income, net .................................... 1,712 1,693 7,757
Income (loss) before income taxes .......................178,794 109,846 (31,837)
Income tax provision (benefit) ............................ 63,400 40,200 (12,700)
Net income (loss) .................................... $ 115,394 $ 69,646 $ (19,137)
Per share data:
Net income (loss) per common share — basic ................. $0.65 $ 0.39 $ (0.11)
Net income (loss) per common & common equivalent share — diluted ............................................ $ 0.64 $ 0.39 $ (0.11)
Weighted average common shares outstanding — basic ..........176,778 177,499 176,606
Weighted average common & common equivalent shares outstanding — diluted ................................. 178,034 178,858 176,606
Dividends declared and paid per share ....................... $ 0.16 ——
The accompanying notes are an integral part of these consolidated statements. 34 CHICO’S FAS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (In thousands)
January 29,2011 January 30,
2010
ASSETS
Current Assets: Cash and cash equivalents ......................................... $ 14,695 $ 37,043
Marketable securities, at fair value .................................. 534,019 386,500
Receivables ................................................... 3,845 3,922
Income tax receivable ............................................ 6,565 312
Inventories .................................................... 159,814 138,516
Prepaid expenses . . . ............................................ 26,851 24,023
Deferred taxes ................................................. 10,976 9,664
Total current assets ............................................ 756,765 599,980
Property and Equipment: Land and land improvements ...................................... 42,468 21,978
Building and building improvements ................................. 89,328 82,169
Equipment, furniture and fixtures ................................... 428,217 388,392
Leasehold improvements .......................................... 426,141 412,834
Total property and equipment .................................... 986,154 905,373
Less accumulated depreciation and amortization ........................(468,777) (383,844)
Property and equipment, net ..................................... 517,377 521,529
Goodwill ....................................................... 96,774 96,774
Other Intangible Assets ........................................... 38,930 38,930
Deferred Taxes .................................................. 964 36,321
Other Assets, Net ................................................ 5,211 25,269
$1,416,021 $1,318,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable . . . ............................................ $ 106,665 $ 79,219
Accrued liabilities . . . ............................................ 94,852 95,862
Current portion of deferred liabilities ................................. 19,760 19,625
Total current liabilities ......................................... 221,277 194,706
Noncurrent Liabilities: Deferred liabilities . . ............................................ 129,837 142,179
Total noncurrent liabilities ....................................... 129,837 142,179
Commitments and Contingencies
Stockholders’ Equity: Preferred stock, $.01 par value; 2,500 shares authorized; no shares issued and outstanding .................................................. — —
Common stock, $.01 par value; 400,000 shares authorized with 177,899 and 178,126 shares issued and outstanding, respectively ....................1,779 1,781
Additional paid-in capital ......................................... 282,528 268,109
Retained earnings . . . ............................................ 780,212 711,624
Accumulated other comprehensive income ............................. 388 404
Total stockholders’ equity ....................................... 1,064,907 981,918
$1,416,021 $1,318,803
The accompanying
notes
are an integral part of these consolidated statements. 35 CHICO’S FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME(In thousands)
Shares Par
Value Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive Income Total
Common Stock
BALANCE, February 2, 2008
. . . . . . . . . . . . . 176,245 $1,762 $249,639 $661,115 $ — $ 912,516
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (19,137) — (19,137)
Unrealized gain on marketable securities, net of taxes................................ — — — — 135 135
Comprehensive loss . . . . . . . . . . . . . . . . . . . . (19,002)
Issuance of common stock . . . . . . . . . . . . . . . . . . . 945 9 297 — — 306
Repurchase of common stock . . . . . . . . . . . . . . . . (60) — (311) — — (311)
Stock-based compensation . . . . . . . . . . . . . . . . . . . — — 12,590 — — 12,590
Adjustment to excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . — — (3,903) — — (3,903)
BALANCE, January 31, 2009 . . . . . . . . . . . . . 177,130 $1,771 $258,312 $641,978 $135 $ 902,196
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 69,646 — 69,646
Unrealized gain on marketable securities, net of taxes................................ — — — — 269 269
Comprehensive income . . . . . . . . . . . . . . . . . 69,915
Issuance of common stock . . . . . . . . . . . . . . . . . . . 1,072 11 4,846 — — 4,857
Repurchase of common stock . . . . . . . . . . . . . . . . (76) (1) (929) — — (930)
Stock-based compensation . . . . . . . . . . . . . . . . . . . — — 7,402 — — 7,402
Adjustment to excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . — — (1,522) — — (1,522)
BALANCE, January 30, 2010 . . . . . . . . . . . . . 178,126 $1,781 $268,109 $711,624 $404 $ 981,918
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 115,394 — 115,394
Unrealized loss on marketable securities, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — (16) (16)
Comprehensive income . . . . . . . . . . . . . . . . . 115,378
Issuance of common stock . . . . . . . . . . . . . . . . . . . 1,940 20 3,628 — — 3,648
Dividends paid on common stock ($0.16 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (28,489) — (28,489)
Repurchase of common stock . . . . . . . . . . . . . . . . (2,167) (22) (869) (18,317) — (19,208)
Stock-based compensation . . . . . . . . . . . . . . . . . . . — — 10,548 — — 10,548
Adjustment to excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,112 — — 1,112
BALANCE, January 29, 2011 . . . . . . . . . . . . . 177,899 $1,779 $282,528 $780,212 $388 $1,064,907
The accompanying notes are an integral part of these consolidated statements.
36 CHICO’S FAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
January 29,2011 January 30,
2010 January 31,
2009
Fiscal Year Ended
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ......................................... $ 115,394 $ 69,646 $ (19,137)
Adjustments to reconcile net income (loss) to net cash provided by operating activities —
Depreciation and amortization ............................ 94,113 96,372 97,572
Deferred tax expense (benefit) ............................ 32,501 5,647 (20,507)
Stock-based compensation expense ......................... 10,548 7,402 12,590
Excess tax benefit from stock-based compensation .............(2,655) (3,194) (100)
Deferred rent and lease credits ............................ (16,624) (17,961) (12,877)
Impairment charges .................................... 1,868 15,026 13,691
Loss on disposal of property and equipment ..................1,217 1,372 761
Decrease (increase) in assets — Receivables .......................................... 77 4,237 3,766
Income tax receivable .................................. (6,253) 11,394 12,267
Inventories .......................................... (21,298) (6,103) 11,847
Prepaid expenses and other .............................. (2,770) (2,489) 4,224
Increase (decrease) in liabilities — Accounts payable ..................................... 27,446 22,677 (22,488)
Accrued and other deferred liabilities . . .....................6,062 11,344 17,837
Total adjustments .................................... 124,232 145,724 118,583
Net cash provided by operating activities ..................239,626 215,370 99,446
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities ............................. (579,488) (590,223) (569,358)
Proceeds from sale of marketable securities . .....................431,953 446,146 587,809
Purchases of property and equipment ........................... (73,045) (67,920) (104,615)
Net cash used in investing activities . .....................(220,580) (211,997) (86,164)
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . .....................3,648 4,857 306
Excess tax benefit from stock-based compensation .................2,655 3,194 100
Dividends paid ........................................... (28,489)
Cash paid for deferred financing costs .......................... (629)
Repurchase of common stock ................................ (19,208) (930) (311)
Net cash (used in) provided by financing activities ...........(41,394) 7,121 (534)
Net (decrease) increase in cash and cash equivalents ..........(22,348) 10,494 12,748
CASH AND CASH EQUIVALENTS, Beginning of period...........37,043 26,549 13,801
CASH AND CASH EQUIVALENTS, End of period................ $ 14,695 $ 37,043 $ 26,549
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest ...................................... $ 322 $ 304 $ 159
Cash paid
for
income taxes, net ............................... $ 41,317 $ 29,530 $ 13,591
NON-CASH INVESTING AND FINANCING ACTIVITIES: Repossession of land in satisfaction of note receivable .............. $20,000
The accompanying notes are an integral part of these consolidated statements. 37 CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts and where otherwise indicated)
1. Business Organization and Significant Accounting Policies:
Description of Business The accompanying consolidated financial statements include the accounts of Chico’s FAS, Inc., a Florida
corporation, and its wholly-owned subsidiaries (“the Company”, “we”, “us”, and “our”). We operate as a national
specialty retailer of private branded, sophisticated, casual-to-dressy clothing, intimates, complimentary accesso-
ries, and other non-clothing gift items. We currently sell our products through retail stores, catalog, and via the
Internet at
www.chicos.com, www.whbm.com, and www.soma.com. As of January 29, 2011, we had 1,151 stores
located throughout the United States, the U.S. Virgin Islands and Puerto Rico.
Fiscal Year
Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the
fiscal year commences. The periods presented in these financial statements are the fiscal years ended January 29,
2011 (“fiscal 2010” or “current period”), January 30, 2010 (“fiscal 2009” or “prior period”) and January 31, 2009
(“fiscal 2008”). Fiscal 2010, 2009, and 2008 all contained 52 weeks.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in consolidation.
Segment Information
Our brands, Chico’s, WHy BM, and Soma Intimates, have been aggregated into one reportable segment due to
the similarities of the economic and operating characteristics of the operations represented by the brands.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Reclassifications of certain prior year balances were made in order to conform to the current year presentation.
Cash and Cash Equivalents Cash and cash equivalents include cash on hand and in banks and short-term highly liquid investments with
original maturities of three months or less.
Marketable Securities
Marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized
holding gains and losses, net of income taxes, reflected as a separate component of stockholders’ equity until
realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific
identification basis. We consider all available-for-sale securities, including those with maturity dates beyond
12 months, as available to support current operational liquidity needs and therefore, classify these securities within
current assets on the consolidated balance sheets.
38 InventoriesWe use the weighted average cost method to determine the cost of merchandise inventories. We identify
potentially excess and slow-moving inventories by evaluating inventory agings, turn rates and inventory levels in
conjunction with our overall sales trend. Further, exposure to inadequate realization of carrying value is identified
through analysis of gross margins and markdowns in combination with changes in current business trends. We
provide lower of cost or market adjustments for such identified excess and slow-moving inventories. We estimate
our expected shrinkage of inventories between physical inventory counts by using the most recent average store
shrinkage experience rates, which are updated on a regular basis. Substantially all of our inventories consist of
finished goods.
Purchasing, merchandising, distribution, and product development costs are expensed as incurred, and are
included in the accompanying consolidated statements of operations as a component of cost of goods sold.
Property and Equipment
Property and equipment is stated at cost. Depreciation of property and equipment is provided on a straight-line
basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their
estimated useful lives (generally 10 years or less) or the related lease term plus one anticipated renewal when there
is an economic penalty associated with non-renewal. Our property and equipment is depreciated using the following
estimated useful lives:
Estimated Useful Lives
Land improvements ...................... 35 years
Building and building improvements .......... 20-35years
Equipment, furniture and fixtures ............ 2-10years
Leasehold improvements .................. 5-10 years or term of lease, if shorter
Maintenance and repairs of property and equipment are expensed as incurred, and major improvements are
capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated
depreciation or amortization are eliminated from the accounts, and any gain or loss is charged to operations.
Operating Leases
We lease retail stores and office space under operating leases. The majority of our lease agreements provide for
tenant improvement allowances, rent escalation clauses and/or contingent rent provisions. Tenant improvement
allowances are recorded as a deferred lease credit within deferred liabilities and amortized as a reduction of rent
expense over the term of the lease, which includes the construction period and one renewal when there is a
significant economic penalty associated with non-renewal. Landlord incentives, “rent-free” periods, rent escalation
clauses, and other rental expenses are amortized on a straight-line basis over the terms of the leases, which includes
the construction period, typically 60-90 days prior to the store opening date, during which we generally begin
improvements in preparation for our intended use.
Certain leases provide for contingent rents, in addition to a basic fixed rent, which are determined as a
percentage of gross sales in excess of specified levels. We record a contingent rent liability in accrued liabilities on
the consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or
when management determines that achieving the specified levels during the fiscal year is probable.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived intangible assets are not amortized, but instead are tested for impairment at
least annually. We perform our annual impairment test during the fourth quarter, or more frequently should events or
circumstances change that would indicate that an impairment may have occurred. In fiscal 2007, we completed the
39
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) acquisition of all outstanding franchise rights and recorded goodwill and territorial franchise rights as an indefinite-
lived intangible asset. During fiscal 2003, in connection with the acquisition of The White House, Inc., we recorded
goodwill and a trademark indefinite-lived intangible asset.Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible
assets acquired and liabilities assumed in a business combination. Impairment testing for goodwill is done at a
reporting unit level. Under the guidance, reporting units are defined as an operating segment or one level below an
operating segment, called a component. Using these criteria, we identified our reporting units and concluded that
the goodwill related to the territorial franchise rights for the state of Minnesota should be allocated to the Chico’s
reporting unit and that the goodwill associated with the WH yBM acquisition should be assigned to the WHy BM
reporting unit.
In the fourth quarter of fiscal 2010 and fiscal 2009, we performed our annual impairment test and concluded
that the implied fair value of the Chico’s and WH yBM reporting units exceeded their respective carrying amounts.
Therefore, we did not recognize an impairment loss.
As of January 29, 2011, the total carrying value of other intangible assets was $38.9 million of which
$34.0 million related to the acquired WHy BM trademark and $4.9 million related to the acquired territorial
franchise rights for Minnesota. The value of the trademark asset was determined using a discounted cash flow
method, based on the estimated future benefit to be received from the trademark. The value of the acquired
territorial franchise rights was determined using a discounted cash flow method, based on a relief from royalty
concept. We are not amortizing our intangible assets, as each has an indefinite useful life. In the fourth quarter of
fiscal 2010 and 2009, we performed an analysis to compare the fair values of each of our intangible assets, using a
discounted cash flow method, to each of their respective carrying values and concluded that the intangible assets
were not impaired.
Other Assets, Net
At January 29, 2011, other assets, net, consist mainly of our deferred compensation plan assets. At January 30,
2010, other assets, net, included a note receivable valued at $20.0 million. The value of the note receivable was
based on the estimated fair value of the underlying collateral, a parcel of land located in Fort Myers, Florida, less
estimated costs to sell. In fiscal 2009, we determined the note receivable was impaired, and therefore, wrote the
value of the note down to $20.0 million in accordance with generally accepted accounting principles. Additionally,
upon determining the note was impaired during the second quarter of fiscal 2009, we ceased recognizing any further
interest income and also reversed the then year-to-date interest income of approximately $0.8 million. During fiscal
2010, we took possession of the land in satisfaction of the note receivable and classified the land within property,
plant and equipment on our consolidated balance sheet.
Accounting for the Impairment of Long-lived Assets
Long-lived assets are reviewed periodically for impairment if events or changes in circumstances indicate that
the carrying amount may not be recoverable. If future undiscounted cash flows expected to be generated by the asset
are less than its carrying amount, an asset is determined to be impaired, and a loss is recorded for the amount by
which the carrying value of the asset exceeds its fair value. See Note 2 for a discussion of impairment charges for
long-lived assets recorded in fiscal 2010, 2009 and 2008.
Income Taxes
Income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset
and liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, we follow a
comprehensive model to recognize, measure, present, and disclose in our financial statements the estimated
40
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) aggregate tax liability of uncertain tax positions that we have taken or expect to take on a tax return. This model
states that a tax benefit from an uncertain tax position may be recognized if it is “more likely than not” that the
position is sustainable, based upon its technical merits.The tax benefit of a qualifying position is the largest amount of tax benefit that has greater than a 50%
likelihood of being realized upon the ultimate settlement with a taxing authority having full knowledge of all
relevant information.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, marketable securities, trade receivables and
payables. The carrying values of these assets and liabilities approximate their fair value due to the short-term nature
of the instruments.
Self-Insurance
We are self-insured for certain losses relating to workers’ compensation, medical and general liability claims.
Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of
the aggregate liability for uninsured claims incurred based on historical experience. Although management believes
it has the ability to adequately accrue for estimated losses related to claims, it is possible that actual results could
significantly differ from recorded self-insurance liabilities.
Revenue Recognition
Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns, sales
discounts under the Passport Club and The Black Book loyalty programs and company issued coupons, promotional
discounts and associate discounts. For DTC sales, revenue is recognized at the time we estimate the customer
receives the product, which is typically within a few days of shipment.
Under our current program, gift cards do not have expiration dates. We account for gift cards by recognizing a
liability at the time a gift card is sold. The liability is relieved and revenue is recognized for gift cards upon
redemption. In addition, we recognize revenue on unredeemed gift cards when it can be determined that the
likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift
cards to relevant jurisdictions (commonly referred to as gift card breakage). We recognize gift card breakage under
the redemption recognition method. This method records gift card breakage as revenue on a proportional basis over
the redemption period based on the historical gift card breakage rate. We determine the gift card breakage rate based
on our historical redemption patterns.
Our policy towards taxes assessed by a government authority directly imposed on revenue producing
transactions between a seller and a customer is, and has been, to exclude all such taxes from revenue.
Supplier Allowances
From time to time, we receive allowances and/or credits from certain of our suppliers. The aggregate amount of
such allowances and credits is immaterial to our results of operations.
Shipping and Handling Costs
Shipping and handling costs to transport goods between stores or directly to customers, net of amounts paid to
us by customers, amounted to $11.2 million, $9.6 million, and $11.0 million in fiscal 2010, 2009 and 2008,
respectively, and are included in store and direct operating expenses in the accompanying consolidated statements
of operations. Amounts paid by customers to cover shipping and handling costs are considered insignificant.
41
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Store Pre-opening CostsOperating costs (including store set-up, rent and training expenses) incurred prior to the opening of new stores
are expensed as incurred and are included in store and direct operating expenses in the accompanying consolidated
statements of operations.
Advertising Costs
Costs associated with the production of advertising, such as writing, copy, printing, and other costs are
expensed as incurred. Costs associated with communicating advertising that has been produced, such as television
and magazine, are expensed when the advertising event takes place. For fiscal 2010, 2009 and 2008, advertising
expense was approximately $86.8 million, $65.0 million, and $67.5 million, respectively, and is reflected as
marketing expenses in the accompanying consolidated statements of operations.
Catalog expenses consist of the cost to create, print, and distribute catalogs. Such costs are amortized over their
expected period of future benefit, which is typically less than six weeks.
Stock-Based Compensation
Stock-based compensation for all awards is based on the grant date fair value of the award. The fair value of
stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The fair value of
restricted stock awards is determined by using the closing price of the Company’s common stock on the date of the
grant. We recognize expense related to stock options and restricted stock grants over the requisite service period on
a straight-line basis. The total compensation expense is reduced by estimated forfeitures expected to occur over the
vesting period of the award.
Compensation expense for performance-based awards is recorded based on the amount of the award ultimately
expected to vest and, depending on the level and likelihood of the performance condition to be met, on a straight-
line basis over the vesting period.
Earnings Per Share
In June 2008, accounting guidance was issued related to share-based awards that qualify as participating
securities. In accordance with this guidance, unvested share-based payment awards that include non-forfeitable
rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are
required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method.
For us, participating securities are comprised of unvested restricted stock awards.
Basic EPS is determined using the two-class method and is computed by dividing net income available to
common shareholders by the weighted-average number of common shares outstanding during the period including
the participating securities. Diluted EPS reflects the dilutive effect of potential common shares from securities such
as stock options.
42
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the computation of basic and diluted EPS shown on the face of the accompanying
consolidated statements of operations:
January 29, 2011 January 30,
2010 January 31,
2009
Numerator
Net income (loss) ............................ $ 115,394 $ 69,646 $ (19,137)
Net income allocated to participating securities . . . . . . (943) – –
Net income (loss) available to common shareholders . . $ 114,451 $ 69,646 $ (19,137)
Denominator Weighted average common shares outstanding —basic .................................. 176,777,953 177,498,862 176,606,274
Dilutive effect of stock options outstanding .......1,255,676 1,358,678 –
Weighted average common and common equivalent shares outstanding — diluted ................178,033,629 178,857,540 176,606,274
Net income (loss) per common share: Basic ................................. $ 0.65 $ 0.39 $ (0.11)
Diluted ................................ $ 0.64 $ 0.39 $ (0.11)
In fiscal 2010, 2009 and 2008, 3,280,324, 3,132,586 and 5,893,557 potential shares of common stock,
respectively, were excluded from the diluted per share calculation relating to stock option awards, because the effect
of including these potential shares was antidilutive.
Newly Issued Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06
(“ASU 2010-06”) which amends Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measures and
Disclosures. ASU 2010-06 amends the ASC to require disclosure of transfers into and out of Level 1 and Level 2
fair value measurements, and also require more detailed disclosure about the activity within Level 3 fair value
measurements. This guidance is effective for annual and interim reporting periods beginning after December 15,
2009, except for requirements related to Level 3 disclosures, which are effective for annual and interim periods
beginning after December 15, 2010. We do not expect that adoption of the remaining provisions of ASU 2010-06
will have a material impact on our consolidated financial statements.
2. Impairment and Restructuring Charges:
Fiscal 2010
Long-lived Asset Impairments: We periodically review our long-lived assets for impairment if events or
changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In fiscal 2010, we
completed an evaluation of long-lived assets at certain underperforming stores for indicators of impairment and, as a
result, determined that the carrying values of certain assets exceeded their future undiscounted cash flows. In
circumstances where future undiscounted cash flows expected to be generated by an asset are less than its carrying
amount, the asset is determined to be impaired, and a loss is recorded for the amount by which the carrying value of
the asset exceeds its fair value. With respect to the assets identified, we determined the fair value of these assets by
discounting their estimated future cash flows using a rate approximating our cost of capital, which resulted in an
impairment charge of approximately $1.9 million within selling, general and administrative expenses in the
consolidated statements of operations.
43
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Fiscal 2009In fiscal 2009, we incurred non-cash impairment charges totaling approximately $15.0 million which are
included in the consolidated statements of operations within selling, general and administrative expenses. A
summary of the charges is presented in the table below (amounts in thousands):
Impairment of long-lived assets related to underperforming stores ................... $1,134
Impairment of software development costs .................................... 8,058
Impairment of note receivable ............................................. 5,834
Total pre-tax impairment charges ........................................... $15,026
Long-lived Asset Impairments: In fiscal 2009, we decided to deploy alternative inventory planning and
allocation software. As a result, $8.1 million of development costs already incurred related to this project were
determined to be impaired. Additionally, similar to 2010, we completed an evaluation of long-lived assets at certain
underperforming stores for indicators of impairment and, as a result, recorded an impairment charge of approx-
imately $1.1 million.
Note Receivable Impairment: During the second quarter of fiscal 2009, we determined that a $25.8 million
note receivable was impaired, based on an independent evaluation of the fair value of the underlying collateral
coupled with the debtor’s apparent inability to pay the note in full. As a result, we recorded a non-cash impairment
charge of approximately $3.8 million, which was determined based on the difference between the book value of the
note and the independent evaluation of the fair value of the land at that time. During the fourth quarter of fiscal 2009,
based on an updated third-party valuation of the land, we determined that the fair value of the land had declined
further and an additional $2.0 million impairment charge was necessary to adjust the note to its current fair value,
less estimated costs to sell.
Fiscal 2008
In fiscal 2008, we incurred certain expense items that materially affected earnings results for the year. These
charges were composed of non-cash impairment charges for certain underperforming stores and severance and
workforce reductions, which are included in selling, general and administrative expenses under impairment and
restructuring charges in the accompanying statement of operations. A summary of the charges is presented in the
table below (amounts in thousands):
Impairment of long-lived assets related to underperforming stores ...................$13,691
Severance and workforce reduction charges .................................... 9,973
Total pre-tax impairment and restructuring charges ..............................$23,664
Long-lived Asset Impairment: As mentioned above, it is our practice to review long-lived assets periodically
for impairment if events or changes in circumstances, such as the worsening macroeconomic conditions expe-
rienced in fiscal 2008, indicate that the carrying amount may not be recoverable. Similar to 2010 and 2009, we
conducted an internal review of our long-lived assets at the store level and determined that the carrying value of
certain assets exceeded their future undiscounted cash flows. We then determined the fair value of the identified
long-lived assets by discounting their future cash flows using a rate approximating our cost of capital, which
resulted in an impairment charge of $13.7 million.
Severance and Workforce Reduction: During the fourth quarter of fiscal 2008, in an effort to reduce costs and
enhance efficiencies, we announced a workforce reduction that included the elimination of approximately 180
positions, or approximately 11% of the NSSC employee base. In addition, we incurred charges related to the
separation agreement with our former CEO. In connection with these actions and in accordance with the relevant
accounting guidance, we recorded approximately $10.0 million of personnel separation costs. The following table
44
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) summarizes the severance and workforce reduction charges incurred in fiscal 2008 as well as activity during fiscal
2009 and 2010 (amounts in thousands):
BeginningBalance Charges Non-Cash
Expense Payments Ending
Balance
Fiscal 2008 .......................... $ — $9,973 $(1,275) $ — $8,698
Fiscal 2009 .......................... $8,698 $ — $ — $8,582 $ 116
Fiscal 2010 .......................... $ 116 $ — $ — $ (116) $ —
3. Marketable Securities: Marketable securities are classified as available-for-sale and generally consist of variable rate demand notes,
which are considered highly liquid, variable rate municipal debt securities, municipal bonds, asset-backed
securities, corporate bonds, and U.S. treasury securities. Although the variable rate demand notes, totaling
$319.2 million, have long-term maturity dates ranging from 2011 to 2049, the interest rates are generally reset
weekly. Despite the long-term nature of the underlying securities of the variable rate demand notes, we have the
ability to quickly liquidate or put back these securities, thereby creating a short-term instrument. The remainder of
the portfolio, as of January 29, 2011, consisted of $117.7 million of securities with maturity dates less than one year
and $97.1 million with maturity dates over one year and less than two years.
The following tables summarize our investments in marketable securities at January 29, 2011 and January 30,
2010 (amounts in thousands):
Amortized Cost Gross
Unrealized Gains Gross
Unrealized Losses Estimated
Fair
Value
January 29, 2011
Total marketable securities .
.................$533,631 $467 $79 $534,019
Amortized
Cost Gross
Unrealized Gains Gross
Unrealized Losses Estimated
Fair
Value
January 30, 2010
Total marketable securities .
.................$386,096 $451 $47 $386,500
4. Fair Value Measurements: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the
principal or most advantageous market in an orderly transaction between market participants on the measurement
date. Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the
measurement date. The three levels are defined as follows:
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or; Unadjusted
quoted prices for identical or similar assets or liabilities in markets that are not active, or; Inputs other than
quoted prices that are observable for the asset or liability
Level 3 — Unobservable inputs for the asset or liability.
45
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) We measure certain financial assets at fair value on a recurring basis, including our marketable securities,
which are classified as available-for-sale securities, certain cash equivalents, specifically our money market
account, and assets held in our deferred compensation plan. The money market accounts are valued based on quoted
market prices in active markets. Our marketable securities are generally valued based on other observable inputs for
those securities (including market corroborated pricing or other models that utilize observable inputs such as
interest rates and yield curves) based on information provided by independent third party pricing entities, except for
U.S. treasury holdings which are valued based on quoted market prices in active markets. The investments in our
non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on
our consolidated balance sheets.
From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived
assets evaluated for impairment and, during fiscal 2009, a note receivable. We estimate the fair value of our long-
lived assets using company-specific assumptions which would fall within Level 3 of the fair value hierarchy. Last
year, the note receivable’s value was based on the value of the underlying real estate collateral as determined by an
independent third party using observable market data, which resulted in a Level 2 classification. During fiscal 2010,
the underlying real estate collateral was repossessed by us in full satisfaction of the note receivable.
New guidance on financial instruments measured at fair value requires additional disclosures regarding
significant transfers into and out of Level 1 and Level 2 as well as more detailed discussions regarding Level 3
activity. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant
inputs have changed that would impact the fair value hierarchy disclosure. During fiscal 2010, we did not make
significant transfers between Level 1 and Level 2 assets. Furthermore, as of January 29, 2011 and January 30, 2010,
we did not have any Level 3 financial assets.
In accordance with the provisions of the guidance, we categorized our financial assets, whether valued on a
recurring or non-recurring basis, based on the priority of the inputs to the valuation technique for the instruments, as
follows (amounts in thousands):
Balance as
of January 29, 2011 Quoted Prices
in Active
Markets for
Identical Assets (Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)
Fair Value Measurements at Reporting Date Using
Current Assets
Cash equivalents: Money market account .............. $ 5,397 $ 5,397 $ — $—
Marketable securities: Variable rate demand notes ...........319,220 — 319,220 —
Municipal securities ................ 151,159— 151,159 —
U.S. government securities ...........58,554 58,554 — —
Corporate bonds ................... 2,055— 2,055 —
Asset-backed securities .............. 3,031— 3,031 —
Noncurrent Assets Deferred compensation plan ..........4,1434,143 — —
Total ............................... $543,559 $68,094 $475,465 $—
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CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Balance as ofJanuary 30, 2010 Quoted Prices
in Active
Markets for
Identical Assets (Level 1) Significant
Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3)
Fair Value Measurements at Reporting Date Using
Current Assets
Cash equivalents: Money market account .................. $ 8,256 $ 8,256 $ — $—
Marketable securities: Variable rate demand notes ...............207,895— 207,895 —
Municipal securities .................... 111,153— 111,153 —
U.S. government securities ...............33,383 33,383 — —
Corporate bonds ....................... 12,826— 12,826 —
Asset-backed securities .................. 21,243— 21,243 —
Noncurrent Assets Note receivable ........................ 20,000— 20,000 —
Deferred compensation plan ..............4,050 4,050 — —
Total ................................... $418,806 $45,689 $373,117 $—
5. Accrued Liabilities: Accrued liabilities consisted of the following:
January 29,2011 January 30,
2010
Allowance for estimated customer returns, gift cards and store credits
outstanding .............................................. $41,781 $40,669
Accrued payroll, benefits, bonuses and severance costs ...............31,547 34,038
Sales and income taxes ....................................... 4,017 7,754
Other . . . ................................................. 17,507 13,401
Total accrued liabilities ..................................... $94,852 $95,862
6. Income Taxes: The income tax provision (benefit) consisted of the following:
Fiscal2010 Fiscal
2009 Fiscal
2008
Current:
Federal ........................................... $29,809 $30,555 $ 4,562
State ............................................. 1,106 3,998 5,924
Deferred: Federal ........................................... 28,623 5,451 (18,992)
State ............................................. 3,862 196 (4,194)
Total income tax provision (benefit) . . ..................$63,400 $40,200 $(12,700)
47
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A reconciliation between the statutory federal income tax rate and the effective income tax rate follows:
Fiscal2010 Fiscal
2009 Fiscal
2008
Federal income tax rate ........................................ 35.0% 35.0% (35.0)%
State income tax, net of federal tax benefit ......................... 1.8 2.5 5.6
Municipal interest income ...................................... (0.3) (0.6) (6.4)
Enhanced charitable contribution ................................. (1.1) (1.1) (6.8)
Decrease in deferred compensation plan assets ....................... — — 4.2
Other items, net ............................................. 0.1 0.8 (1.5)
Total .................................................... 35.5% 36.6% (39.9)%
Deferred tax assets and liabilities are recorded due to different carrying amounts for financial and income tax
reporting purposes arising from cumulative temporary differences. These differences consist of the following as of
January 29, 2011 and January 30, 2010:
January 29, 2011 January 30,
2010
Current deferred tax assets:
Accrued liabilities and allowances ............................. $ 11,161 $ 12,287
Other, net ............................................... 1,642 1,932
$ 12,803 $ 14,219
Noncurrent deferred tax assets: Property related, net ....................................... $ — $ 19,516
Accrued liabilities and allowances ............................. 2,105 3,480
Accrued straight-line rent ................................... 16,980 16,381
Stock-based compensation ................................... 10,915 9,851
Other, net ............................................... 3,228 4,060
$ 33,228 $ 53,288
Total deferred tax assets ...................................... $ 46,031 $ 67,507
Current deferred tax liabilities: Inventories .............................................. $ (1,827) $ (4,555)
$ (1,827) $ (4,555)
Noncurrent deferred tax liabilities: Property related, net ....................................... $(14,160) $ —
Other intangible assets ..................................... (18,104) (16,967)
$(32,264) $(16,967)
Total deferred tax liabilities .................................... $(34,091) $(21,522)
48
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A reconciliation of the beginning and ending amounts of uncertain tax positions for each of fiscal 2010 and
fiscal 2009 is as follows:
Fiscal 2010 Fiscal
2009
Balance at beginning of year ...................................... $ 6,886 $10,567
Additions for tax positions of prior years ............................. 278 411
Reductions for tax positions of prior years ............................(2,612) (937)
Additions for tax positions for the current year . ........................ 335 173
Reductions for tax positions for the current year ........................ — —
Settlements with tax authorities .................................... (1,172) (2,708)
Reductions due to lapse of applicable statutes of limitation ................(87) (620)
Balance at end of year ........................................... $ 3,628 $ 6,886
Included in the January 29, 2011 and January 30, 2010 balances are $2.4 million and $4.5 million, respectively,
of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate in future periods.
Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized tax
benefits in income tax expense. For fiscal 2010, 2009 and 2008, we accrued $0.4 million, $0.9 million, and
$2.2 million, respectively, for interest and penalties. We had approximately $2.1 million and $2.7 million for the
payment of interest and penalties accrued at January 29, 2011 and January 30, 2010, respectively. The amounts
included in the reconciliation of uncertain tax positions do not include accruals for interest and penalties.
In fiscal 2006, we began participating in the IRS’s real time audit program, Compliance Assurance Process
(“CAP”). Under the CAP program, material tax issues and initiatives are disclosed to the IRS throughout the year
with the objective of reaching agreement as to the proper reporting treatment when the federal return is filed. Our
fiscal 2007 and fiscal 2008 years have been examined and a no change letter issued. Our fiscal 2009 year has been
examined and a partial acceptance letter issued. The only outstanding issue relates to a tax credit and is currently
being addressed in the post-file review process. Due to the filing of a Telephone Excise Tax Refund (TETR) claim,
our fiscal 2006 year return is potentially subject to survey (limited review).
With few exceptions, we are no longer subject to state and local examinations for years before fiscal 2007.
Various state examinations are currently underway for fiscal periods spanning from 2003 through 2009; however,
we do not expect any significant change to our uncertain tax positions within the next year.
7. Deferred Liabilities:
Deferred liabilities consisted of the following:
January 29,2011 January 30,
2010
Deferred rent .............................................. $ 42,929 $ 41,614
Deferred lease credits ........................................ 97,253 107,714
Other deferred liabilities ...................................... 9,415 12,476
Total deferred liabilities ..................................... 149,597 161,804
Less current portion ....................................... (19,760) (19,625)
Total deferred liabilities ...................................... $129,837 $142,179
Deferred rent represents the difference between operating lease obligations currently due and operating lease
expense, which is recorded on a straight-line basis over the terms of our leases.
Deferred lease credits represent construction allowances received from landlords and are amortized as a
reduction of rent expense over the appropriate respective terms of the related leases.
49
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 8. Commitments and Contingencies:
LeasesWe lease retail store space, office space and various office equipment under operating leases expiring in
various years through the fiscal year ending 2020. Certain of the leases provide that we may cancel the lease if our
retail sales at that location fall below an established level, and certain leases provide for additional rent payments to
be made when sales exceed a base amount.
Certain operating leases provide for renewal options for periods from three to five years at their fair rental
value at the time of renewal. In the normal course of business, operating leases are generally renewed or replaced by
other leases.
Minimum future rental payments under non-cancelable operating leases (including leases with certain
minimum sales cancellation clauses described below and exclusive of common area maintenance charges and/or
contingent rental payments based on sales) as of January 29, 2011, are approximately as follows:
FISCAL YEAR ENDING:
January 28, 2012 ...................................................... $133,195
February 2, 2013 ...................................................... 118,717
February 1, 2014 ...................................................... 104,028
January 31, 2015 ...................................................... 95,080
January 30, 2016 ...................................................... 84,412
Thereafter ........................................................... 149,968
Total minimum lease payments . . ........................................ $685,400
A majority of our store operating leases contain cancellation clauses that allow the leases to be terminated at
our discretion, if certain minimum sales levels are not met within the first few years of the lease term. We have not
historically exercised many or met these cancellation clauses and, therefore, have included commitments for the full
lease terms of such leases in the above table. For fiscal 2010, 2009 and 2008, total rent expense under operating
leases was approximately $172.1 million, $161.6 million, and $154.8 million, respectively, including common area
maintenance charges of approximately $25.0 million, $23.7 million, and $23.6 million, respectively, other rental
charges of approximately $24.5 million, $23.6 million, and $21.4 million, respectively, and contingent rental
expense of approximately $8.2 million, $6.5 million, and $5.1 million, respectively, based on sales.
Credit Facility
We have a $55 million senior secured revolving credit facility (the Credit Facility) with SunTrust Bank, which
provides us the ability, subject to satisfaction of certain conditions, to increase the commitments available under the
Credit Facility from $55 million up to $100 million through additional syndication. The proceeds of any borrowings
under the Credit Facility may be used to fund future permitted acquisitions, to provide for working capital, and to be
used for other general corporate purposes. The Credit Facility is scheduled to expire in November 2011. At
January 29, 2011, no borrowings were outstanding under the Credit Facility.
The obligations under the Credit Facility are secured by (i) all credit card accounts and receivables for goods
sold or services rendered and (ii) all inventory of any kind wherever located of Chico’s FAS, Inc. and its
subsidiaries.
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CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The interest on revolving loans under the Credit Facility will accrue, at our election, at either (i) a Base Rate
plus the Applicable Margin or (ii) a Eurodollar Rate tied to LIBOR for the selected interest rate period plus the
Applicable Margin. Base Rate shall mean the highest of (i) the per annum rate which SunTrust publicly announces
as its prime lending rate, (ii) the Federal Funds rate plus one-half of one percent (
1 2%) per annum or (iii) the
Eurodollar Rate tied to the one-month LIBOR rate determined on a daily basis. The Applicable Margin is based
upon a pricing grid depending on the total unused availability under the Credit Facility and certain financial ratios.
The Credit Facility contains customary terms and conditions for credit facilities of this type, including certain
restrictions on our ability to incur additional indebtedness, create liens, enter into transactions with affiliates,
transfer assets, pay dividends, repurchase stock or make distributions on junior capital, consolidate or merge with
other entities, or suffer a change in control. The Credit Facility contains customary events of default. If a default
occurs and is not cured within any applicable cure period or is not waived, our obligations under the Credit Facility
may be accelerated. The Credit Facility also contains various financial covenants including a fixed charge coverage
ratio (as defined in the Credit Facility). The Credit Facility also requires the payment of monthly fees based on the
average daily unused portion of the Credit Facility, in an amount equal to 0.50% per annum.
Other
At January 29, 2011 and January 30, 2010, we had approximately $326.7 million and $252.7 million,
respectively, due under non-cancelable purchase commitments consisting of amounts to be paid under agreements
to purchase inventory.
The Company was named as a defendant in a putative class action filed in February 2011 in the Superior Court
of the State of California for the County of Orange,
Lorraine V. Garcia v. Chico’s FAS, Inc. The Complaint alleges
that the Company, in violation of California law, requested or required customers to provide personal information as
a condition of accepting payment by credit card. The Company denies the material allegations of the Complaint and
will file its response by the required deadline. The Company believes that the case is wholly without merit and, thus,
does not believe that the case should have any material adverse effect on the Company’s financial condition or
results of operations.
The Company was named as a defendant in a putative class action filed in March 2011 in the Superior Court of
the State of California for the County of Los Angeles,
Eileen Schlim v. Chico’s FAS, Inc. The Complaint attempts
to allege numerous violations of California law related to wages, meal periods, rest periods, and vacation pay,
among other things. The Company denies the material allegations of the Complaint and will file its response by the
required deadline. The Company believes that its policies and procedures for paying its associates comply with all
applicable California laws. As a result, the Company does not believe that the case should have a material adverse
effect on the Company’s financial condition or results of operations.
Other than as noted above, we are not currently a party to any legal proceedings, other than various claims and
lawsuits arising in the normal course of business, none of which we believe should have a material adverse effect on
our financial condition or results of operations.
9. Stock Compensation Plans and Capital Stock Transactions:
General
At January 29, 2011, we had stock-based compensation plans as described below. The total compensation
expense related to stock-based awards granted under these plans during fiscal 2010, 2009 and 2008 was
$10.5 million, $7.4 million and $12.6 million, respectively. The total tax benefit associated with stock-based
compensation for fiscal 2010, 2009 and 2008 was $4.0 million, $2.8 million and $4.8 million, respectively. We
recognize stock-based compensation costs net of a forfeiture rate for only those shares expected to vest and on a
straight-line basis over the requisite service period of the award. We estimated the forfeiture rate for fiscal years
2010, 2009 and 2008 based on historical experience during the preceding four fiscal years.
51
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In addition to stock options, we have historically issued nonvested stock awards (restricted stock) under our
stock-based compensation plans, pursuant to restricted stock agreements. Shares of nonvested restricted stock have
the same voting rights as common stock, are entitled to receive dividends and other distributions thereon, and are
considered to be currently issued and outstanding. In general, restricted stock awards vest pro-rata over a period of
three years from the date of grant.
In both fiscal 2009 and 2010, we granted our President and Chief Executive Officer a performance award grant
under which he is eligible to receive from 0 to 133,333 shares, with a target of 100,000 shares, contingent upon the
achievement of certain Company-specific performance goals over the fiscal year. At each fiscal year-end, it was
determined that he had earned 133,333 shares based on our performance. For the 2009 grant, the award will vest
3 years from the date of grant. For the 2010 grant, the award will vest 2 years from the date of grant. We accounted
for the grants by recording compensation expense, based on the number of shares ultimately expected to vest on a
straight-line basis over the respective service period.
In fiscal 2010, certain of our executive officers were also granted Performance Stock Units (“PSU”). Each PSU
award has the ability to be converted into shares on the second anniversary of the grant date upon the achievement of
certain Company-specific performance goals for fiscal 2011. Based on the level of achievement of the performance
goals, the participants in this award may earn up to 100% of the units awarded. Similar to the performance awards
granted to our President and Chief Executive Officer, compensation cost is recognized on a straight-line basis over
the vesting period, based on the number of units ultimately expected to vest and depending on the level and
likelihood of the performance condition being met. Additionally, we reevaluate the amount of compensation
expected to be earned at the end of each reporting period and record an adjustment, if necessary.
Stock Option Plans
1993 Stock Option Plan
During fiscal year 1993, the Board approved a stock option plan, as amended in fiscal 1999 (the “1993 Plan”)
for eligible employees. Options granted under the terms of the 1993 Plan generally vest evenly over three years and
have a 10-year term. As of January 29, 2011, approximately 56,000 nonqualified options remain outstanding under
the 1993 Plan.
Independent Directors’ Plan
In October 1998, the Board approved a stock option plan (the “Independent Directors’ Plan”) for eligible
independent directors. Options granted under the terms of the Independent Directors’ Plan vest after six months and
have a 10-year term. From the date of the adoption of the Independent Directors’ Plan and until the 2002 Omnibus
Stock and Incentive Plan was adopted, 507,500 options were granted under the Independent Directors’ Plan. As of
January 29, 2011, approximately 30,000 options under the Independent Directors’ Plan remain outstanding.
Omnibus Stock and Incentive Plan
In April 2002, the Board approved the Chico’s FAS, Inc. 2002 Omnibus Stock and Incentive Plan, which
initially reserved 9,710,280 shares of common stock for future issuance. In fiscal 2008, our shareholders approved
the Amended and Restated Chico’s FAS, Inc. 2002 Omnibus Stock and Incentive Plan (the “Omnibus Plan”),
effective as of June 26, 2008. In particular, the amendments included: (i) increasing the total number of shares of our
Common Stock with respect to which awards may be granted under the plan by an additional 10,000,000 shares,
(ii) expanding the permissible types of awards to include stock-based and cash-based Stock Appreciation Rights
(SARs) and performance awards, and (iii) eliminating the automatic grants of stock options for both new and
continuing non-employee directors. Our executive officers and directors are eligible to receive awards under the
Omnibus Plan, including stock options, restricted stock, restricted stock units, SARs and performance awards, in
accordance with the terms and conditions of the Omnibus Plan. No new grants can be made under our existing 1993
52
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Plan or Independent Directors’ Plan, and such existing plans remain in effect only for purposes of administering
options that are outstanding.Under the Omnibus Plan, options generally vest evenly over three years and have a 10-year term. In accordance
with the terms of the Omnibus Plan, shares of common stock that are represented by options granted under our
previously existing plans which are forfeited, expire or are canceled without delivery of shares of common stock are
added to the amounts reserved for issuance under the Omnibus Plan. As of January 29, 2011, approximately
5,947,000 nonqualified stock options are outstanding under the Omnibus Plan.
Employee Stock Purchase Plan
We sponsor an employee stock purchase plan (“ESPP”) under which substantially all full-time employees are
given the right to purchase up to 400 shares of our common stock during each of the two specified offering periods
each fiscal year, for a total of up to 800 shares in any given fiscal year, at a price equal to 85 percent of the value of
the stock immediately prior to the beginning of each offering period. During fiscal 2010, 2009 and 2008,
approximately 85,000, 60,000, and 46,000 shares, respectively, were purchased under the ESPP. In accordance
with accounting provisions, we recognize compensation expense based on the 15% discount at purchase.
Methodology Assumptions
We use the Black-Scholes option-pricing model to value our stock options. Using this option-pricing model,
the fair value of each stock option award is estimated on the date of grant. The fair value of the stock option awards,
which are subject to pro-rata vesting generally over 3 years, is expensed on a straight-line basis over the vesting
period of the stock options. The expected volatility assumption is based on the historical volatility of the stock over
a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived
from historical exercise experience under the stock option plans and represents the period of time that stock option
awards granted are expected to be outstanding. The expected term assumption incorporates the contractual term of
an option grant, which is ten years, as well as the vesting period of an award, which is generally pro-rata vesting over
three years. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a
remaining term equal to the expected term of the option granted. The expected dividend yield is based on the
expected annual dividend divided by the market price of our common stock at the time of declaration.
The weighted average assumptions relating to the valuation of our stock options for fiscal 2010, 2009 and 2008
were as follows:
Fiscal 2010 Fiscal 2009 Fiscal 2008
Weighted average fair value of grants .................. $6.65 $ 3.23 $ 1.69
Expected volatility ................................ 66% 63% 54%
Expected term (years) . ............................ 4.5 years 4.5 years 4.5 years
Risk-free interest rate . ............................ 2.0% 1.9% 2.0%
Expected dividend yield ............................ 1.1% N/A N/A
Aggregate Stock Option Activity As of January 29, 2011, 6,033,101 nonqualified options are outstanding at a weighted average exercise price of
$12.87 per share, and approximately 6.9 million shares remain available for future grants of either stock options,
restricted stock, restricted stock units, SARs, or performance awards. Of the options outstanding, 3,654,694 options
are exercisable as of January 29, 2011.
53
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Stock option activity for fiscal 2010 was as follows:
Number ofShares Weighted
Average
Exercise Price Weighted
Average
Remaining
Contractual Term Aggregate
Intrinsic
Value
(in thousands)
Outstanding, beginning of period ............6,288,358 $12.54
Granted ............................. 1,170,800 13.26
Exercised ........................... (642,830) 4.53
Canceled or expired . . .................. (783,227) 17.59
Outstanding, end of period ................6,033,101 12.87 6.27 $17,061
Vested and expected to vest at January 29, 2011 ............................... 5,614,882 13.17 6.11 15,618
Exercisable at January 29, 2011 .............3,654,694 15.57 5.16 8,753
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the excess, if any, of
the closing stock price on the last trading day of fiscal 2010 and the exercise price, multiplied by the number of such
in-the-money options) that would have been received by the option holders had all option holders exercised their
options on January 29, 2011. This amount changes based on the fair market value of our common stock. Total
intrinsic value of options exercised during fiscal 2010, 2009 and 2008 (based on the difference between our stock
price on the respective exercise date and the respective exercise price, multiplied by the number of respective
options exercised) was $4.9 million, $5.9 million and $0.3 million, respectively.
As of January 29, 2011, there was $9.3 million of total unrecognized compensation expense related to unvested
stock options granted under our share-based compensation plans. That expense is expected to be recognized over a
weighted average period of 1.6 years.
Cash received from option exercises and purchases under the ESPP for fiscal 2010 was an aggregate of
$3.6 million. The actual tax benefit realized for the tax deduction from option exercises of stock option awards
totaled $1.9 million for fiscal 2010.
Restricted Stock Activity
Restricted stock awards as of January 29, 2011 and changes during fiscal 2010 were as follows:
Number ofShares Weighted
Average
Grant Date Fair Value
Fiscal 2010
Nonvested, beginning of period
................................. 816,677 $ 6.76
Granted ................................................. 1,192,993 10.46
Vested .................................................. (466,175) 7.64
Canceled ................................................ (113,160) 6.51
Nonvested, end of period . . .................................... 1,430,335 9.27
Total fair value of shares of restricted stock that vested during fiscal 2010, 2009 and 2008 was $5.6 million,
$5.4 million and $1.0 million, respectively. As of January 29, 2011, there was $22.5 million of unrecognized stock-
based compensation expense related to nonvested restricted stock awards. That cost is expected to be recognized
over a weighted average period of 2.9 years.
54
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Share Repurchase ProgramIn August 2010, our Board of Directors authorized the repurchase of up to $200 million of our outstanding
common stock through January 2013. During the third quarter, we repurchased 2,096,300 shares, at a total cost of
approximately $18.3 million, under this program. However, we have no continuing obligation to repurchase shares
under this authorization, and the timing, actual number and value of any additional shares to be purchased will
depend on the performance of our stock price, market conditions and other considerations.
10. Retirement Plans:
We have a 401(k) defined contribution employee benefit plan (the “Plan”) covering substantially all
employees. Employees’ rights to Company-contributed benefits vest fully upon completing five years of service,
with incremental vesting starting in service year two. Under the Plan, employees may contribute up to 100 percent
of their annual compensation, subject to certain statutory limitations. We have elected to match employee
contributions at 50 percent on the first 6 percent of the employees’ contributions and can elect to make additional
contributions over and above the mandatory match. For fiscal 2010, 2009 and 2008, our costs under the Plan were
approximately $2.6 million, $2.4 million, and $2.3 million, respectively.
In April 2002, we adopted the Chico’s FAS, Inc. Deferred Compensation Plan (the “Deferred Plan”) to provide
supplemental retirement income benefits for a select group of management employees. Eligible participants may
elect to defer up to 80 percent of their salary and 100 percent of their bonuses pursuant to the terms and conditions of
the Deferred Plan. The Deferred Plan generally provides for payments upon retirement, death or termination of
employment. In addition, we may make employer contributions to participants under the Deferred Plan. To date, no
Company contributions have been made under the Deferred Plan. The amount of the deferred compensation
liability payable to the participants is included in deferred liabilities in the consolidated balance sheets. These
obligations are funded through the establishment of rabbi trust accounts held by us on behalf of the management
group participating in the plan. The trust accounts are reflected in other assets in the accompanying consolidated
balance sheets.
11. Quarterly Results of Operations (Unaudited):
Net
Sales Gross
Margin Net
Income Net Income Per
Common Share — Basic Net Income Per
Common and Common Equivalent Share — Diluted
Fiscal year ended
January 29, 2011:
First quarter .......... $481,588 $281,580 $35,402 $0.20 $0.20
Second quarter ........465,371 259,207 30,455 0.17 0.17
Third quarter ......... 483,022 275,067 28,844 0.16 0.16
Fourth quarter ........474,974 252,723 20,694 0.12 0.12
Fiscal year ended January 30, 2010:
First quarter .......... $410,643 $233,388 $14,489 $0.08 $0.08
Second quarter ........419,915 231,041 14,905 0.08 0.08
Third quarter ......... 446,863 257,278 22,745 0.13 0.13
Fourth quarter ........435,730 238,033 17,508 0.10 0.10
55
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 12. Subsequent Events:Dividends Declared On February 23, 2011, we announced that our Board of Directors declared a quarterly dividend of $0.05 per
share on our common stock. The dividend will be payable on March 28, 2011 to shareholders of record at the close
of business on March 14, 2011. Although it is our Company’s intention to continue to pay a quarterly cash dividend
in the future, any decision to pay future cash dividends will be made by the Board of Directors and will depend on
future earnings, financial condition and other factors.
Share Repurchase Program In accordance with our previously announced share repurchase program, since January 29, 2011, the Company
repurchased 1,834,440 shares of stock for $25.0 million.
56
CHICO’S FAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required
to be disclosed in our reports under the Securities and Exchange Act of 1934, as amended, is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules and forms.
As of the end of the period covered by this report, an evaluation was carried out under the supervision and with
the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls
and procedures were effective in providing reasonable assurance in timely alerting them to material information
relating to us (including our consolidated subsidiaries) and that information required to be disclosed in our reports is
recorded, processed, summarized, and reported as required to be included in our periodic SEC filings.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated
to management, including the principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes
in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their
evaluation. There was no change in our internal control over financial reporting during the fourth fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation of the effectiveness of our internal control over financial reporting as of January 29, 2011 as required
by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Inte-
grated Framework. Based on our evaluation, management concluded that internal control over financial reporting
was effective as of January 29, 2011.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the
objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the
system of controls has operated effectively in all cases. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projec-
tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of January 29, 2011 has been audited by
Ernst & Young LLP, an independent registered certified public accounting firm, as stated in their report which
follows.
57 Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders of Chico’s FAS, Inc. We have audited Chico’s FAS, Inc. and subsidiaries’ internal control over financial reporting as of January 29,
2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Chico’s FAS, Inc. and subsidiaries’
management is responsible for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Chico’s FAS, Inc. and subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of January 29, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the fiscal 2010 consolidated financial statements of Chico’s FAS, Inc. and subsidiaries and our
report dated March 22, 2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Tampa, Florida
March 22, 2011
ITEM 9B. OTHER INFORMATION None.
58 PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information about directors and nominees for director, procedures by which security holders may recommend
director nominees, the code of ethics, the audit committee, audit committee membership and our audit committee
financial expert and Section 16(a) beneficial ownership reporting compliance in our 2011 Annual Meeting proxy
statement is incorporated herein by reference. Information about our executive officers is included in Part I of this
Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information about executive compensation and compensation committee interlocks and the Compensation and
Benefits Committee report in our 2011 Annual Meeting proxy statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is included in our 2011 Annual Meeting proxy statement and is
incorporated herein by reference.
Equity Compensation Plan Information
The following table shows information concerning our equity compensation plans as of the end of the fiscal
year ended January 29, 2011:
Plan category Number of
Securities to be Issued uponExercise of
Outstanding
Options, Warrants and Rights Weighted-Average
Exercise Price of Outstanding
Options, Warrants and Rights ($) Number of
Securities
Remaining Available for Future Issuance Under Equity
Compensation Plans (ExcludingSecurities
Reflected in Column (a))
(a) (b) (c)
Equity compensation plans approved
by security holders(1) ...........6,033,101 $12.87 6,906,471
Equity compensation plans not approved by security holders ...... — ——
Total ........................ 6,033,101 $12.87 6,906,471
(1) Includes shares authorized for issuance under the Company’s 1993 Stock Option Plan, Independent Directors’
Plan, and Amended and Restated 2002 Omnibus Stock and Incentive Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is included in our 2011 Annual Meeting proxy statement and is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is included in our 2011 Annual Meeting proxy statement and is
incorporated herein by reference.
59 PA RT I V
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Report. (1) The following financial statements are contained in Item 8:
Financial Statements Page in this Report
Report of Ernst & Young LLP, independent registered certified public
accounting firm ............................................ 33
Consolidated Statements of Operations for the fiscal years ended January 29, 2011, January 30, 2010, and January 31, 2009 ...................... 34
Consolidated Balance Sheets as of January 29, 2011 and January 30, 2010 . . 35
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the fiscal years ended January 29, 2011, January 30, 2010, and
January 31, 2009 ........................................... 36
Consolidated Statements of Cash Flows for the fiscal years ended January 29, 2011, January 30, 2010, and January 31, 2009 ............. 37
Notes to Consolidated Financial Statements ......................... 38
(2) The following Financial Statement Schedules are included herein:
Schedules are not submitted because they are not applicable or not required or because the required
information is included in the financial statements or the notes thereto.
(3) The following exhibits are filed as part of this report (exhibits marked with an asterisk have been previously filed with the Commission as indicated and are incorporated herein by this reference):
3.1* Composite Articles of Incorporation of Chico’s FAS, Inc. (Filed as Exhibit 3.1 to the Company’s Form 10-Q as filed with the Commission on September 4, 2009)
3.2* Composite Amended and Restated By-laws of Chico’s FAS, Inc. (Filed as Exhibit 3.2 to the Company’s Form 10-K as filed with the Commission on March 24, 2010)
4.1* Composite Articles of Incorporation of Chico’s FAS, Inc. (Filed as Exhibit 3.1 to the Company’s Form 10-Q as filed with the Commission on September 4, 2009)
4.2* Composite Amended and Restated By-laws of Chico’s FAS, Inc. (Filed as Exhibit 3.2 to the Company’s Form 10-K as filed with the Commission on March 24, 2010)
4.3* Form of specimen Common Stock Certificate (Filed as Exhibit 4.9 to the Company’s Form 10-K for the year ended January 29, 2005, as filed with the Commission on April 8, 2005)
10.1* Employment Agreement between the Company and Scott A. Edmonds, effective as of September 3, 2003 (Filed as Exhibit 10.13 to the Company’s Form 10-K for the year ended January 31, 2004, as filed
with the Commission on April 9, 2004)
10.2* Amendment No. 1 to Employment Agreement between the Company and Scott A. Edmonds, effective as of June 22, 2004 (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended July 31,
2004, as filed with the Commission on August 26, 2004)
10.3* Amendment No. 2 to Employment Agreement between the Company and Scott A. Edmonds, dated December 18, 2008 and effective as of January 1, 2005 (Filed as Exhibit 10.1 to the Company’s
Form 8-K, as filed with the Commission on December 19, 2008)
10.4* Separation letter agreement and release between Chico’s FAS, Inc. and Scott A. Edmonds, dated as of January 7, 2009 (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on
January 8, 2009)
10.5* Employment letter agreement between the Company and Donna Noce Colaco, with employment commencing on August 6, 2007 (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter
ended August 4, 2007, as filed with the Commission on August 29, 2007)
60 10.6* Employment letter agreement between the Company and Kent A. Kleeberger, with employmentcommencing on November 1, 2007 (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the
Commission on October 23, 2007)
10.7* Employment letter agreement between the Company and David F. Dyer, dated as of January 7, 2009 (Filed as Exhibit 10.2 to the Company’s Form 8-K, as filed with the Commission on January 8, 2009)
10.8* Amendment No. 1 to employment letter agreement between the Company and David F. Dyer, dated March 5, 2009 (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on
March 12, 2009)
10.9* Employment letter agreement between the Company and Jeffrey A. Jones, dated as of February 11, 2009 (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on February 27,
2009)
10.10* Employment letter agreement between the Company and Cynthia S. Murray, dated as of January 29, 2009 (Filed as Exhibit 10.16 to the Company’s Form 10-K for the year ended January 31, 2009, as filed
with the Commission on March 27, 2009)
10.11* Employment letter agreement between the Company and Laurie Van Brunt, dated as of April 21, 2010 (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended May 1, 2010, as filed with the
Commission on May 28, 2010)
10.12* Employment letter agreement between the Company and Sara K. Stensrud, dated as of July 6, 2010 (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended July 31, 2010, as filed with the
Commission on August 27, 2010)
10.13* 1993 Stock Option Plan (Filed as Exhibit 10.14 to the Company’s Form 10-K for the year ended January 2, 1994, as filed with the Commission on April 1, 1994)
10.14* First Amendment to the 1993 Stock Option Plan (Filed as Exhibit 10.9 to the Company’s Form 10-K for the year ended January 30, 1999, as filed with the Commission on April 28, 1999)
10.15* Second Amendment to 1993 Stock Option Plan (Filed as Exhibit 10.21 to the Company’s Form 10-K for the year ended February 2, 2002, as filed with the Commission on April 24, 2002)
10.16* Non-Employee Directors Stock Option Plan (Filed as Exhibit 10.49 to the Company’s Form 10-K for the year ended January 30, 1999, as filed with the Commission on April 28, 1999)
10.17* First Amendment to Chico’s FAS, Inc. Non-Employee Directors Stock Option Plan (Filed as Exhibit 10.51 to the Company’s Form 10-K for the year ended January 29, 2000, as filed with the
Commission on April 25, 2000)
10.18* 2002 Omnibus Stock and Incentive Plan (Filed as Exhibit 10.22 to the Company’s Form 10-K for the year ended February 2, 2002, as filed with the Commission on April 24, 2002)
10.19* First Amendment to Chico’s FAS, Inc. 2002 Omnibus Stock and Incentive Plan, effective as of June 20, 2006 (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on June 22,
2006)
10.20* Amended and Restated 2002 Omnibus Stock and Incentive Plan (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on July 2, 2008)
10.21* Form of 2002 Omnibus Stock and Incentive Plan Stock Option Certificate for Employees (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on February 3, 2005)
10.22 Revised Form of 2002 Omnibus Stock and Incentive Plan Stock Option Agreement for Employees
10.23* Form of 2002 Omnibus Stock and Incentive Plan Stock Option Certificate for Non-Management Directors (Filed as Exhibit 10.2 to the Company’s Form 8-K, as filed with the Commission on
February 3, 2005)
10.24* Form of 2002 Omnibus Stock and Incentive Plan Restricted Stock Agreement for Employees (Filed as Exhibit 10.25 to the Company’s Form 10-K for the year ended January 31, 2009, as filed with the
Commission on March 28, 2008)
10.25 Revised Form of 2002 Omnibus Stock and Incentive Plan Restricted Stock Agreement for Employees
61 10.26 Form of 2002 Omnibus Stock and Incentive Plan Performance-Based Restricted Stock Agreement forEmployees
10.27* Form of 2002 Omnibus Stock and Incentive Plan Restricted Stock Agreement for Non-Management Directors (Filed as Exhibit 10.28 to the Company’s Form 10-K for the year ended February 2, 2008, as
filed with the Commission on March 27, 2009)
10.28* Form of 2002 Omnibus Stock and Incentive Plan Performance Share Unit Agreement for Employees (Filed as Exhibit 10.28 to the Company’s Form 10-K for the year ended January 30, 2010, as filed with
the Commission on March 24, 2010)
10.29* Chico’s FAS, Inc. Amended and Restated 2002 Employee Stock Purchase Plan (Filed as Exhibit 10.29 to the Company’s Form 10-K for the year ended January 31, 2004, as filed with the Commission on
April 9, 2004)
10.30* 2005 Cash Bonus Incentive Plan (Filed as Exhibit 10.5 to the Company’s Form 8-K, as filed with the Commission on February 3, 2005)
10.31* First Amendment to 2005 Cash Bonus Incentive Plan (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on April 5, 2006)
10.32* Second Amendment to 2005 Cash Bonus Incentive Plan (Filed as Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on April 13, 2007)
10.33* Amended and Restated Chico’s FAS, Inc. Cash Bonus Incentive Plan (Filed as Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended July 31, 2010, as filed with the Commission on August 27,
2010
10.34* Chico’s Amended and Restated Executive Severance Plan (Filed as Exhibit 10.32 to the Company’s Form 10-K for the year ended January 31, 2009, as filed with the Commission on March 28, 2008)
10.35* Amendment No. 1 to Chico’s FAS, Inc. Executive Severance Plan (Filed as Exhibit 10.35 to the Company’s Form 10-K for the year ended January 31, 2009, as filed with the Commission on March 27,
2009)
10.36* Chico’s FAS, Inc. Vice President Severance Plan (Filed as Exhibit 10.32 to the Company’s Form 10- K for the year ended February 2, 2008, as filed with the Commission on March 28, 2008)
10.37* Amendment No. 1 to Chico’s FAS, Inc. Vice President Severance Plan (Filed as Exhibit 10.37 to the Company’s Form 10-K for the year ended January 31, 2009, as filed with the Commission on March 27,
2009)
10.38* Participation Agreement with Kent A. Kleeberger (Filed as Exhibit 10.2 to the Company’s Form 8-K, as filed with the Commission on March 6, 2008)
10.39* Indemnification Agreement with David F. Walker (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended October 29, 2005, as filed with the Commission on November 29, 2005)
10.40* Indemnification Agreements with Betsy S. Atkins, John W. Burden, III, Verna K. Gibson, and Ross E. Roeder (Filed as Exhibits 10.1-10.3 and 10.8 to the Company’s Form 8-K as filed with the Commission
on December 9, 2005)
10.41* Indemnification Agreement with A. Alexander Rhodes (Filed as Exhibit 10.2 to the Company’s Form 8-K as filed with the Commission on May 2, 2006)
10.42* Indemnification Agreements with John J. Mahoney and David F. Dyer (Filed as Exhibits 10.1-10.2 to the Company’s Form 8-K as filed with the Commission on July 25, 2008)
10.43 Indemnification Agreement with Andrea M. Weiss
10.44 Indemnification Agreement with Stephen E. Watson
10.45* Credit Agreement by and among SunTrust Bank, the Company and the subsidiaries of the Company dated as of November 24, 2008, including the schedules and exhibits (Filed as Exhibit 10.1 to the
Company’s Form 8-K/A (Amendment No. 2) as filed with the Commission on September 30, 2009)
10.46 Amendment No. 1 to Credit Agreement by and among SunTrust Bank, the Company and the subsidiaries of the Company dated as of March 3, 2011
10.47* Chico’s FAS, Inc. Deferred Compensation Plan effective April 1, 2002 (Filed as Exhibit 10.53 to the Company’s Form 10-K for the year ended February 2, 2002, as filed with the Commission on April 24,
2002)
62 10.48* Chico’s FAS, Inc. 2005 Deferred Compensation Plan effective January 1, 2005 (amended and restatedJanuary 1, 2008) (Filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended November 1,
2008, as filed with the Commission on December 9, 2008)
10.49* Lease Agreement between Joint Development Authority of Winder-Barrow County and Chico’s Real Estate, LLC dated as of March 25, 2002 (Filed as Exhibit 10.54 to the Company’s Form 10-K for the
year ended February 2, 2002, as filed with the Commission on April 24, 2002)
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
31.1 Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002- Chief Executive Officer
31.2 Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002- Chief Financial Officer
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
63 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
C
HICO ’SFAS,INC.
By: /s/ D
AVID F. D YER
David F. Dyer
President, Chief Executive Officer and Director
Date: March 22, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature TitleDate
/s/ D AVID F. D YER
David F. DyerPresident, Chief Executive Officer, and
Director (Principal Executive Officer) March 22, 2011
/s/ K
ENT A. K LEEBERGER
Kent A. Kleeberger Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) March 22, 2011
/s/ R
OSS E. R OEDER
Ross E. Roeder Chairman of the Board March 22, 2011
/s/ B
ETSY S. A TKINS
Betsy S. Atkins Director March 22, 2011
/s/ J
OHN W. B URDEN , III
John W. Burden, III Director March 22, 2011
/s/ V
ERNA K. G IBSON
Verna K. Gibson Director
March 22, 2011
/s/ J
OHN J. M AHONEY
John J. Mahoney Director
March 22, 2011
/s/ D
AVID F. W ALKER
David F. Walker Director March 22, 2011
/s/ S
TEPHEN E. W ATSON
Stephen E. Watson Director March 22, 2011
/s/ A
NDREA M. W EISS
Andrea M. Weiss Director March 22, 2011
64 (This page intentionally left blank) (This page intentionally left blank) To Our Shareholders:
Our 2010 results built on the financial success we reestablished in the prior year: Net sales increased 11.2 percent to $1.905 billion compared to $1.713 billion for the prior
year;
Comparable sales, including stores and direct-to-consumer, increased 8.3 percent on top of
the 7.6 percent increase for 2009; and
Net income equaled $115.4 million, or $0.64 per diluted share, a 64 percent increase on the
2009 net income of $69.6 million, or $0.39 per diluted share.
Excluding one-time impairment charges in both years, 2010 net income was $116.6 million, or $0.65
per diluted share, compared to net income of $79.2 million, or $0.44 per diluted share for 2009.
We had another positive year in generating cash from operations. In order to return a portion of
our excess cash to shareholders, we initiated the company’s first quarterly cash dividend in March
2010, and raised the annual dividend rate 25 percent to $0.20 per share in February 2011. We also
began a $200 million share repurchase program in August 2010. Nevertheless, we ended fiscal year
2010 with a balance sheet showing $548.7 million in cash and marketable securities, no debt, and
inventories at a level consistent with the pace of our sales growth.
New store growth was a key contributor to our success in 2010. We opened a total of 79 new
stores, including 19 outlets and 2 frontline boutiques under the Chico’s brand, 13 frontline boutiques
and 4 outlets for White House | Black Market and 37 frontline and 4 outlets for Soma Intimates.
This year, we are targeting 100 - 110 net new boutique and outlet openings across our three brands.
The new store openings should include 12 to 15 new Chico’s boutiques, a portion of the estimated
75 potential locations in secondary markets across the U.S. identified for future Chico’s frontline
stores.
Our direct-to-consumer or DTC sales continue to post substantial gains. In 2010, DTC sales
increased 40 percent on top of the 39 percent increase in the prior year. DTC sales have benefitted
from the alignment of our web sites with each brand’s marketing to better drive customer interest
in our fashion apparel and accessories. In 2010, our company, in conjunction with the highly regarded Great
Place to Work® Institute, began transforming into one in which our
associates place confidence in those they work for, have pride in the
work they do and enjoy the people with whom they work. In addition
to interacting with our National Store Support and Distribution
Centers’ associates on this endeavor, we are again conducting, as we
did last spring, our company-wide Most Amazing Store Tour. The Tour
enables our store management and sales associates to meet with
senior corporate management and exchange ideas on how to make
Chico’s FAS, Inc. a great place to work, learn and grow.
In closing, I would like to recognize Jeff Jones, who retired as chief operating officer in March 2011.
Jeff ’s contributions to our success during his two years with the company are immeasurable and
deeply appreciated by all of us who have had the pleasure of working with him.
On behalf of your Board of Directors, officers and the more than 18,900 associates at Chico’s
FAS, we are grateful for your continuing support of our efforts to grow our business and increase
profitability.
Sincerely,
David F. Dyer
President and CEO
March 22, 2011 Reports on Form 10-K
A copy of the Company’s annual report to the
Securities and Exchange Commission on Form 10-K
will be sent to any shareholder without charge upon
written request to Investor Relations at the mailing
address or Web site address below:
Chico’s FAS, Inc. National Store Support
Center
11215 Metro Parkway
Fort Myers, Florida 33966-1206
Web site: www.chicosfas.com
Transfer Agent and Registrar:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Phone 800-368-5848
Web site: www.rtco.com
Legal Counsel:
Trenam, Kemker
Tampa, Florida
Independent Public Accountants:
Ernst & Young LLP
Tampa, Florida
Annual Shareholders Meeting:
Thursday, June 23, 2011 at 9:00 a.m. EDT
Chico’s FAS, Inc. National Store Support Center
Fort Myers, Florida
Brand Web Sites:
www.chicos.com
www.whbm.com
www.soma.com
Executive Officers
David F. Dyer
President and Chief Executive Officer
Donna M. Colaco
Brand President – White House | Black Market
Cynthia S. Murray
Brand President – Chico’s
Laurie Van Brunt
Brand President – Soma Intimates
Lee Eisenberg
Executive Vice President – Chief Creative Officer
Gary A. King
Executive Vice President – Chief Information Officer
Kent A. Kleeberger
Executive Vice President – Chief Operating Officer &
Chief Financial Officer
Mori C. MacKenzie
Executive Vice President – Chief Stores Officer
A. Alexander Rhodes
Executive Vice President – General Counsel,
Chief Compliance Officer & Secretary
Sara K. Stensrud
Executive Vice President – Chief Human Resources Officer
Board of Directors
Ross E. Roeder 1,6,7
Chairman of the Board
Retired Chairman, Smart & Final, Inc.
Betsy S. Atkins
2,8
Chief Executive Officer, Baja Ventures
John W. Burden, III
9
Retailing Consultant
David F. Dyer
10
President and Chief Executive Officer
Verna K. Gibson
3,10
Retailing Consultant
John J. Mahoney
4,7
Vice Chairman and Chief Financial Officer, Staples, Inc.
David F. Walker
5,6,10
Retired Director of the Program of Accountancy,
The University of South Florida
Stephen E. Watson
7,8
Retired President and CEO of Gander Mountain Company
Andrea M. Weiss
8,9
Founder & Chief Executive Officer, Retail Consulting, Inc.
(1) Chairman of the Executive Committee
(2) Chairwoman of the Corporate Governance and Nominating Committee
(3) Chairwoman of the Merchant Committee
(4) Chairman of the Compensation and Benefits Committee
(5) Chairman of the Audit Committee
(6) Member of the Corporate Governance & Nominating Committee
(7) Member of the Audit Committee
(8) Member of the Compensation and Benefits Committee
(9) Member of the Merchant Committee
(10) Member of the Executive Committee
Chico’s FAS had net sales of $1.905 billion compared to $1.713 billion in 2010.
The Chico’s brand had a 9% increase in average transactions per store during 2010.
White House | Black
Market had a 14.3%
increase in net sales to
$590.3 million for 2010.
Soma Intimates opened 41 new frontline and
outlet boutiques in 2010 compared to just 20 in 2009.
Chico’s FAS direct-to-
consumer sales increased 39.7% in 2010.
The Company paid its first quarterly cash dividend
beginning in March 2010. AnnuAl Repo Rt 2010 ChicosFAS.com
