FBR Capital Thinks Chico’s FAS’s Stock is Going to Recover

By Austin Angelo

In a report released today, Susan Anderson from FBR Capital assigned a Buy rating to Chico’s FAS (NYSE: CHS), with a price target of $14. The company’s shares closed yesterday at $7.52, close to its 52-week high of $16.85.

Anderson commented:

“CHS reported 2Q EPS of $0.18 versus FBR/consensus of $0.19/$0.21 (see 2Q drivers here). CHS is on track to achieve its annualized $100-$110M in savings and expects to realize $25M in 2H17. Management also noted that they have been able to find incremental savings. Management provided updated 2017 guidance around GM of -75 to -100 bps (from flat to +30 bps) due to lowered SSS of -HSD (from -MSD), and SGA expense to be down around $50 to $60 million (from flat). CHS closed 10 stores this quarter and noted that rent was down for the first time this quarter driven by closed stores/rent negotiations (3/4 of boutiques have renegotiable lease terms through 2020). Management pushed back its timeline to achieve DD op margin, which it previously set for 2019, based on lower comps and sales trends YTD. Management has done a good job getting CHS’s cost structure in line with the new omni environment, in our view, and once top line turns we believe there is significant margin upside potential from cost-cutting/operational initiatives. We remain aggressive buyers of CHS given its strong brands, differentiated model and loyal customer.”

According to TipRanks.com, Anderson is a 1-star analyst with an average return of -0.9% and a 47.9% success rate. Anderson covers the Services sector, focusing on stocks such as Lululemon Athletica Inc, Ascena Retail Group, and Abercrombie Fitch.

Currently, the analyst consensus on Chico’s FAS is Moderate Buy and the average price target is $11.67, representing a 55.2% upside.

In a report issued on August 16, RBC Capital also reiterated a Buy rating on the stock with a $12 price target.

The company has a one year high of $16.85 and a one year low of $6.96. Currently, Chico’s FAS has an average volume of 3.2M.

Based on the recent corporate insider activity of 54 insiders, corporate insider sentiment is negative on the stock.

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Chico’s FAS, Inc. engages in the retail of private label women’s apparel, accessories, and other non-clothing items. The firm’s product portfolio consists of the following brands: Chico’s, Soma, and White House Black Market. It also operates boutiques, retail stores, and websites to sell the products. The company was founded by Helene B.