CHS
#Thank you for the question.
As I said in my intro, I have 25 years-plus of retail experience from food, grocery, specialty crafting and my last six years at Walmart both in Canada, Europe and Africa.
Just that host of in many ways, some early blocking and tackling parts of understanding how data is used, understanding all of the metrics of SG&A.
And then, in the European portion of Walmart, that is a ground-up design apparel business as well.
Wanting to make sure that we have got full line of sight into production, into synergies, I'm very much into the shared services model and really believe in front of the house back of the house separation.
The beautiful part to me about the opportunity of Chico's is the uniqueness of Soma, the uniqueness of White House and the uniqueness of Chico's and making sure the front of the house, what the customer sees, the essence of that brand, how we market to them, the uniqueness and style of that apparel that is customized for that specific group of targeted customers.
But also, allowing that back of the house to be incredibly leveraged and that the way we go to market, the way source product, the way we utilize factories, the way we look at shipping cost, the way we build a single platform in [decom] that can be skimmed in three different ways, that we built one analytic and algorithmic-based system that can have copious amounts of data through it.
Yet the answers can be specified for each of those brands are all experiences that I've had in my previous life that we can lay on top of this business.
And as I was going through my own decision-making process and saw that, that skill set applied to this business gives me a lot of upside hope, and that was part of the decision-making for sure.
Thanks, <UNK>.
We are here, as we said, on day 86 or 87 ---+ we've lost count.
I am still calling them key focus areas and I haven't put them in any prioritize group.
Obviously, anything to do with customers comes first, comes for me for sure.
We are doing that within the conjunction of our three-year planning cycle.
What are we thinking about, what are we doing and when do expect those results and what are commensurate expenses and profits that we will expect from each one of these initiatives.
We are building a strategy focused organization here.
We are all 25,000 Associates at Chico's FAS will know what our move forward strategy is for the total Corporation and what their specific role in attaining our success is by brand.
That is how I have worked in business in the past and had success in doing so.
And so we're very much at the early stages and just sharing these focus areas with the way to allow you sort of an insight in to how we are grouping our priorities.
That is absolutely the next step, is running the detailed analytics on what the benefit of each one of these will be, what our expense ratio will be around executing them and what our expected return is and when we will start to see that reflected into our sales and profits.
And so we are right at that stage now.
To your first question, I am just learning that piece and starting to understand our marketing mix and not applying some of the traditional science of marketing mix that I've learned in the past because it's very, very different here.
And I will just give you one example, that I'm still working through during the learning phase.
In the shop-along I did in Dallas with our customers, we have customers who keep the catalog and tape it up inside their closet so they know which necklace and scarf goes with which item.
Before I start to get to analytic on you, what is the best marketing mix and how I can save money in print, I have a lot more to do about understanding how that catalog is used to drive inspiration and in some cases education to our customer.
So I'm a ways away from making any decisions about that.
Just a little more background, what line were you looking at in particular.
Yes.
In the release back on page 9 of the release, we actually give you what our consolidated results were and then break out what Boston Proper is which then gives you consolidated results excluding Boston Proper, our operating results.
And those would exclude any strategic charges, restructuring charges, goodwill impairment and all that.
That is much more your ongoing apples to apples.
As we look back on Q4 it was clearly a very promotional environment and I think you've heard that from a lot of people.
For us what that meant is we had to get in there in and be promotional at specific periods in time.
The good news is we were able to ---+ as we stayed competitive and moved through and maintained a certain rate of sales.
We were able to move through our inventories at a healthy pace.
So really where you got the upside was not having as much inventory left to clear at the end of the day.
And not having to have that access clearance inventory is really where we were able to drive a lot of that gross margin.
As we look forward to next year, inventory is flat.
We've talked a little bit about this in the past but a huge opportunity for us as much as anything on inventory management is around the allocation of where exactly our inventory goes and this goes back into the retail science that Shelly was talking about.
It's better understanding what items are going to sell in a particular location, how we can distort the assortment that we are allocating so that we are maybe putting more particular styles that are going to sell in a particular store and less in others.
And doing that in a way that ultimately means we have to be either less promotional or have less clearance inventory.
The other thing we're doing a lot of right now is testing.
We were joking that this is very much going to be the year of the test and that applies to inventory management as well.
We are testing out different curing methodologies for allocating our inventory, testing out true profitability of different categories, going a lot of different directions to make sure the information we have is actionable and something that we can respond to very quickly.
With flat inventory dollars you can basically make that inventory work harder for us.
I think for this year, a lot of what we were talking about is getting better use out of the tools we have.
Of course we will be looking at if there are more automated or efficient ways to do some of the things but it's probably early to get into that kind of detail.
There is a lot of testing that we are going to do this year, to start there.
I would expect as we get into 2017 we'll go into the year with more momentum.
That's the plan.
I would say if there's benefits to be gained, they will probably be more back end oriented.
There are probably some things that will be quicker hits that may hit the back end.
I would really look more towards 2017 and beyond for the majority of the benefits.
No, we are finding in White House, and we can see it now with their positive comps, they have merchandise marketing that is resonating with the customer.
The customer is coming in.
We continue to work at White House on the rebranding and making sure that customers ---+ well that there is awareness of exactly who White House is, exactly what White House can offer and we're finding there is still lots of opportunity around that awareness which in the long-term is a great thing.
How we get there is kind of what we are working on right now and that's part of what Shelly is bringing to the table with looking at the branding and some of the customer research.
It's ongoing.
In the shop-along that I did, I think these took place in Dallas.
But the shop-alongs I did with non-customers, the non-White House customer, people who were in that demographic who of course should be a White House shopper but aren't.
It was fascinating to understand their view of the brand and why they hadn't been in and opens up a tremendous opportunity for us on describing that brand and marketing that brand to a customer segmentation who is very much aligned to that merchandise but has a certain view of what's inside that is representative.
And so, I get pretty excited about thinking about sharing the offering of White House with a wider base of customers and I think there is opportunity there.
First on the quarter-to-date comp, what I can tell you is that other brands are performing roughly in line with the Q4 run rate.
We typically don't go much beyond that so I have probably already broken my rule.
Nothing I would call out that's been a major change in trend outside of the White House positive performance to date.
In terms of margin opportunities, we really try not to get into that level of detail ---+ as much as anything, from a competitive perspective.
We continue to look at opportunities really across the entire portfolio.
I would say that is still the case for us that we do have opportunities across the Company.
And probably as we get further into our planning, we will come back with a little more detail on that for you.
I would say generally we are looking at very similar to past years.
We have a certain amount of capital that we want to spend that we think is important to spend internally and generates a return.
Beyond that to the extent that we have excess cash, we have a dividend that's in place that has a healthy yield right now.
Share repurchases is really next in the priority list and I think we've shown our commitment to share repurchases and intend to continue to show that.
That is probably about what we have for cash at this point.
How are you doing, <UNK>.
Thank you.
Talking about Soma, we have 287 Soma stores today in what I think is just a tremendously un-crowded space in the market for customers who has aged out of some of the traditional retailers and isn't finding what they want in a department store setting.
As far as being channel-agnostic, if you just look at the different types of product that are accelerating online you see across the board where intimates stack up in there.
Intimate apparel is heavily penetrated online and our expectation of Soma will be the same.
I do however, believe that bricks and mortar companion to that is incredibly important.
And not just for the show roomy aspect of that, but for the tenants of that brand in comfort and fit, in every day sexiness, in things that look great and feel great and are appropriate for somebody living an active lifestyle.
I certainly wouldn't say that I'm channel-agnostic and in order to continue to grow market share in intimate apparel you have got to be doing that by driving your online business.
You are seeing now and you will see it with the launch of our new bra which I can't wait for Todd to explain to you next time.
You will see a much more exciting, much more sensuous type of marketing and advertising of coming from Soma.
And I continue to be very bullish on that positioning.
I think it's one of the few spots left in retail where there is room to grow.
Part of my own decision-making was the excitement of the growth of that brand.
I don't know if it's really a big surprise or not, I did a lot of due diligence.
It was a tough decision for me.
I was having a terrific career where I was.
I don't know if it was a surprise, I just had a real affinity for the people here and a real affinity for the customers.
This is a unique, incredibly loyal and dedicated customer base at all three of our brands and they are advocates.
When you find a Chico's customer who is a loyalist or a White House customer, and the same with the Soma.
They are incredible advocates for our brand and the idea of unleashing that.
And in some cases helping them unleash that.
At Chico's as we move forward with more digital commerce, the excitement of our customers to become part of that interaction with digital was really, really fun for me.
I think the excitement was I just have an incredible affinity for the brand, for the customers and for the associates and I think it is all leverageable and I'm excited.
I'll start with the Chico's customer.
The shop-along experiences that I've had have been terrific and I look forward to my week as a Chico's associate too.
I've done this everywhere that I've worked.
I just show up on a Sunday or Monday at an unannounced store and I work in that single store for six days straight as an Associate, running the register, wardrobing.
And that is the best deep dive of any brand I think that you can do.
You not only become completely aware of the associate experience and what torturous things from the corporate office we are sending down that we need to stop immediately.
But also, you get a true sense of what is happening with our customers.
So I look forward to that.
During the shop-along I learned so much.
One was what I shared with you about the customers who actually tapes up ---+ and this is not a single customer, by the way, who tapes up that magalog in her closet.
There were several different types of Chico's customers I interacted with during that shop-along.
One is a woman who loves fashion.
I wouldn't say that our customers are fashion forward as much as they are fashionable.
They don't want to be a victim of fashion in something that is not age-appropriate or in any way makes them look silly, but they want to be stylish and they want to be rocking it.
What I learned from our customers in the shop-along is two very different camps.
One who wants us to help her head to toe.
She wants bottoms, tops, a scarf, an accent piece, maybe a sweater that can go over the top as well as jewelry, and she wants that in a very mix and match style and she will continue to build from that particular collection to build out that section of her wardrobe.
Which I think is very exciting when we think about leveraging our online data.
Remember we ---+ on our loyalty to those customers who are part of our passport program, we know all of the apparel she has and what she has purchased from us.
And imagine being able to pair that digitally with our new items coming in for her to show her that wardrobing aspect that she has got in her own closet.
That is the kind of digital customer facing science that Todd was referring to that we can look forward to in some of the out years.
And then there is another type of customer who was part of the collecting of the individual items is part of the hunt.
She doesn't want us to outfit her head to toe.
She takes huge pride in being a bit of a fashionista and doing that herself.
And so making sure that we are meeting the needs of both of those two different customer segmentations is great.
The most exciting part to me at Chico's is five women will come into Chico's and each one of them will leave with their own look.
It doesn't look like I know where you got that or that or that is cookie-cutter look from Chico's.
The ability to wardrobe and changeup is an enormously aspirational and fun part of that brand and our customers love that aspect of it.
And I'll take the brand profitability question.
I will say good job in trying to take advantage [the new person] (laughter) ---+ we do not go into brand profitability.
What I can say is yes, we did say merchandise margins were up in the quarter at Soma.
I thought that was important context in relation to their comp because it really was about driving profitability.
Soma is at the point, and we've said before, where they have a product that inherently should have a little bit higher merchandise margin and they passed the point of scale where that is in fact true.
They're at the point where they are really growing the top-line is what will enable them to leverage SG&A and their other cost structure and continue to grow that profitability.
But at this point as Shelly said, still seeing lots of opportunity and things are headed in the right direction.
Sure.
So first on transactions.
We are in a unique environment where you do see traffic to malls generally being down.
We get all of the shopper track information that you probably get and what I can tell you is generally our customer tends to love to come to the mall, touch it, try it on and feel the fabric.
As a result, we end up seeing less negative traffic, than other retailers and to the extent there is net traffic that is down, we typically offset it at least with our conversion.
And then the added bonus for us to the extent that online becomes more and more accessible and we are able to bridge that gap in the customer experience even better than we see transactions online continuing to grow.
So all that ultimately leads improvements in transactions which is something we would hope to see going forward.
And I'm sorry the second part of your question was.
From a brand perspective the majority of those 25 openings would be Soma, actually about 15.
The rest are evenly split between Chico's and White House.
We are taking advantage of a new mall or a new location that is appropriate for us to be in.
From a closure perspective, one thing if you look at timing that we had last year, the overall timing will be very consistent with 2015 on the closures so that probably helps in your modeling.
Then from the brand by brand perspective, about half of the closures are slotted to be for Chico's and obviously very few in Soma.
And White House, somewhere in between.
Awesome.
Thank you, Laura.
That concludes our call for this morning.
Thank you, all for joining us this morning and we appreciate your continued interest in Chico's FAS.
