Chico’s FAS (CHS) dips to 21-year low amidst digital transition hopes

Chico’s FAS, Inc. (NYSE: CHS) stock plunged to a 21-year low of $1.07 on Thursday due to the extension of the temporary closure of its retail stores across North America. However, investors remained positive about the company’s future and retail industry due to the transition to digital commerce amidst the impact of the covid-19 spread.

The rapid spread of the covid-19 has enabled the company’s executive officers to forgo 50% of their base salary and the board’s annual cash retainers will be reduced by 50% as part of the cost-saving efforts. On Wednesday, the company announced additional cost-saving measures to mitigate the operating and financial impact of the covid-19 pandemic.

The measures include the majority of the employees will be placed on furlough and all non-furloughed employees will take a 50% salary or similar hours reduction, excluding distribution center employees. The company has taken other aggressive measures to significantly lower expenses for reducing its operating costs and preserve cash.

The retailers are expected to have a strategic plan amidst a possible recession and potential fallout from tariff tensions looming, according to a Deloitte report. While the overall economy might be losing its shine in 2020, it presents retailers an opportunity to review their playbook for riding out a downturn.

Meanwhile, investors expect consumer spending to improve provided the containment of the coronavirus spread. The market economists forecast retail sales to dip by 4.1% in March, by 4.5% in April, by 2% in May, and by 0.2% in June. Following this, the weakness is likely to subside after April due to isolation and social distancing measures.

For the fourth quarter, Chico’s FAS reported a narrower loss helped by higher sales and lower costs and expenses. Comparable store sales improved by 2.2% on higher average dollar sales and an increase in transaction count. The company continued its disciplined focus on driving sales through improved and elevated products aligned more closely to its customer’s expectations.

As of February 1, 2020, Chico’s FAS operated 1,341 retail stores in 46 states, Puerto Rico, the US Virgin Islands, and Canada, and sold merchandise through 70 international franchise locations in Mexico and 2 domestic airport locations.

As part of its plan to reduce costs and improve profitability, the company intends to close about 60 to 70 underperforming stores in fiscal 2020. Chico’s FAS will continue to re-evaluate each prospective store closure in fiscal 2020 and 2021 against anticipated improvements in its sales trends and modify its closure plan as appropriate.

The stock opened lower and is trading in the red territory in the mid-afternoon on Thursday. The shares are below the 50-day moving average of $2.88 and the 200-day moving average of $3.64. The stock has been trading between $1.07 and $5.14 in the past 52 weeks.