An Analysis and Comparison Between Talbots Inc. and Chico's Fas, Inc.

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A Brief Summary of the Businesses
The purpose of this term paper is to discuss the similarities and differences between Talbots Inc. ("Talbots") and Chico's FAS Inc. ("Chico's"). This paper will detail the nature of each company's respective business, past financial performance, and expected future outlook. The paper is divided into two sections. The first section will discuss each company's history, business structure, and future plans independently from each other. The second section will discuss several important financial ratios and provide a detailed analysis comparing the two companies. By the end of this analysis, the reader will have a better understanding of these two retailers and the industry in which they operate.

Chico's is a specialty retailer of private label women's merchandise, with fashion looks ranging from casual to dressy. The company also sells intimates, accessories and other non-clothing items. Chico's began its operations in 1983 with its target market being women over 35 years old and of moderate to high level income households. The company designs the vast majority of its products in-house or through its independent vendors. Chico's has made small acquisitions of product lines and/or companies, including the White House / Black Market ("WHBM") brand and Soma's, as well as acquiring most of the assets of Fitigues which operated 784 retail stores in 47 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico. Over the past several years, Chico's has continued to open new stores. Chico's business strategy is focused on its private-label merchandise and the accessories it sells at a great, bargain value. As of March 17, 2006, Chico's operated 31 Chico's brand outlet stores, eight WHBM brand outlet stores and one Fitigues brand outlet store. Currently, the distribution for all brands (except the Fitigues brand) is handled through Chico's distribution center in Winder, Georgia. As of January 28, 2006, Chico's had roughly 11,000 employees.

In fiscal year 2005 ("FY 2005 "), Chico's continued to see strong growth in its financial performance. Chico's reported its ninth consecutive year of double-digit comparable same store sales increases, as well as record revenues, net income and its highest ever operating margin. They also believe that the increase in comparable Company store net sales in the current fiscal year resulted from the continuing effort to focus Chico's product development, merchandise planning and allocation, buying, technical design, and marketing departments on Chico's' target customers. In FY 2005, net income rose 37.4% from $141 million to $194 million. Net sales increased for the FY 2005 by 31.7%, to $1.4 billion and operating income rose 33% to $298 million. The main drivers in the increase of net sales were catalogue orders and Internet orders for FY 2005, which increased by $9.3 million, or 34.7%, compared to FY 2004. It is believed that this increase was primarily due to the increased circulation of catalogue mailings and additional television spots in FY 2005 compared to FY 2004. Comparable store sales for Chico's owned stores increased 14.3% year over year, primarily due to increased transactions compared to FY 2004. Chico's believes that comparable store sales growth is critical in achieving its ability to manage their stores efficiently and continue future increases in financial performance. In other words, by increasing the transactions per store, while minimizing markdowns, and other miscellaneous costs, the same store sales will increase. Besides their operating liabilities, Chico's is virtually debt-free, while having cash and marketable securities of over $400 million. In FY 2005, Chico's generated $268 million of cash flow from operations compared with $224 million in FY 2004, an increase of 20%. Strong cash flow is paramount to Chico's' future success. By efficiently managing its cash flows, Chico's will help support its general operating needs...
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