Chico's FAS Annual Report 2017

FY2017 Annual Report · Chico's FAS
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LETTER FROM THE CEO

Fiscal year 2017 was another important year in the evolution of Chico’s FAS as we substantially completed
the second phase of the three-phase transformation that we began in 2016. During the year, we better deﬁned
and strengthened the market positioning of each of our three iconic brands. We launched new product and
customer engagement strategies, and we improved how we source, market and sell our products. These efforts
have positioned us for the sales growth we are expecting in the second half of 2018 and beyond and have
already resulted in meaningful cost savings and enhanced merchandise margin rate.

Our 2017 ﬁnancial performance reﬂects this momentum:

(cid:129) Earnings per share increased to $0.79,

including the favorable impact of U.S.

tax reform of $0.08,

compared to $0.69 in 2016;

(cid:129) Free cash ﬂow remained robust at $118 million – the 9th consecutive year that we generated free cash ﬂow

of approximately $100 million or more; and

(cid:129) SG&A savings reached $56 million, with two-year savings in excess of $100 million.

We have great conﬁdence in the business and in our ability to deliver enhanced value creation for
shareholders. We returned nearly $70 million to shareholders through share repurchases and dividends last
year, and we recently announced a 3% increase to our dividend, the 8th annual increase since the dividend was
established in 2010.

With our healthy balance sheet, our strengthened operational foundation and our access to powerful customer
insights, we are ready to execute on the third phase of our plan. In that phase we are building sustainable
revenue streams and pursuing business opportunities that we believe will excite our existing customers and
generate new ones, will open additional channels of distribution, and will ignite new levels of growth. We’re
seeing success from our initial efforts.

For example,

(cid:129) Early results from last year’s launch of ChicosOffTheRack.com, a new online outlet channel, have been

positive.

(cid:129) The expansion of our gift card penetration to over 40,000 locations in the 2017 fourth quarter generated

strong sales.

(cid:129) The continued expansion of special sizes has increased our ability to acquire new customers and drive
sales. In 2017, petites generated greater than $13 million of incremental sales at Chico’s and White House
Black Market combined.

(cid:129) The enhancements we made in 2017 to our “Locate Tool” resulted in a more than $14 million increase in

orders in ﬁscal 2017 over the prior year.

The new leaders at our brands and across the organization are taking other bold actions in 2018 to drive
growth.

(cid:129) We will be adding more functionality to our Locate Tool in the second half of 2018, creating an “Endless
Aisle” environment for our customers, so their online orders can be fulﬁlled from our distribution centers
or from a store.

(cid:129) Chico’s recently launched its #HowBoldAreYou campaign as part of a brand refresh that has included a
new merchandise architecture, a renewed focus on original prints stemming from Chico’s artisanal heritage,
bold colors, and silhouettes designed with a range of body shapes in mind.

(cid:129) White House Black Market is returning to what historically made the brand so successful – polished
wear-to-work styles and a balance of black and white. While this merchandise shift will take time to
learnings from the Chico’s brand refresh,
implement,
including faster cycle times, which we expect to positively impact the brand’s performance in the latter part
of 2018.

the brand is already applying the operational

(cid:129) To follow up on its most proﬁtable year ever, the Soma team has been working to redeﬁne the brand’s core
franchises by emphasizing solutions. This year, we will be testing a relationship with QVC, reﬁning our
loungewear offering and introducing other enhancements to our product line to make her feel conﬁdent and
comfortable.

The future of retail will reside at the intersection of digital and physical customer interaction. To be successful
and create enhanced value over the long-term, we know we need to be accessible wherever she shops, lives
and explores. So, we have established a dedicated business development team who has already identiﬁed a
number of opportunities that we believe will provide new avenues of revenue and increase brand awareness.
These include:

(cid:129) ShopRunner. Our partnership launched in late March 2018 with great success. As a member-only service
for online shoppers, ShopRunner offers free 2-day shipping and free returns. Members have the opportunity
to purchase from all three of our brands, and we gain access to ShopRunner’s 7 million active members,
few of whom are in our existing customer ﬁle.

(cid:129) Shop Chico’s on Amazon.com.

In spring of 2018, Chico’s began to offer a curated selection of its styles
on Amazon.com, all eligible for Prime delivery. This platform will showcase our amazing products well
beyond our traditional customer base.

(cid:129) Cruise. Based on solid returns in a pilot cruise last summer, we have entered into agreements with
Princess Cruises and Starboard Cruise Services to feature the Chico’s brand on 18 ships across the Holland
America, Princess, and Celebrity cruise lines this summer. We know that our targeted customers love to
travel and to take cruises.

(cid:129) Airport. Working with Stellar Partners,

Inc., Chico’s FAS brands will debut a ﬁrst-of-its-kind,
multi-concept travel retail experience in airports, starting with Philadelphia International Airport in late
2018, with several more opportunities under consideration.

Other exciting opportunities are being considered and developed, and I look forward to updating you on those
and on other developments in our business throughout the year.

In closing, I want to thank our Board of Directors, shareholders and all of our associates for their tremendous
support as we work to transform our company.

Sincerely,

SHELLEY BROADER
CEO and President

LETTER FROM THE CHAIR

Over the past year, Chico’s FAS made substantial additional progress in building a solid foundation for
continued growth and proﬁtability. We focused on operational improvements, strategies to better connect with
our customers, platforms for new distribution channels and strengthening of the leadership team – all with the
objective of driving value creation.

Financially, we ended the year with improved sales trends and earnings per share as our strategic initiatives
gained traction. Cash ﬂow was strong, and we returned real value to shareholders in the form of dividends and
share repurchases. We remain fully committed to implementing the ﬁnal phase of
the three-phase
transformation plan that Shelley Broader and her team launched in 2016, and we are conﬁdent that Shelley’s
foresight and leadership will help ensure successful navigation through this rapidly changing retail landscape.

We have long believed that strong corporate governance is an important driver of success and value creation.
Ensuring we maintain governance policies and practices that support our business objectives remained at the
the Board’s agenda in 2017. Along these lines, we continued to evolve our executive
forefront of
compensation program and enhanced our Board composition and refreshment during the year.

We made a signiﬁcant change to our long-term equity plan to provide a stronger and more direct link between
executive compensation and the creation of long-term shareholder value. Beginning with ﬁscal year 2018,
Chico’s FAS has increased the measurement period for performance-based equity grants from one year to
three years and aligned the vesting for those grants to the new measurement period. This change, together
with our stock-ownership requirements for executives, demonstrates our focus on linking compensation to
long-term strategic goals and strengthens the retention aspects of the plan as well.

Beginning in 2017, shareholders elect Directors to our Board for one-year terms. Beginning with next year’s
Annual Meeting, our Board will be fully declassiﬁed, and all Board seats will be up for election annually.

We strive to have a Board composed of Directors who bring diversity and a mix of perspectives that are
relevant to our strategic direction. Over half of our Board members are women, and over the past three years,
we have added ﬁve new Directors to our nine-member Board. We are pleased to have welcomed Deborah L.
Kerr as our newest independent Director last year. She is a highly experienced technology expert, with proven
that we believe will contribute to our efforts to enhance our
skills in innovation and risk management
customers’ overall experience with the Chico’s FAS brands, both in our stores and online. Collectively, the
Board is diverse and includes individuals who bring the expertise needed to advance the Company’s vision
and strategy, as well as our commitment to women’s empowerment.

Women comprise 55% of the Board and 65% of the Company’s executive committee – a rarity for publicly
traded companies. Our commitment to diversity in the boardroom and throughout the Company sets Chico’s
FAS apart and has been widely applauded:

(cid:129) Recently, Chico’s FAS was named a Top 10 Company for Women Executives by the National Association

for Female Executives (NAFE) and Working Mother magazine;

(cid:129)

In 2017, for the 6th consecutive year, Chico’s FAS was recognized as a “Winning Company” by 2020
Women on Boards; and

(cid:129) Last year, we also received the Women Executive Leadership Florida’s (WEL Florida) Corporate Salute

Elevate Award for the Company’s advancement of gender diversity in the boardroom and C-Suite.

We also work to consider our shareholders’ views in setting governance policies and practices. Many of our
largest shareholders are engaged with the Investor Stewardship Group (ISG), a collective of some of the
largest institutional investors and asset managers in the world. ISG was formed to bring all types of investors
together to establish a framework of basic standards of conduct and corporate governance for U.S. boards. We
are pleased that our governance policies already strongly align with the ISG principles, and we are committed
to staying abreast of changes in best practices in corporate governance and to consider those that make sense
for our shareholders.

In 2018, we celebrate the 25-year anniversary of our IPO. While the number of U.S. public companies has
declined over those 25 years, Chico’s FAS has stayed the course by maintaining a long-term focus on
customer satisfaction, building strong cultural goals and adapting to opportunities and change to remain
relevant. We have emerged as a leader in this highly competitive specialty retail market and our journey
continues.

In summary, we believe the Company is on the right path to further optimize operations, accelerate growth
and improve proﬁtability. With proven leadership, a clear strategic plan and a commitment
to strong
governance, we are conﬁdent that Chico’s FAS has a bright future ahead and that we are well positioned to
deliver enhanced shareholder value. Thank you for your investment in and support of Chico’s FAS.

Sincerely,

DAVID F. WALKER
Chair of the Board

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(cid:2)

□

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the ﬁscal year ended February 3, 2018

TRANSITION 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 charter)

Florida
(State or other jurisdiction
of incorporation)

11215 Metro Parkway, Fort Myers, Florida
(Address of principal executive offices)

59-2389435
(IRS Employer
Identiﬁcation No.)

33966
(Zip code)

(239) 277-6200
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class
Common Stock, Par Value $0.01 Per Share

Name of Exchange on Which Registered
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 Securities Act. Yes (cid:2) No (cid:4)
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 (cid:4) No (cid:2)
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 (cid:2) No (cid:4)

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 (cid:2) No (cid:4)

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K (§229.406 of this chapter) 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 (cid:2).

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, a smaller reporting
company, or emerging growth company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler’’, ‘‘smaller reporting company’’,
‘‘and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated ﬁler (cid:2)
Non-accelerated ﬁler

□ (do not check if a smaller reporting company)

□
Accelerated ﬁler
Smaller reporting company □
Emerging growth company □

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised ﬁnancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □
Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act). Yes (cid:4) No (cid:2)
State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant:
Approximately $1,142,000,000 as of July 29, 2017, based upon the closing stock price on July 28, 2017 as reported by the NYSE.
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 $0.01 per share — 127,468,432 shares as of February 26, 2018.

Documents incorporated by reference:

Portions of the Deﬁnitive Proxy Statement for the Company’s Annual Meeting of Shareholders presently scheduled for June 21, 2018

are incorporated by reference into Part III of this Annual Report on Form 10-K.

CHICO’S FAS, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE
FISCAL YEAR ENDED FEBRUARY 3, 2018

TABLE OF CONTENTS

PART I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Item 4.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 5.

Item 6.

Item 7.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . .

Item 8.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .

Item 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.

Certain Relationships and Related Transactions, and Director Independence . . . . . . .

Item 14.

Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16.

Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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32

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60

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i

This Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and
are subject to risks, uncertainties, and other factors which could cause actual results to differ materially
from those expressed or implied by such forward-looking statements. See ‘‘Item 1A. Risk Factors.’’

PART I

ITEM 1. BUSINESS

Overview

Chico’s FAS, Inc.1 is a leading omni-channel specialty retailer of women’s private branded, sophisticated,
intimates and complementary accessories. We operate under the Chico’s, White
casual-to-dressy apparel,
House Black Market (‘‘WHBM’’) and Soma brand names in the United States, Puerto Rico, the U.S. Virgin
Islands and Canada. Our distinct lifestyle brands serve the needs of fashion-savvy women 35 years and older.
We earn revenues and generate cash through the sale of merchandise in our domestic and international retail
stores, our various e-commerce websites and our call center, which takes orders for all of our brands, and
through an unaffiliated franchise partner in Mexico. We view our stores and Company-operated e-commerce
websites as a single, integrated sales function rather than as separate sales channels operating independently.
As of February 3, 2018, we operated 1,460 stores across 46 states, Puerto Rico, the U.S. Virgin Islands and
Canada, and sold merchandise through 94 franchise locations in Mexico.

Since 1983, we have grown by offering high quality and unique merchandise, supported by compelling
marketing and outstanding personalized customer service. While each of our brands has a distinct customer
base, the overall portfolio caters to a broad age and economic demographic, with household incomes in the
moderate to high income level.

Our Brands

Chico’s

The Chico’s brand, which began operations in 1983, primarily sells exclusively designed, private branded
clothing focusing on women 45 and older. The style sensibility is unique with an individual expression created
to illuminate the women wearing the brand. Chico’s apparel, including the Black Label, Zenergy and Travelers
collections, emphasizes problem solving styles, comfort and relaxed ﬁt. Accessories and jewelry are original
and designed to elevate the clothing assortment, allowing our customer to individualize her personal style.
Chico’s is vertically integrated, controlling almost all aspects of the apparel design process, including choices
of pattern, print, construction, design speciﬁcations, fabric, ﬁnishes and color through in-house designers,
purchased designs and independent suppliers.

The distinctive nature of Chico’s clothing is also reﬂected in its sizing, which is comprised 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). Chico’s will
occasionally offer half-sizes (up to 4.5), one-size-ﬁts-all, petite sizes, short and tall
inseams, and small,
medium and large sizing for some items. The relaxed ﬁt allows us to utilize this kind of sizing and thus offer
a wide selection of clothing without investing in a large number of sizes within a single style.

White House Black Market

The WHBM brand, which began operations in 1985 and was acquired in September 2003, is dedicated to
being a go-to style destination and authority on wardrobe building. WHBM primarily sells exclusively
designed, private branded clothing focusing on women 35 and older. WHBM offers a modern collection for
the way women live now, selling stylish and versatile clothing and accessory items, including everyday basics,
polished workwear, black and white pieces, and feminine, all-occasion dresses. The accessories at WHBM,
such as shoes, belts, scarves, handbags and jewelry, are speciﬁcally designed to coordinate with each
collection, allowing customers to easily individualize their wardrobe selections. WHBM is vertically
integrated, controlling almost all aspects of the apparel design process, including choices of patterns, prints,
construction, design speciﬁcations, fabric, ﬁnishes and color through in-house designers, purchased designs
and independent suppliers.

1

As used in this report, all references to ‘‘we,’’ ‘‘us,’’ ‘‘our’’ and ‘‘the Company,’’ refer to Chico’s FAS,
Inc., a Florida corporation, and all of its wholly-owned subsidiaries.

1

WHBM uses American sizes in the 00-14 range (with online sizes up to 16), including petite sizing, as
well as short and long inseams, and small, medium and large sizing for some items. The ﬁt of the WHBM
clothing is tailored to complement the ﬁgure of a body-conscious woman, while still remaining comfortable.

Soma

The Soma brand, which began operations in 2004, primarily sells exclusively designed, private branded
lingerie, sleepwear, loungewear, activewear, swimwear and beauty products focusing on women 35 and older.
The Soma brand’s core franchise emphasizes solutions, including vanishing back bras, vanishing edge panties,
slimming leggings and cool nights sleepwear. Bras range in size from 32A-46HH. The sleepwear and
loungewear offerings range from extra small to extra-extra large sizing. The beauty category consists of the
Memorable, Enticing and Oh My Gorgeous lines of ﬁne fragrance. The Soma team develops product offerings
by working closely with a small number of independent suppliers to design proprietary products in-house and,
in some cases, designs provided by its independent suppliers under labels other than the Soma brand.

Our Business Strategy

Our overall business strategy is focused on building a collection of distinct high-performing retail brands
serving the fashion needs of women 35 and older. We seek to accomplish this strategy through our ﬁve focus
areas: (1) evolving the customer experience, (2) strengthening our brands’ positions, (3) leveraging actionable
retail science, (4) building growth platforms and (5) achieving operational excellence. Over the long term, we
may build our brand portfolio by organic development or acquisition of other specialty retail concepts if
research indicates that the opportunity complements our current brands and is appropriate and in the best
interest of the shareholders.

We pursue improving the performance of our brands by building our omni-channel capabilities, which
includes managing our store base and growing our online presence, by executing marketing plans, by
effectively leveraging expenses, by considering additional sales channels and markets, and by optimizing the
merchandise offerings of each of our brands. We continue to invest heavily in our omni-channel capabilities in
order to allow customers to fully experience our brands in the manner they choose.

We view our stores and Company-operated e-commerce websites as a single, integrated sales function
rather than as separate sales channels operating independently. To that end, we often refer to our brands’
respective websites as the brand’s ‘‘largest store’’. Customers may shop in one place and consummate the
purchase somewhere else. Our domestic customers can return merchandise to a store or to our distribution
center, regardless of where they purchased it. As a result, we maintain a shared inventory platform for our
operations, allowing us to fulﬁll orders for all channels from our distribution center (‘‘DC’’) in Winder,
Georgia. We also fulﬁll in-store orders directly from other stores.

We seek to acquire and retain customers by leveraging existing customer-speciﬁc data and through
targeted marketing, including e-marketing, television, catalogs and mailers. We seek to optimize the potential
of our brands with improved product offerings, potential new merchandise opportunities, and brand extensions
that enhance the current offerings, as well as through our continued emphasis on our ‘‘Most Amazing Personal
Service’’ standard. We also will continue to consider potential alternative sales channels for our brands,
including international franchising and licensing, wholesale opportunities and others.

In ﬁscal 2016, we began implementing cost reduction and operating efficiency initiatives,

including
realigning marketing and digital commerce, improving supply chain efficiency and reducing non-merchandise
expenses. In ﬁscal 2017, we strengthened our brand positioning and began preparing for future growth. We are
now intently focused on evolving the customer experience and leveraging actionable retail science to drive
proﬁtable retail sales. Additionally, we have launched multiple initiatives that utilize technology and new
platforms to drive growth.

Our Customer Service Model

Our customers deserve outstanding and personalized customer service, which we strive to achieve
through our trademark ‘‘Most Amazing Personal Service’’ standard. We believe this service model is one of
our competitive advantages and a key to our continued success. An important aspect of our successful
implementation of this model involves the specialized training we give sales associates to help meet their

2

customers’ fashion and wardrobe needs, including clothing and accessory style, 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 develop long-term relationships with their customers, to know their customers’
preferences and to assist those customers in selecting merchandise best suited to their tastes and wardrobe
needs. Our brands utilize tablets in stores to access customer purchase history and style preferences as a
clienteling tool that enhances the shopping experience in a personalized and efficient manner.

We also serve our customers’ needs and build customer loyalty through our customer rewards programs.
Our programs are designed to reward our loyal customers by leveraging the rich data our customers share
with us to deliver a relevant and engaging experience with our brands. The beneﬁts provided are routinely
evaluated in conjunction with our overall customer relationship management and marketing activities to ensure
they remain a compelling reason for customers to shop at our brands.

(cid:129)

Chico’s. A Chico’s customer can join the ‘‘Passport’’ program at no cost and receive additional
beneﬁts after spending a ﬁxed amount. Features of the program include a 5% discount, exclusive
invitations to private sale events and advance notice
offers, special promotions, free shipping,
regarding new arrivals.

(cid:129) WHBM. With ‘‘WHBM Rewards’’, a customer can join at no cost for tier-based discounts, a 5%
discount after spending a ﬁxed amount, free shipping, special promotions and invitations to private
sales based on annual spend.

(cid:129)

Soma.
purchases. Features of the program include reward coupons at speciﬁed loyalty point
exclusive promotions and free shipping.

A Soma customer can join ‘‘Love Soma Rewards’’ at no cost and earns points based on
levels,

Our Boutiques and Outlet Stores

Our boutiques are located in upscale indoor shopping malls, outdoor shopping areas and standalone
street-front locations in the United States, Puerto Rico, the U.S. Virgin Islands and Canada. Boutique locations
are determined on the basis of various factors, including, but not limited to: geographic and demographic
characteristics of the market, nearby competitors, our own network of existing boutiques, the location of
the shopping venue, including the site within the shopping center, proposed lease terms, anchor or other
co-tenants, parking accommodations and convenience. Our merchandise is also sold through franchise
locations in Mexico, including boutique locations as well as shop-in-shop formats within a department store
environment.

Our outlet stores are primarily located in quality outlet centers. The Chico’s and WHBM brand outlets,
including our hybrid Chico’s Off the Rack format, contain a mixture of made-for-outlet and clearance
merchandise. The made-for-outlet product carries a higher margin than the clearance items from our boutique
stores. Soma outlets contain a mix of boutique and clearance merchandise. We also sell clearance merchandise
on our websites. We regularly review the appropriate ratio of made-for-outlet and clearance merchandise sold
at our outlets and adjust that ratio as appropriate.

As of February 3, 2018, we operated 1,460 retail stores in 46 states, Puerto Rico, the U.S. Virgin Islands
and Canada. As of February 3, 2018, our merchandise was also sold through 94 franchise locations in Mexico.
The following tables set forth information concerning our retail stores during the past ﬁve ﬁscal years:

Stores
Stores at beginning of year . . . . . .
Opened . . . . . . . . . . . . . . . . . .
Closed . . . . . . . . . . . . . . . . . .
Total Stores . . . . . . . . . . . . .

2017

2016

Fiscal Year(1)
2015

2014

2013

1,501
7
(48)
1,460

1,518
17
(34)
1,501

1,547
40
(69)
1,518

1,472
109
(34)
1,547

1,357
135
(20)
1,472

3

2017

2016

Fiscal Year End
2015

2014

2013

Stores by Brand
Chico’s frontline boutiques . . . . . . . . . . . .
Chico’s outlets
. . . . . . . . . . . . . . . . . . . .
Chico’s Canada . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .

Chico’s total

WHBM frontline boutiques . . . . . . . . . . . .
WHBM outlets . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
WHBM Canada
WHBM total . . . . . . . . . . . . . . . . . . . .

Soma frontline boutiques . . . . . . . . . . . . .
Soma outlets . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

Soma total

568
120
4
692

404
69
6
479

270
19
289

587
116
4
707

423
71
6
500

275
19
294

604
117
4
725

429
71
6
506

269
18
287

613
118
3
734

441
68
5
514

263
17
280

611
110
—
721

436
59
3
498

232
17
249

Boston Proper boutiques . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .

Total Stores

—
1,460

—
1,501

—
1,518

19
1,547

4
1,472

(1) 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 February 3, 2018 (‘‘ﬁscal 2017’’, ‘‘2017’’ or ‘‘current period’’), January 28, 2017 (‘‘ﬁscal 2016’’,
‘‘2016’’ or ‘‘prior period’’), January 30, 2016 (‘‘ﬁscal 2015’’ or ‘‘2015’’), January 31, 2015 (‘‘ﬁscal
2014’’ or ‘‘2014’’) and February 1, 2014 (‘‘ﬁscal 2013’’ or ‘‘2013’’). Each of these periods had 52 weeks,
except for ﬁscal 2017, which consisted of 53 weeks.

In ﬁscal 2018, we anticipate approximately 50 net store closures. We continuously evaluate the
appropriate new store growth rate and closures in light of economic conditions and may adjust the growth rate
and closures as conditions require or as opportunities arise. Our unaffiliated franchisee expects to continue
opening franchise locations in Mexico.

Digital Commerce

Each of our brands has a digital ﬂagship: www.chicos.com, www.whbm.com and www.soma.com, which
provide customers the ability to browse and order merchandise, locate our stores and engage with content to
enhance the shopping experience. Additionally, in ﬁscal 2017, we launched www.chicosofftherack.com, a new
e-commerce site that gives customers 24/7 access to the same exclusive styles available at our Chico’s Outlet
locations. Our websites are designed to complement the in-store experience and play a vital role in both our
omni-channel strategy and the customer experience. Some products are available exclusively online including
extended sizes, additional style and color choices, premier partner brands and clearance items. Online
merchandise is also available for order through our call centers and in our stores through our clienteling
applications. Domestic customers may return product directly to our DC or in our store locations regardless of
the channel in which the merchandise was purchased.

We remain focused on our efforts to better align with shifts in customer traffic and consumers’
consumption of media and content. As a result of signiﬁcant
in 2016 we
implemented a responsive website design for Chico’s and WHBM to ensure a consistent and seamless
customer experience across devices. In ﬁscal 2017, we completed the responsive website design conversion
for Soma. We will maintain focus on our omni-channel approach by enhancing all brand websites through
new features, functionality, search engine optimization and content designed to improve and evolve the
customer’s experience.

increases in mobile traffic,

Marketing and Advertising

Driven by our industry-leading transactional data, our brands continue to develop targeted and effective
marketing strategies. We continue to optimize and shift advertising from traditional to digital media with a
focus on attracting new customers and using predictive modeling and advanced segmentation to drive
retention and reactivation.

4

Our marketing programs currently consists of the following media mix to engage current and prospective

customers:

(cid:129)

(cid:129)

(cid:129)

(cid:129)

(cid:129)

(cid:129)

(cid:129)

(cid:129)

Loyalty and rewards programs;

Direct marketing: catalogs, postcards, email and calling campaigns;

Digital marketing: mobile paid search, product
remarketing, affiliate programs;

listing ads, display banner advertising and

Social marketing: organic and paid efforts across social platforms;

National and local print and broadcast advertising;

Editorial content;

Public relations; and

Charitable giving and outreach programs.

In 2018, our marketing efforts will remain focused on attracting customers to our iconic brands’

differentiated positioning by leveraging retail science and introducing alternative sales channels.

Information Technology/Data Analytics

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 so that we are able to take advantage of technological developments
to support and enhance our processes across all areas of our business. We use a proprietary customer database,
together with data analytics, to customize our communications and make targeted offers to customers in an
effort to increase traffic in-store and online and to increase conversion.

Merchandise Distribution

The distribution functions for all brands are handled from our DC in Winder, Georgia. New merchandise
is generally received daily at the DC. Imported merchandise is shipped from the country of export by sea, air,
truck or rail, as circumstances require. Domestic merchandise is primarily shipped by truck or rail. Upon
arrival at the DC, merchandise is sorted and packaged for shipment to individual stores or is held for future
store replenishment or direct shipment to customers. Merchandise is generally pre-ticketed with price and
related informational tags at the point of manufacture.

Our DC has been granted Foreign Trade Zone status from the Department of Commerce and U.S.
Customs and Border Protection. This status facilitates international expansion and allows us to move certain
merchandise to the DC without paying U.S. Customs duty until the merchandise is shipped to domestic stores
or online customers.

Product Sourcing

Our product sourcing activities are performed by a centralized shared service team focused on identifying
cost-effective opportunities to improve production speed and ﬂexibility while maintaining our quality
standards. In ﬁscal 2017, China sources accounted for approximately 52% of our merchandise cost. We take
ownership in the foreign country, at a designated point of entry into the United States, or at our DC,
depending on the speciﬁc terms of sale.

We purchase the majority of our merchandise through key suppliers with whom we have established
strategic collaborations; these key suppliers represented 61% of our purchases in ﬁscal 2017 with our largest
supplier accounting for 23% of the total. Currently, we believe our product sourcing is appropriately
distributed among suppliers and across countries of manufacture taking into consideration product quality
execution, ﬂexibility and speed at an acceptable cost and level of risk.

5

Competition

The women’s retail apparel and intimate apparel business is highly competitive and includes local,
national and international department stores, specialty stores, boutique stores, catalog companies and online
retailers. We believe that our distinctively designed merchandise offerings and emphasis on customer service
distinguish us from our competitors.

Trademarks and Service Marks

We are the owner of certain registered and common law trademarks and service marks (collectively

referred to as ‘‘Marks’’).

Our Marks

include, but are not

limited to: CHICO’S, CHICO’S PASSPORT, ZENERGY, SO
SLIMMING, WHITE HOUSE BLACK MARKET, WHBM REWARDS, WORK KIT, SOMA, SOMA
INTIMATES, ENTICING, COOL NIGHTS, EMBRACEABLE, VANISHING BACK, VANISHING EDGE,
LOVE SOMA REWARDS and CHICO’S OFF THE RACK. We have registered or are seeking to register a
number of these Marks in the United States, Canada, Mexico and other foreign countries.

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 material
claims of infringement or other challenges to our rights to use any registered Marks in the United States.

Available Information

Through our investor relations website, www.chicosfas.com, 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 and are available at www.sec.gov. This
website also includes recent press releases, corporate governance information, beneﬁcial ownership reports,
institutional presentations, quarterly and institutional conference calls and other ﬁnancial data,
including
historical store square footage.

Our Code of Ethics, which is applicable to all of our employees, including the principal executive officer,
the principal ﬁnancial officer and the Board of Directors (‘‘Board’’),
is posted on our investor relations
website. Any amendments to or waivers from our Code of Ethics are also available on this website. Charters
of each of the Audit Committee, Human Resources, Compensation and Beneﬁts Committee, Corporate
Governance and Nominating Committee and Executive Committee as well as the Corporate Governance
Guidelines,
to Ethical Sourcing and Stock Ownership
Guidelines are available on this website or upon written request by any shareholder.

Insider Trading Policy, Terms of Commitment

Employees

As of February 3, 2018, we employed approximately 19,000 people, approximately 30% of whom were
full-time employees and the balance of whom were part-time employees. The number of part-time employees
ﬂuctuates during peak selling periods. As of the above date, approximately 90% of our employees worked in
our boutique and outlet stores. We have no collective bargaining agreements covering any of our employees,
have never experienced any material labor disruption and are unaware of any efforts or plans to organize our
employees. We consider the overall relations with our employees to be good.

6

ITEM 1A. RISK FACTORS

risks affecting our business operations. Additional

An investment in our common stock involves certain risks. The risks and uncertainties described below
are not the only risks that may have a material adverse effect on the Company, and the risks described herein
are not listed in order of the potential occurrence or severity. There is no assurance that we have identiﬁed,
assessed and appropriately addressed all
risks and
uncertainties could adversely affect our business and our results. If any of the following risks actually occur,
our business, consolidated ﬁnancial condition or results of operations could be negatively affected, and the
market price for our shares could decline. Further, to the extent that any of the information contained in this
Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below are
cautionary statements, identifying important factors that could cause the Company’s actual results to differ
materially from those expressed in or implied by any forward-looking statements made by or on behalf of the
Company. 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.

Business Strategy

If we cannot successfully execute our business strategy, our consolidated ﬁnancial condition and results
of operations could be materially adversely impacted. There are numerous risks associated with this strategy
including, but not limited to, the following:

Risk

Description

1. Failure to

implement and
manage our
business strategy

Our long-term omni-channel business strategy is dependent upon a number of factors,
including anticipating and quickly responding to changing customer preferences,
shopping habits (such as online versus in-store) and fashion trends, identifying and
developing new brand extensions, markets and channels of distribution, effectively
using our marketing resources to communicate with existing and potential customers,
effectively managing our store base, including management of store productivity and
negotiating acceptable lease terms, effectively managing our wholesale licensing and
franchising relationships to optimize sales and margin and to protect our brands,
having the appropriate corporate resources to support our business strategies, sourcing
levels of inventory in line with expected sales and then managing its disposition,
hiring, training and retaining qualiﬁed employees, generating sufficient operating cash
ﬂows to fund our business strategies, maintaining brand-speciﬁc websites that offer
the system functionality, service and security customers expect, and correctly
identifying,
implementing and maintaining appropriate technology to support our
business strategies.

7

2. Competition

3. Risks of

expanding
internationally

The women’s specialty retail industry is highly competitive. We compete with local,
national and international department stores, specialty and discount stores, catalogs
and internet businesses offering similar categories of merchandise. Many of our
competitors have advantages over us,
including substantially greater ﬁnancial,
marketing, distribution and other resources. Increased levels of promotional activity
by our competitors, some of whom may be able to adopt more aggressive pricing
policies than we can, both online and in stores, may negatively impact our sales and
proﬁtability. There is no assurance that we can compete successfully with these
companies in the future. In addition to competing for sales, we compete for store and
online traffic,
favorable store locations and lease terms and for qualiﬁed
associates. The growth of fast fashion, value fashion retailers and expansion of
off-price retailers has shifted shopper expectations to more affordable pricing of
well-known brands and has contributed to continued promotional pressure as well as
a shift in customers’ expectations with regard to the timing and costs of product
deliveries and returns. If we do not identify and respond to these emerging trends in
consumer spending as well as the growing preference of many customers for online
e-commerce options, we may harm our ability to retain our existing customers or
attract new customers. Increased competition in any of these areas may result in
higher costs or otherwise reduce our sales or operating margins.

for

Our current growth strategy includes potential expansion of our operations and
presence internationally. As part of that strategy, we may face unanticipated and
signiﬁcant costs and challenges in setting up foreign offices, hiring experienced
management or franchising partners, negotiating proﬁtable licensing or franchising
agreements, obtaining prime locations for stores,
introducing and marketing our
brands, and others.

We may be unable to successfully grow our international business, or we may face
operational issues or resource constraints that delay our intended pace of international
to identify
growth, such as an inability to identify suitable franchising partners,
proﬁtable markets for our brands and sites for store locations,
to anticipate and
address the different operational or cultural challenges presented in a new country, to
ﬁnd vendors that can meet our international merchandise needs, to provide adequate
resource and system support through our shared service model, to achieve acceptable
operating margins, compete with local competitors or adapt to different consumer
demand and behavior. Any challenges that we encounter may divert ﬁnancial,
operational and managerial resources from our existing operations.

In addition, we are subject to certain U.S. laws that may impact our international
operations or expansion, including the Foreign Corrupt Practices Act, as well as the
laws of the foreign countries in which we operate. Violations of these laws could
subject us to sanctions or other penalties that could negatively affect our reputation,
business and operating results.

8

General Economic Conditions

Numerous economic conditions, all of which are outside of our control, could negatively affect the level
of our customers’ spending or our costs of operations. If these economic conditions persist for a sustained
period, our consolidated ﬁnancial condition and results of operations could be materially adversely impacted.
These economic conditions include, but are not limited to, the following:

Risk

Description

4. Declines in
consumer
spending

5. Fluctuating costs

6. Impairment
charges

7. Fluctuating

comparable sales
and operating
results

Consumer spending in our sector may decline as a result of: threatened or actual
government shut downs, higher unemployment levels, low levels of consumer credit,
declines in consumer conﬁdence,
inﬂation, changes in interest rates, recessionary
pressures, increasing gas and other energy costs, increased taxes, changes in housing
prices, higher durable goods or other consumer spending, volatility in the ﬁnancial
markets and changes in the political climate or conditions.

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,
may contribute to ongoing pricing pressures throughout our supply chain. The price
and availability of
to the manufacturing process may ﬂuctuate
signiﬁcantly, depending on several factors, including commodity costs (such as higher
cotton prices), energy costs (such as fuel), shipping costs, inﬂationary pressures from
emerging markets,
and currency
ﬂuctuations.

increased labor

costs, weather

such inputs

conditions

Signiﬁcant negative industry or general economic trends, changes in customer
demand for our product, disruptions to our business and unexpected signiﬁcant
changes or planned changes in our operating results or use of long-lived assets (such
as boutique relocations or discontinuing use of certain boutique ﬁxtures) may result
in impairments to goodwill, intangible assets and other long-lived assets.

Our comparable sales and overall operating results have ﬂuctuated in the past and are
expected to continue to ﬂuctuate in the future. In addition to other factors discussed
in this Item 1A., a variety of factors affect comparable sales and operating results,
including changes in fashion trends, changes in our merchandise mix, customer
acceptance of merchandise offerings,
the timing of marketing activities, calendar
shifts of holiday periods, the periodic impact of a ﬁfty-three week ﬁscal year, weather
conditions and general economic conditions. In addition, our ability to address the
current challenges of sustained declining store traffic combined with a highly
promotional retail environment may impact our comparable sales, operating results
and ability to maintain or gain market share. Past comparable sales or operating
results are not an indicator of future results.

9

Omni-Channel Operations

Our omni-channel operations (including our websites and catalogs) are a critical part of our customers’
overall experience with our brands and will be a signiﬁcant contributor to our future business growth and
proﬁtability. Our inability or failure to successfully manage and maintain those operations could materially
and adversely impact our results of operations. Speciﬁc risks include, but are not limited to, the following:

Risk

Description

8. Reliance on
technology

Our brands’ websites and select systems are heavily dependent on technology, which
creates numerous risks including unanticipated operating problems, system failures,
rapid technological change, failure of technology to operate the websites and systems
as anticipated, reliance on third party computer hardware and software providers,
computer viruses, telecommunication failures, liability for online content, systems and
data breaches, denial of service attacks, spamming, phishing attacks, computer
hackers and other similar disruptions. Our failure to successfully assess and respond
to these risks could negatively impact sales, increase costs, inhibit our ability to
acquire new customers and damage the reputation of our brands.

9. Reliance on the
U.S. Postal
Service and other
shipping vendors

Postal rate increases or a reduction or delay in service could affect the cost of our
order fulﬁllment and catalog and promotional mailings. We use the Postal Service to
mail millions of catalogs each year to educate our customers about our products,
acquire new customers, drive customers to our boutiques and websites and promote
catalog sales. We rely on discounts from the basic postal rate structure, such as
discounts for bulk mailings and sorting.

10. Inability to
successfully
launch other
channels of sales,
marketing and
distribution

We utilize additional shipping vendors to support our online operations. Any
signiﬁcant and unanticipated increase in shipping costs, reduction in service, or
slow-down in delivery could impair our ability to deliver merchandise in a timely or
economically efficient manner.

including through licensing, wholesaling,

Our strategic plans include additional channels for the marketing and sale of our
product and brands,
franchising and
alternative distribution models. Each of these methods presents new operational,
reputational and ﬁnancial challenges for us. Our inability to ﬁnd the right markets,
partners or business models, our inability to negotiate agreements that protect our
proﬁt and brand quality and reputation, or our inability to accurately anticipate the
resources, systems and operational needs that go along with these new ventures could
result
in lower than expected returns and adversely impact other areas of our
business.

10

Information Technology Systems

In addition to the dependence of our retail websites on technology as discussed above, we also rely on
various information technology systems to manage our overall operations, and failure of those systems to
operate as expected or a signiﬁcant interruption in service could materially adversely impact our consolidated
ﬁnancial condition and results of operations. Risks include, but are not limited to, the following:

Risk

Description

11. Disruptions in

current systems
or difficulties in
integrating new
systems

12. Cybersecurity/

Data Privacy

We regularly maintain, upgrade, enhance or replace our information technology
systems to support our business strategies and provide business continuity. Replacing
legacy systems with successor systems, making changes to existing systems or
acquiring new systems with new functionality have inherent
including
disruptions, delays, gaps in functionality, user acceptance, adequate user training or
other difficulties that may impair the effectiveness of our information technology
systems.

risks

We are subject to cybersecurity risks. Cybersecurity refers to the combination of
technologies, processes and procedures established to protect information technology
systems and data from unauthorized access, attack, exﬁltration, loss or damage. Our
business involves the storage and/or transmission of customers’ personal information,
shipping preferences and credit card information, as well as conﬁdential information
regarding our business, employees and third parties. In addition, as part of our
acceptance of customers’ debit and credit cards as forms of payment, we are required
to comply with the Payment Card Industry Data Security Standards (‘‘PCI’’) as well
as other laws and regulations, both foreign and in the United States.

While we have implemented measures reasonably designed to prevent security
breaches and cyber incidents, and while we have taken steps to comply with PCI and
other laws, those measures may not be effective. A breach or cyber incident could
result in the loss or misuse of data and could result in ﬁnes, penalties, damages, loss
of business, legal expenses, remediation costs, reputational damage or loss of our
ability to accept debit and credit cards as forms for payment. In addition, changes in
laws or regulations, or in the PCI standards, could result in cost increases due to
system or administrative charges.

11

Sourcing and Distribution Strategies

Our sourcing and distribution strategies are subject to numerous risks that could materially adversely
impact our consolidated ﬁnancial condition and results of operations. These risks include, but are not limited
to, the following:

Risk

Description

13. Reliance on

foreign sources
of production

The majority of the merchandise we sell is produced outside the United States. As a
result, our business remains subject to the various risks of doing business in foreign
markets and importing merchandise from abroad, such as: geo-political instability,
non-compliance with the Foreign Corrupt Practices Act and other anti-corruption laws
and regulations, potential changes to the North American Free Trade Agreement and
imposition of new legislation relating to import quotas,
other trade agreements,
imposition of new or increased duties, taxes, or other charges on imports, foreign
exchange rate challenges and pressures presented by implementation of U.S.
monetary policy, challenges
issues,
transportation disruptions, our shift to a predominantly FOB (free on board) shipping
structure rather than predominantly DDP (delivered duty paid), natural disasters,
delays in the delivery of cargo due to port security considerations or government
funding; seizure or detention of goods by U.S. Customs authorities, or a reduction in
the availability of shipping sources caused by industry consolidation or other reasons.
We continue to source a substantial portion of our merchandise from Asia, including
China. A change in exchange rates, labor laws or policies affecting the costs of goods
in Asia could negatively impact our merchandise costs. Furthermore, delays in
production or shipping product, whether due to work slow-downs, work stoppages,
strikes, port congestion, labor disputes, product regulations and customs inspections
or other factors, could have a negative impact.

from local business practices or political

We cannot predict whether or not any of the foreign countries in which our clothing
and accessories are produced will be subject to import restrictions or taxes by the
United States government. 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.

14. Our suppliers’
inability to
provide quality
goods in a timely
manner

We are subject to risk because we do not own or operate any manufacturing facilities
and depend on independent
third parties to manufacture our merchandise. A key
supplier may become unable to address our merchandising needs for a variety of
reasons. If we were unexpectedly required to change suppliers or if a key supplier
were unable to supply acceptable merchandise in sufficient quantities on acceptable
terms, we could experience a signiﬁcant impact to the supply or cost of merchandise.

15. Reliance upon
one supplier

Approximately 23% of total purchases in ﬁscal 2017 and ﬁscal 2016 were made from
one supplier, and we cannot guarantee that this relationship will be maintained in the
future or that
the supplier will continue to be available to supply merchandise.
However, 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.

12

16. Our suppliers’
failure 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 monitor compliance with these terms, some
of our independent suppliers may not be in complete compliance with our guidelines
at all times. 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.

17. Reliance on one
location to
distribute goods
for our brands

With minor exceptions, the distribution functions for all of our brands are handled
from our DC in Winder, Georgia and a signiﬁcant interruption in the operation of that
facility due to natural disasters, severe weather, accidents, system failures, capacity
constraints or other unforeseen causes could delay or impair our ability to distribute
merchandise to our stores and/or fulﬁll online or catalog orders.

Other Risks Factors

Our business is subject to numerous other risks that could materially adversely impact our consolidated

ﬁnancial condition and results of operations. These risks include, but are not limited to, the following:

Risk

Description

18. Failure to

comply with
applicable laws
and regulations

19. Adverse

outcomes of
litigation matters

20. Our inability to
retain or recruit
key personnel

the Dodd-Frank Wall Street Reform and Consumer Protection Act,

Our policies, procedures and internal controls are designed to help us comply with all
applicable foreign and domestic laws, accounting and reporting requirements,
regulations and tax requirements, including those imposed by the Sarbanes-Oxley Act
of 2002,
the
Foreign Corrupt Practices Act, The Patient Protection and Affordable Care Act, the
SEC and the New York Stock Exchange (‘‘NYSE’’), as well as applicable
employment and data security laws and various applicable laws
in foreign
jurisdictions. We could be subject to legal or regulatory action in the event of our
failure to comply, which could be expensive to defend and resolve and be disruptive
to our business. Any changes in regulations, the imposition of additional regulations
or the enactment of any new legislation that affects us may increase the complexity
of the legal and regulatory environment in which we operate and the related costs of
compliance.

We are involved 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, presenting multiple risks and uncertainties and requiring signiﬁcant
management time. Our assessment could change in light of the discovery of facts
with respect to pending or potential legal actions against us, not presently known to
us, or determinations by judges, juries or other ﬁnders of fact which are inconsistent
with our evaluation of the possible liability or outcome of such litigation. In addition,
we may be subject to litigation which has not yet been ﬁled.

Our success and ability to properly manage our business depends to a signiﬁcant
extent upon our ability to attract, develop and retain qualiﬁed employees, including
executive and senior management and talented merchants. Competition for talented
employees within our industry is intense. Failure to recruit and retain such personnel
and implement appropriate succession planning,
including the transition of new
executives, particularly at the senior executive level, could jeopardize our continued
and sustained success.

13

21. Our inability to
achieve the
results of our
strategic
initiatives

the last

internal change and effort,

two years, we have launched signiﬁcant

Over
initiatives designed to
reposition our brands, drive sales, acquire new customers, establish new channels of
distribution and further align the organizational structure for long-term growth. These
initiatives require substantial
including reductions and
changes in personnel and signiﬁcant adjustments in how we design and source
product and how we ultimately present and sell it to our customers. These initiatives
may not deliver all of the results we expect. Moreover, the process of implementing
them places signiﬁcant stress on the Company and could result
in unexpected
short-term interruptions or negative impacts to our business, such as disruptions to
our current business processes as we migrate to the new processes, or failure to
successfully migrate to those new processes, which could negatively impact product
ﬂow, product quality or inventory levels.

In addition, there is no assurance that we can complete the implementation of all of
that, once
these initiatives in the manner or
implemented,
in the expected increases in the efficiency or
they will
productivity of our business.

in the time-frame planned, or

result

22. Our inability to
operate our
business within
our ﬁnancial
covenants or to
replace our credit
facility

23. War, terrorism or

other
catastrophes

24. Our inability to
protect our
brands’
reputation

Our revolving credit agreement and term loan contains various affirmative and
negative covenants that may restrict the ability of the Company to incur indebtedness,
grant
liens, engage in mergers, make certain investments, pay dividends or
distributions on our common stock or enter into sales-leaseback transactions. The
agreement also contains ﬁnancial covenants that require the Company to maintain
certain ﬁnancial ratios. The ability of the Company to comply with these provisions
may be affected by events beyond our control. Failure to comply with these
covenants could result in an event of default which, if not cured or waived, could
accelerate the Company’s repayment obligations. Also, the inability to obtain credit
on commercially reasonable terms in the future when this facility expires could
adversely impact our
In addition, market
liquidity and results of operations.
conditions could potentially impact the size and terms of a replacement facility or
facilities.

In the event of war, acts of terrorism or the threat of terrorist attacks, public health
crises or weather catastrophes, consumer spending could signiﬁcantly decrease for a
sustained period. In addition, local authorities or shopping center management could
close stores in response to any immediate security concern, public health 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, our DC, or
our entire supply chain.

Our ability to protect our brands’ reputations is an integral part of our general success
strategy and is critical to the overall value of the brands. If we fail to maintain high
standards for merchandise quality and integrity in our business conduct or fail to
address other risk factors, such failures could jeopardize our brands’ reputations.
Consumers value readily available information from social media and other sources
concerning retailers and their goods and services and many times act on such
information without further investigation in regards to its accuracy. Any negative
publicity, whether true or not, may affect our reputation and brand and, consequently,
reduce demand for our merchandise, decrease customer and investor loyalty and
affect our vendor relationships.

14

25. Our inability to
protect our
intellectual
property

While we devote signiﬁcant resources to the protection of our intellectual property,
others may still attempt to imitate our products 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.

26. Stock price
volatility

27. Our business
could be
impacted as a
result of actions
by activist
shareholders or
others

28. Disadvantageous
lease obligations
and commercial
retail
consolidation

In addition, the intellectual property laws and enforcement practices in many foreign
countries can be substantially different from those in the United States. There are also
inherent challenges with enforcing intellectual property rights on third party
e-commerce websites, especially those based in foreign jurisdictions. We cannot
guarantee that such rights are not infringed.

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 sales, changes in earnings estimates by
analysts or the failure of investors or analysts to understand our business strategies or
fundamental changes in our business or sector, among other factors, could cause the
market price of our common stock to ﬂuctuate substantially. In addition, stock market
have experienced periods of extreme price or 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.

to legal and business challenges in the
From time to time, we may be subject
operation of our Company due to proxy contests, shareholder proposals, media
campaigns and other such actions instituted by activist shareholders or others.
Responding to such actions is costly and time-consuming, disrupts our operations,
may not align with our business strategies and may divert the attention of our Board
of Directors and management
from the pursuit of current business strategies.
Perceived uncertainties as to our future direction or changes to the composition of
our Board of Directors as a result of shareholder activism may lead to the perception
of instability in the organization and its future and may make it more difficult to
attract and retain qualiﬁed personnel and business partners.

We have, and will continue to have, signiﬁcant lease obligations. If an existing or
future store is not proﬁtable, and we decide to close it, we may nonetheless be
committed to fulﬁll our obligations under the applicable lease including paying the
base rent for the balance of the lease term. Additionally, continued consolidation in
the commercial retail real estate market could affect our ability to successfully
negotiate favorable rental terms for our stores in the future and could concentrate our
leases with fewer landlords who may then be in a position to dictate unfavorable
terms to us due to their signiﬁcant negotiating leverage. If we are unable to enter into
new leases or renew existing leases on terms acceptable to us or be released from our
obligations under leases for stores that we close this could affect our ability to
proﬁtably operate our stores.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

15

ITEM 2.

PROPERTIES

Stores

At ﬁscal year-end for 2017, 2016 and 2015 our total consolidated selling square feet was 3.5 million,
3.6 million and 3.7 million, respectively. For a general description of our leases, see Note 1 to our ﬁnancial
statements under the heading ‘‘Operating Leases.’’ As of February 3, 2018, our 1,460 stores were located in
46 states, Puerto Rico, the U.S. Virgin Islands and Canada, as follows:

Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine

20
34
12
147
24
21
8
124
56
5
62
23
7
13
16
19
3

Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma

39
30
36
28
12
29
6
10
19
6
51
7
58
47
5
47
15

Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
West Virginia
Wisconsin
U.S. Virgin Islands
Puerto Rico
Ontario, Canada

16
68
4
35
4
33
136
10
46
29
4
17
1
8
10

NSSC and Distribution Centers

Our NSSC is located on approximately 65 acres in Fort Myers, Florida and consists of approximately
504,000 square feet of office space. Our distribution center is located on approximately 110 acres in Winder,
Georgia and consists of approximately 583,000 square feet of distribution, fulﬁllment, call center and office
space.

ITEM 3. LEGAL PROCEEDINGS

In July 2015, White House Black Market, Inc. (WHBM) was named as a defendant in Altman v. White
House Black Market, Inc., a putative class action ﬁled in the United States District Court for the Northern
District of Georgia. The complaint alleges that WHBM, in violation of federal law, willfully published more
than the last ﬁve digits of a credit or debit card number on customers’ point-of-sale receipts. Plaintiff seeks an
award of statutory damages of $100 to $1,000 for each alleged willful violation of the law, as well as
attorneys’ fees, costs and punitive damages. The Company denies the material allegations of the complaint and
believes the case is without merit. On October 25, 2017, the magistrate in the matter recommended that the
class be certiﬁed. On November 8, 2017, WHBM ﬁled objections to such recommendation. On February 12,
2018, the District Court issued an order certifying the class. On February 26, 2018, the Company ﬁled a
petition with the District Court for permission to appeal its decision to the Eleventh Circuit Court of Appeals.
including a planned motion for summary
The Company will continue to vigorously defend the matter,
judgment to dismiss all claims. At this time, the Company is unable to reasonably estimate the potential loss
or range of loss, if any, related to the lawsuit because there are a number of unknown facts and unresolved
legal issues that may impact the amount of any potential liability, including, without limitation, (a) whether
the action will ultimately be permitted to proceed as a class, (b) if the action proceeds as a class, the
resolution of certain disputed statutory interpretation issues that may impact the size of the putative class and
(c) whether or not the plaintiff is entitled to statutory damages. No assurance can be given that these issues
will be resolved in the Company’s favor or that the Company will be successful in its defense on the merits or
otherwise. If the case were to proceed as a class action and the Company were to be unsuccessful in its
the ultimate resolution of the case could have a material adverse effect on the
defense on the merits,
Company’s consolidated ﬁnancial condition or results of operations.

16

Other than as noted above, we are not currently a party to any material legal proceedings other than
claims and lawsuits arising in the normal course of business. All such matters are subject to uncertainties, and
outcomes may not be predictable. Consequently, the ultimate aggregate amounts of monetary liability or
ﬁnancial impact with respect to these matters as of February 3, 2018 are not estimable. However, while such
matters could affect our consolidated operating results when resolved in future periods, management believes
that upon ﬁnal disposition, any monetary liability or ﬁnancial impact to us would not be material to our
annual consolidated ﬁnancial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

17

PART II

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 February 26, 2018, the last
reported sale price of the Common Stock on the NYSE was $9.09 per share. The number of holders of record
of common stock on February 26, 2018 was 1,138.

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 February 3, 2018
Fourth Quarter (October 29, 2017 − February 3, 2018) . . . . . . . . . . .
Third Quarter (July 30, 2017 − October 28, 2017) . . . . . . . . . . . . . .
Second Quarter (April 30, 2017 − July 29, 2017) . . . . . . . . . . . . . . .
First Quarter (January 29, 2017 − April 29, 2017) . . . . . . . . . . . . . .

For the Fiscal Year Ended January 28, 2017
Fourth Quarter (October 30, 2016 − January 28, 2017) . . . . . . . . . . .
Third Quarter (July 31, 2016 − October 29, 2016) . . . . . . . . . . . . . .
Second Quarter (May 1, 2016 − July 30, 2016) . . . . . . . . . . . . . . . .
First Quarter (January 31, 2016 − April 30, 2016) . . . . . . . . . . . . . .

High
$10.21
9.26
14.36
14.96

High
$16.70
12.68
12.72
13.27

Low
$ 7.37
7.15
8.47
12.86

Low
$11.28
11.23
10.15
9.73

In ﬁscal 2017, we declared four quarterly dividends of $0.0825 per share, resulting in an annualized
dividend of $0.33 per share. In ﬁscal 2016, we declared four quarterly dividends of $0.08 per share, resulting
in an annualized dividend of $0.32 per share.

On February 21, 2018, we announced that our Board of Directors declared a quarterly dividend of $0.085
per share on our common stock. The dividend will be payable on April 2, 2018 to shareholders of record at
the close of business on March 19, 2018.

In ﬁscal 2015, we executed accelerated share repurchase agreements (the ‘‘ASR Agreements’’) and
purchased $250 million of
the Company’s common stock under our $300 million share repurchase
authorization announced in December 2013. In November 2015, we announced a new $300 million share
repurchase authorization for the Company’s common stock and canceled the remainder of the December 2013
authorization, which had $40 million remaining. In ﬁscal 2016, we repurchased 8.1 million shares of the
Company’s common stock at approximately $96.4 million. During the fourth quarter of ﬁscal 2017, we
repurchased 0.2 million shares of the Company’s common stock, for a total ﬁscal 2017 repurchase of
2.7 million shares at approximately $27.4 million. There was approximately $136.2 million remaining under
the program at the end of ﬁscal 2017. The repurchase program has no speciﬁc termination date and will
expire when we have repurchased all securities authorized for repurchase thereunder, unless terminated earlier
by our Board of Directors.

In ﬁscal 2017, we repurchased 516,092 restricted shares in connection with employee tax withholding
obligations under employee compensation plans, of which 78,562 were repurchased in the fourth quarter and
are included in the following chart (amounts in thousands except share and per share amounts):

Period
October 29, 2017 − November 25, 2017 . . .
November 26, 2017 − December 30, 2017 . .
December 31, 2017 − February 3, 2018 . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .

Total

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans

—
196,449
—
196,449

Approximate
Dollar Value of
Shares that May
Yet Be
Purchased Under
the Publicly
Announced Plans
$137,945
136,243
136,243

Average
Price
Paid per
Share
$7.87
8.68
9.51
8.75

Total
Number of
Shares
Purchased
11,460
227,840
35,711
275,011

18

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 February 2, 2013 and the reinvestment of dividends.

Comparison of Cumulative Five Year Total Return

Chico’s FAS, Inc.

S&P 500 Index

S&P 500 Apparel Retail Index

$250

$200

$150

$100

$50

$0

2/02/13

2/01/14

1/31/15

1/30/16

1/28/17

2/03/18

Chico’s FAS, Inc.
. . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . .
S&P 500 Apparel Retail Index . . . .

02/02/13
$100
100
100

02/01/14
$ 94
120
116

01/31/15
$ 96
137
146

01/30/16
$ 61
137
157

01/28/17
$ 76
165
157

02/03/18
$ 58
203
167

19

ITEM 6.

SELECTED FINANCIAL DATA

Selected 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 consolidated 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,
and number of stores data.

Summary of Operations:(1)
Net sales . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . .
Gross margin as a percent of net sales . . . . .
Income (loss) from operations . . . . . . . . . .
Income (loss) from operations as a percent of
. . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Net income as a percent of net sales . . . . . .

net sales

Per Share Data:
Net income per common share-basic . . . . . .

Net income per common and common

equivalent share − diluted . . . . . . . . . . .

Weighted average common shares

2017
(53 weeks)

Fiscal Year
2014
2015
(52 weeks)
(52 weeks)
(dollars in thousands, except per share amounts)

2016
(52 weeks)

2013
(52 weeks)

$2,282,379
864,777

$2,476,410
946,836

$2,660,635
1,026,871

$2,693,929
1,034,238

$2,604,411
1,049,353

37.9%

38.2%

145,170

140,702

38.6%
(13,084)

38.4%

40.3%

116,343

141,183

6.4%

101,000

4.4%

5.7%

91,229

3.7%

(0.5)%

1,946

0.1%

4.3%

64,641

2.4%

5.5%

65,883

2.5%

$

$

0.79

0.79

$

$

0.69

0.69

$

$

0.01

0.01

$

$

0.42

0.42

$

$

0.41

0.41

outstanding − basic . . . . . . . . . . . . . . .

125,341

128,995

138,366

148,622

155,048

Weighted average common and common

equivalent shares outstanding − diluted . . .

125,403

129,237

138,741

149,126

155,995

Cash dividends per share . . . . . . . . . . . . .

$

0.33

$

0.32

$

0.31

$

0.30

$

0.24

Balance Sheet Data (at year-end):
Cash and marketable securities
. . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Working capital
Long-term debt . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . .

$ 220,131
1,087,605
247,557
53,601
656,382

$ 192,505
1,108,994
174,766
68,535
609,173

$ 140,145
1,166,052
167,190
82,219
639,788

$ 259,912
1,438,581
255,405
—
943,621

$ 152,446
1,371,191
167,568
—
909,103

Other Selected Operating Data:
Percentage (decrease) increase in comparable
sales . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment, net . . .
Total depreciation and amortization . . . . . .
Goodwill and trade name impairment, pre-tax
charges . . . . . . . . . . . . . . . . . . . . . .
Restructuring and strategic charges, pre-tax . .
Total stores at year end . . . . . . . . . . . . . .
. . . .
Total selling square feet (in thousands)

$
$

$
$

(7.7)%

(3.7)%

(1.5)%

0.0%

(1.8)%

48,530
96,310

$
47,836
$ 109,251

$
84,841
$ 118,800

$ 119,817
$ 122,269

$ 138,510
$ 118,303

— $
— $

1,460
3,513

— $ 112,455
48,801
1,518
3,652

31,027
1,501
3,612

$

$
$

30,100
16,745
1,547
3,706

$
$

72,466
—
1,472
3,547

(1) Five-year table includes the operating results of Boston Proper through ﬁscal 2015.

20

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated ﬁnancial
statements and notes thereto. References herein to ‘‘Notes’’ refer to the Notes to our consolidated ﬁnancial
statements. The periods presented had ﬁfty-two weeks, except for the ﬁscal year ended February 3, 2018
(‘‘ﬁscal 2017’’), which consisted of ﬁfty-three weeks.

EXECUTIVE OVERVIEW

We are a leading omni-channel

specialty retailer of women’s private branded,

sophisticated,
casual-to-dressy apparel, intimates and complementary accessories, operating under the Chico’s, White House
Black Market (‘‘WHBM’’) and Soma brand names in the United States, Puerto Rico, the U.S. Virgin Islands
and Canada. Our distinct lifestyle brands serve the needs of fashion-savvy women 35 years and older. We earn
revenues and generate cash through the sale of merchandise in our domestic and international retail stores, our
various e-commerce websites and our call center, which takes orders for all of our brands, and through an
unaffiliated franchise partner in Mexico.

We utilize an integrated, omni-channel approach to managing our business. We want our customers to
experience our brands holistically and to view the various retail channels we operate as a single, integrated
experience rather than as separate sales channels operating independently. This approach allows our customers
to browse, purchase, return or exchange our merchandise through whatever sales channel and at whatever time
is most convenient. As a result, we track total sales and comparable sales on a combined basis.

2017 Financial Highlights

(cid:129)
(cid:129)

Earnings per share of $0.79 compared to $0.69 last year
$70 million returned to shareholders, consisting of $27 million in share repurchases and
$43 million in dividends

(cid:129) Maintained healthy balance sheet and strong cash position

Income from Operations and Select Charges

The following table depicts income from operations and select charges for ﬁscal 2017, 2016 and 2015:

Income from operations . . . . . . . . . . . . . . . . . . . . . .
Restructuring and strategic charges . . . . . . . . . . . . . .
Goodwill and intangible impairment charges . . . . . . . .

Fiscal
2017

$145
—
—

Fiscal
2016
(dollars in millions)
$141
31
—

Fiscal
2015

$ (13)
49
112

Earnings per diluted share for ﬁscal 2017 was $0.79 compared to $0.69 in ﬁscal 2016. The change in
earnings per share primarily reﬂects the impact of the Tax Cuts and Jobs Act (‘‘the Tax Act’’) as well as the
beneﬁt of the ﬁfty-third week, partially offset by the unfavorable impact of hurricanes Harvey, Irma and Maria
(collectively, the ‘‘Hurricanes’’) as detailed below.

Tax Cuts and Jobs Act of 2017, Fifty-Third Week and Hurricane Impact on Financial Results

Results for ﬁscal 2017 include the favorable impact of the Tax Act of approximately $10 million after-tax
as well as the beneﬁt of the ﬁfty-third week of approximately $4 million after-tax, partially offset by the
unfavorable impact of the Hurricanes recorded in the third quarter of ﬁscal 2017 of approximately $5 million
after-tax.

21

Key Initiatives

Fiscal 2017 key initiatives included:

(cid:129)

(cid:129)

(cid:129)

(cid:129)

(cid:129)

evolving the customer experience

strengthening our brands’ positions

leveraging actionable retail science

building growth platforms

achieving operational excellence

Future Outlook

For the full year of ﬁscal 2018, the Company is anticipating:

(cid:129)

(cid:129)

(cid:129)

(cid:129)
(cid:129)

(cid:129)

a low single-digit percentage decline in comparable sales

gross margin expansion driven by decreased average unit costs and planned improvement in
promotions

selling, general and administrative expenses approximately ﬂat compared to ﬁscal 2017

ﬁscal 2018 tax rate in the range of 26% and 28%
capital expenditures to be $70 million to $80 million, primarily driven by store reinvestments and
technology enhancements
approximately 50 closures, net

RESULTS OF OPERATIONS

Net Sales

The following table depicts net sales by Chico’s, WHBM, Soma and Boston Proper in dollars and as

a percentage of total net sales for ﬁscal 2017, 2016 and 2015:

Fiscal 2017

%

Fiscal 2016

%
(dollars in millions)

Fiscal 2015

%

Chico’s
. . . . . . . . . . . . . . .
WHBM . . . . . . . . . . . . . . .
Soma . . . . . . . . . . . . . . . . .
Boston Proper(1)
. . . . . . . . .
Total net sales . . . . . . . . .

$1,188
751
344
—
$2,282

52.0%
32.9
15.1
—
100.0%

$1,286
846
344
—
$2,476

51.9%
34.2
13.9
—
100.0%

$1,364
875
335
87
$2,661

51.3%
32.9
12.6
3.2
100.0%

(1) The Company exited Boston Proper in ﬁscal 2015.

For ﬁscal 2017, net sales were $2.3 billion compared to $2.5 billion in ﬁscal 2016. This decrease of 7.8%
primarily reﬂects a comparable sales decline of 7.7% as well as a 2.7% net decrease in selling square footage
in 2017, partially offset by the $29 million beneﬁt of the ﬁfty-third week. The comparable sales decline
consisted of lower average dollar sale and a decline in transaction count. Comparable sales is deﬁned as sales
from stores open for the preceding twelve months, including stores that have been expanded, remodeled or
relocated within the same general market and includes online and catalog sales. The comparable sales
calculation excludes the negative impact of stores closed four or more days, International and Boston Proper
and sales attributable to the ﬁfty-third week.

For ﬁscal 2016, net sales were $2.5 billion compared to $2.7 billion in ﬁscal 2015. This decrease of 6.9%
included $87.0 million related to Boston Proper in ﬁscal 2015. When excluding Boston Proper from ﬁscal
2015, net sales decreased 3.8%, primarily reﬂecting a decline in comparable sales of 3.7%, comprised of
reduced transaction count and lower average dollar sale.

22

The following table depicts comparable sales percentages for Chico’s, WHBM and Soma for ﬁscal 2017,

2016 and 2015:

Chico’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WHBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Soma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Company . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal 2017(1)
(7.2)%
(10.9)%
(1.5)%
(7.7)%

Fiscal 2016
(5.3)%
(2.8)%
0.5%
(3.7)%

Fiscal 2015
(2.0)%
(2.5)%
3.1%
(1.5)%

(1) The 53rd week is excluded from comparable sales calculations.

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 2017, 2016 and 2015:

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin percentage . . . . . . . . . . . . . . . . . . . . .

Fiscal 2017

$1,418
$ 865

Fiscal 2016
(dollars in millions)
$1,530
$ 947

Fiscal 2015

$1,634
$1,027

37.9%

38.2%

38.6%

37.9%

$865

38.2%

$947

38.6%

$1,027

Gross Margin

Gross Margin
Percent

)
s
n
o
i
l
l
i

m

(
$

2017

2016

2015

For ﬁscal 2017, gross margin was $865 million, or 37.9%, compared to $947 million, or 38.2%, in ﬁscal
2016. This 30 basis point decrease from ﬁscal 2016 primarily reﬂects a deleverage of occupancy costs as
a percent of sales, partially offset by an improvement in merchandise margin and a decrease in incentive
compensation.

For ﬁscal 2016, gross margin was $947 million, or 38.2%, compared to $1,027 million, or 38.6%, in
ﬁscal 2015. When excluding Boston Proper from ﬁscal 2015, gross margin decreased 60 basis points in ﬁscal
2016 compared to gross margin of $1,000 million, or 38.8%, in ﬁscal 2015. This 60 basis point decrease from
the ﬁscal 2015 adjusted gross margin rate primarily reﬂects deleverage of occupancy costs and incentive
compensation, partially offset by an improvement in merchandise margin.

23

 
Selling, General and Administrative Expenses

The following table depicts selling, general and administrative expenses (‘‘SG&A’’), which includes store
and direct operating expenses, marketing expenses and NSSC expenses, in dollars and as a percentage of net
sales for ﬁscal 2017, 2016 and 2015:

Selling, general and administrative expenses . . . . . . . .
Percentage of total net sales . . . . . . . . . . . . . . . . . . .

$ 720

31.5%

Fiscal 2017

Fiscal 2016
(dollars in millions)
$ 775

31.2%

Fiscal 2015

$ 879

33.0%

31.5%

31.2%

$720

$775

33.0%

$879

SG&A

SG&A
Percent

)
s
n
o
i
l
l
i

m

(
$

2017

2016

2015

For ﬁscal 2017, SG&A were $720 million, or 31.5%, compared to $775 million, or 31.2%, in ﬁscal 2016.
This $56 million decrease, or 7.2% decline, primarily reﬂects a reduction in store-related costs and marketing
spend, partially offset by the impact of the ﬁfty-third week.

For ﬁscal 2016, SG&A were $775 million, or 31.2%, compared to $879 million, or 33.0%, in ﬁscal 2015.
When excluding Boston Proper from ﬁscal 2015, SG&A decreased $56 million, or 110 basis points, compared
to $831 million, or 32.3%, in ﬁscal 2015. This decrease is primarily due to a reduction in unproductive
marketing spend and improvements in store labor productivity, partially offset by an increase in incentive
compensation.

Goodwill and Intangible Impairment Charges

In ﬁscal 2015, primarily based on declining market indications of value, the Company determined that
certain Boston Proper intangibles were impaired and recorded $112.5 million in pre-tax, non-cash intangible
impairment charges. The $112.5 million Boston Proper impairment charges included $48.9 million related to
goodwill, $39.4 million related to the trade name and $24.2 million related to customer relationship intangible
assets. The ﬁscal 2015 after-tax impact of the Boston Proper impairment charges totaled $88.4 million, or
$0.63 per diluted share. The remaining value of the Boston Proper intangible assets was included in the sale
of the assets and liabilities of the Boston Proper business in January 2016.

Restructuring and Strategic Charges

In the fourth quarter of ﬁscal 2014, we initiated a restructuring program, including the acceleration of
to ensure that resources align with long-term
domestic store closures and an organizational realignment,
including omni-channel. Restructuring and strategic charges for ﬁscal 2015 were
growth initiatives,
$49 million, primarily consisting of $22 million in non-cash property and equipment impairment charges,
$10 million in lease termination charges, $8 million in continuing employee-related costs and $7 million in
severance charges and termination beneﬁts. The ﬁscal 2015 after-tax impact of the restructuring and other
charges totaled $30 million, or $0.21 per diluted share. Restructuring and strategic charges for ﬁscal 2016
were $31 million, primarily consisting of $12 million in outside services, $9 million in severance costs and
$6 million in proxy solicitation costs. The ﬁscal 2016 after-tax impact of the restructuring and other charges
totaled $19 million, or $0.15 per diluted share. In ﬁscal 2016, we substantially completed our restructuring
program. As of the end of ﬁscal 2017, we have closed a majority of the stores identiﬁed for closure in
connection with our restructuring and strategic activities and did not incur any material additional expenses
related to lease terminations or restructuring and strategic charges.

24

 
Provision for Income Taxes

Our effective tax rate was 29.7%, 34.2% and 113.3%, for ﬁscal 2017, 2016 and 2015, respectively. The
ﬁscal 2017 effective tax rate reﬂects an approximate $10 million beneﬁt related to the Tax Act, partially offset
by the recognition of the tax impact of deﬁciencies resulting from our adoption of the new accounting
guidance related to employee share-based payment transactions. The ﬁscal 2016 and 2015 effective tax rates
reﬂect the impact of the disposition of Boston Proper’s stock and goodwill impairment charges, partially offset
by an outside basis difference realized upon the sale and subsequent liquidation of the Boston Proper business.
Excluding the tax impacts of the Tax Act, the Boston Proper stock disposition, goodwill impairment charges,
outside basis difference and subsequent liquidation, the ﬁscal 2017, 2016 and 2015 effective tax rates would
have been 36.4%, 37.2% and 36.6%, respectively.

Net Income and Earnings Per Diluted Share

Net income for ﬁscal 2017 was $101 million, or $0.79 per diluted share, compared to net income for
ﬁscal 2016 of $91 million, or $0.69 per diluted share. The change in earnings per share primarily reﬂects the
increase in ﬁscal 2017 net income. Fiscal 2017 net income includes the favorable impact of the Tax Act of
approximately $10 million after-tax and the beneﬁt of the ﬁfty-third week of approximately $4 million
after-tax, partially offset by the unfavorable impact of the Hurricanes of approximately $5 million after-tax.

Net income for ﬁscal 2016 was $91 million, or $0.69 per diluted share, compared to net income for ﬁscal
2015 of $2 million, or $0.01 per diluted share. The change in earnings per share reﬂects the increase in ﬁscal
2016 net income and the impact of share repurchases. Fiscal 2016 results included the impact of restructuring
and strategic charges primarily related to outside services, severance costs and proxy solicitation costs of
$19 million after-tax, or $0.15 per diluted share, partially offset by a $0.03 tax beneﬁt related to the
disposition of the Boston Proper DTC business.

Liquidity and Capital Resources

Overview

We believe that our existing cash and marketable securities balances, cash generated from operations,
available credit facilities and potential future borrowings will be sufficient
to fund capital expenditures,
working capital needs, dividend payments, potential share repurchases, commitments and other liquidity
requirements associated with our operations for the foreseeable future. Furthermore, while it is our intention to
repurchase our stock and pay a quarterly cash dividend in the future, any determination to repurchase
additional shares of our stock or pay future dividends will be made by the Board of Directors and will depend
on our stock price, future earnings, ﬁnancial condition and other factors considered by the Board.

Our ongoing capital requirements will continue to be primarily for enhancing and expanding our

omni-channel capabilities, including expanded, relocated and remodeled stores; and information technology.

Operating Activities

Net cash provided by operating activities in ﬁscal 2017 was $167 million, a decrease of approximately
$64 million from ﬁscal 2016. This decrease primarily results from the settlement of prior year accruals for
outside services and severance, the timing of tax payments and the impact of a decrease in the incentive
compensation accrual, partially offset by the timing of vendor payments.

Net cash provided by operating activities in ﬁscal 2016 was $231 million, an increase of approximately
$34 million from ﬁscal 2015. This increase primarily reﬂected the change in working capital and an increase
in net income compared to prior year when adjusted for non-cash impairment charges and the deferred tax
beneﬁt related to the exit of Boston Proper. The change in working capital is primarily due to a decrease in
income tax receivable.

Investing Activities

Net cash used in investing activities for ﬁscal 2017 was $58 million compared to $32 million for ﬁscal
2016. The change in net cash used in investing activities primarily reﬂects a $10 million net increase in
marketable securities related to the investment of cash from operations in ﬁscal 2017 and the impact of
$16 million in proceeds from the sale of land in ﬁscal 2016.

25

Net cash used in investing activities for ﬁscal 2016 was $32 million compared to $0.5 million provided
by investing activities for ﬁscal 2015. The ﬁscal 2016 results reﬂect net purchases of property and equipment
totaling $48 million, offset by proceeds from the sale of land of $16 million. Fiscal 2015 results included net
purchases of property and equipment totaling $85 million, offset by a $76 million net decrease in marketable
securities related to share repurchases and proceeds from the sale of Boston Proper.

Financing Activities

Net cash used in ﬁnancing activities for ﬁscal 2017 was $91 million compared to $147 million in ﬁscal
2016. The decrease in net cash used in ﬁnancing activities primarily reﬂects a $69 million decline in share
repurchases in ﬁscal 2017 compared to ﬁscal 2016, partially offset by higher payments on borrowings under
our Credit Agreement in ﬁscal 2017. In ﬁscal 2017, we paid four cash dividends at $0.0825 per share on our
common stock,
totaling $43 million, and received approximately $2 million in proceeds from issuing
approximately 2 million shares related to employee stock ownership plans and stock option exercises.

Net cash used in ﬁnancing activities for ﬁscal 2016 was $147 million compared to $240 million in ﬁscal
2015. The ﬁscal 2016 decrease in net cash used in ﬁnancing activities primarily reﬂects a decrease of
$201 million in share repurchases in ﬁscal 2016 compared to ﬁscal 2015, partially offset by net borrowings of
$93 million under our Credit Agreement in ﬁscal 2015. In ﬁscal 2016, we paid four cash dividends at $0.08
per share on our common stock, totaling $42 million and received $4 million in proceeds from issuing
approximately 2 million shares related to employee stock ownership plans and stock option exercises.

Store and Franchise Activity

During ﬁscal 2017, we had 41 net store closures, consisting of 15 Chico’s stores, 21 WHBM stores and 5
Soma stores. In ﬁscal 2018, we anticipate approximately 50 net store closures. We continuously evaluate the
appropriate new store growth rate and closures in light of economic conditions and may adjust the growth rate
and closures as conditions require or as opportunities arise. As of February 3, 2018, the Company’s franchise
operations consisted of 94 retail locations in Mexico.

Contractual Obligations

The following table summarizes our contractual obligations at February 3, 2018:

Operating leases
. . . . . . . . . . . . .
Purchase orders . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . .
Long-term debt obligations . . . . . .
. . . . . . . . . . . . . . . . . . .

Total

Total

$ 931
326
5
69
$1,331

One year
or less

$191
325
4
15
$535

2 − 3 years
(in millions)
$329
1
1
54
$385

4 − 5 years

$243
—
—
—
$243

After
5 years

$168
—
—
—
$168

As of February 3, 2018, our contractual obligations consisted of: 1) amounts outstanding under operating
leases, 2) open purchase orders for inventory and other operating expenses, in the normal course of business,
3) contractual commitments for ﬁscal 2018 capital expenditures and 4) long-term debt obligations.

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 approximately $2 million at February 3, 2018 from the above table.

Credit Facility

On May 4, 2015, we entered into a credit agreement (the ‘‘Credit Agreement’’) among the Company,
JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and other
lenders. Our obligations under
the Credit Agreement are guaranteed by certain of our material U.S.
subsidiaries. The Credit Agreement provides for a term loan commitment in the amount of $100.0 million, of
which $100.0 million was drawn at closing, and matures on May 4, 2020. The Credit Agreement also provides
for a $100.0 million revolving credit facility, of which $24.0 million was drawn at closing and was repaid in

26

the second quarter of 2015. The Credit Agreement has borrowing options which accrue interest by reference,
at our election, at either an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate plus an interest
rate margin, as deﬁned in the Credit Agreement. The Credit Agreement also requires us to maintain certain
maximum leverage ratio (as deﬁned in the Credit Agreement) of no more than 3.50 to 1.00 until July 31,
2018, and 3.25 to 1.00 after July 31, 2018, and a minimum ﬁxed coverage charge of not less than 1.20 to
1.00. As of February 3, 2018, the Company was in compliance with all ﬁnancial covenant requirements of the
Credit Agreement. For a more detailed description of the interest rate options and the ﬁnancial covenants,
please see Note 8.

On May 4, 2015, in connection with our entry into the Credit Agreement, we repaid and terminated, with
no prepayment penalties, the $124.0 million outstanding obligation under our 2011 revolving credit facility.
We used the proceeds from the initial draw of the term loan and revolving credit facility of the Credit
Agreement to repay such obligations.

As of February 3, 2018, $68.6 million in net borrowings under the term loan were outstanding under the
Credit Agreement, and are reﬂected as $15.0 million in current debt and $53.6 million in long-term debt in the
accompanying consolidated balance sheet.

Off-Balance Sheet Arrangements

At February 3, 2018 and January 28, 2017, we did not have any relationship with unconsolidated entities
for other

facilitating off-balance sheet arrangements or

the purpose of

or ﬁnancial partnerships for
contractually narrow or limited purposes.

Critical Accounting Policies

The discussion and analysis of our consolidated ﬁnancial condition and results of operations are based
upon the consolidated 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 consolidated results of operations and
ﬁnancial position.

Inventory Valuation and Shrinkage

We identify potentially excess and slow-moving inventories by evaluating inventory aging, turn rates and
inventory levels in conjunction with our overall sales trend. Further,
inventory realization exposure is
identiﬁed through analysis of gross margins and markdowns in combination with changes in current business
trends. We record excess and slow-moving inventories at net realizable value and may liquidate certain
slow-moving inventory through third parties. Historically, the variation of those estimates to actual results is
immaterial and material variation is not expected in the future.

We estimate our expected shrinkage of inventories between our physical

inventory counts by using
average store shrinkage experience rates, which are updated on a regular basis. Historically, the variation of
those estimates to actual results is immaterial and material variation is not expected in the future.

Revenue Recognition

Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns,
sales discounts under rewards programs and company issued coupons, promotional discounts and employee
discounts. For sales from our websites and catalogs, revenue is recognized at the time we estimate the
customer receives the product, which is typically within a few days of shipment. Amounts related to shipping
and handling costs billed to customers are recorded in net sales and the related shipping and handling costs

27

are recorded in cost of goods sold in the accompanying consolidated statements of income. Amounts paid by
customers to cover shipping and handling costs are immaterial.

We sell gift cards in stores, on our e-commerce website and through third parties. Our 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 for the amount of gift cards expected to go unredeemed (commonly referred to as 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. We recognize revenue on the
remaining 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.

Soma offers a points based loyalty program in which customers earn points based on purchases. Attaining
speciﬁed loyalty point levels results in the issuance of reward coupons to discount future purchases. As
program members accumulate points, we accrue the estimated future liability, adjusted for expected
redemption rates and expirations. The liability is relieved and revenue is recognized for loyalty point reward
coupons upon redemption. In addition, we recognize revenue on unredeemed points when it can be determined
that the likelihood of the point being redeemed is remote and there is no legal obligation to remit the point
value. We determined the loyalty point breakage rate based on historical and redemption patterns.

As part of the normal sales cycle, we receive customer merchandise returns related to store, website and
catalog sales. To account for the ﬁnancial impact of potential customer merchandise returns, 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.

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.

Evaluation of Long-Lived Assets, Goodwill and Indeﬁnite-Lived Intangible 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
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
industry and by incorporating third-party data, which we believe results in a reasonably accurate
retail
approximation of fair value. Nevertheless, changes in the assumptions used could have an impact on our
assessment of recoverability.

lives of the assets. We exercise our best

the reporting unit

We review our goodwill for impairment at

level on an annual basis, or when
circumstances indicate its carrying value may not be recoverable. We evaluate the appropriateness of
performing a qualitative assessment, on a reporting unit level, based on current circumstances. If the results of
the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, the two-step impairment test will be performed. If we conclude that this is not the
case, then the two-step impairment test will not be required. We may elect to skip the qualitative assessment
and perform the two-step impairment test. The ﬁrst step of the impairment test compares the fair value of our
reporting units with their carrying amounts, including goodwill. If the carrying amount exceeds the 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 both an income approach and market approach. The income approach is based
on estimated future cash ﬂows, discounted at a rate that approximates the cost of capital of a market

28

participant, while the market approach is based on sales and EBITDA multiples of similar companies and/or
transactions, or other available indications of value.

We review our other indeﬁnite-lived intangible assets for impairment on an annual basis, or when
circumstances indicate its carrying value may not be recoverable. We evaluate the appropriateness of
performing a qualitative assessment based on current circumstances. If the results of the qualitative assessment
indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
we calculate the fair value of the indeﬁnite-lived intangible assets using a discounted cash ﬂow method, based
on the relief from royalty concept.

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 term of the leases, including the construction period. This 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.

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 guidance as applicable to our operations. Deferred tax assets are reduced, if necessary, by a
valuation allowance to the extent future realization of those tax beneﬁts are uncertain. Our effective tax rate
considers management’s judgment of expected tax liabilities within the various taxing jurisdictions in which
we are subject to tax.

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 affect amounts recognized related to income tax uncertainties and may affect
our consolidated results of operations or ﬁnancial position. 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. Historically, the variation of estimates to actual results is immaterial and material variation
is not expected in the future.

Stock-Based Compensation Expense

Stock-based compensation expense for all awards is based on the grant date fair value of the award, net
of estimated forfeitures, and is recognized over the requisite service period of the awards. Compensation
expense for restricted stock awards and stock options with a service condition is recognized on a straight-line
basis over the requisite service period. Compensation expense for performance-based awards with a service
condition is recognized ratably for each vesting tranche based on our estimate of the level and likelihood of
meeting certain Company-speciﬁc performance goals. The calculation of stock-based compensation expense
involves estimates that require management’s judgment. We have elected to estimate the expected forfeiture
rate for all stock-based awards, 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
recorded in current and prior periods.

For performance-based awards, estimates include the probable number of shares that will ultimately be
issued based on the likelihood of meeting the respective performance condition. We estimate the probable
the relevant performance metrics. The
vesting based on current ﬁnancial performance forecasts for

29

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.

Recent Accounting Pronouncements

In October 2016,

the Financial Accounting Standards Board (‘‘FASB’’) issued ASU No. 2016-16,
Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. ASU 2016-16 is
effective for ﬁscal years, and interim periods within those years, beginning after December 15, 2017. ASU
2016-16 requires companies to recognize the income tax effects of intercompany sales or transfers of other
assets in the income statement as income tax expense (beneﬁt) in the period the sale or transfer occurs.
Additionally, companies would evaluate whether the tax effects of the intercompany sales of transfers of
non-inventory assets should be included in their estimates of annual effective tax rates by using today’s
interim guidance on income tax accounting. ASU 2016-16 will require modiﬁed retrospective transition with a
cumulative catch-up adjustment
to opening retained earnings in the period of adoption, which we will
implement in the ﬁrst quarter of ﬁscal 2018. At February 3, 2018, the Company had $5.7 million in assets
related to the transfer of intra-entity asset transfers.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces the existing guidance in
Accounting Standard Codiﬁcation 840, Leases. ASU 2016-02 is effective for ﬁscal years, and interim periods
within those years, beginning after December 15, 2018 and should be applied on a modiﬁed retrospective
basis. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for
leases as ﬁnance leases or operating leases. Both ﬁnance leases and operating leases will result in the lessee
recognizing a right-of-use asset and corresponding lease liability. For ﬁnance leases,
the lessee would
recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would
recognize straight-line total rent expense. Upon adoption of the standard in ﬁscal 2019, we expect to record
material right-of-use assets and lease liabilities on the balance sheet approximating the present value of future
lease payments.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets
and Financial Liabilities, under which entities will no longer be able to recognize unrealized holding gains and
losses on equity securities they classify as available-for-sale in other comprehensive income but
instead
recognize the change in fair value in net income. The standard is effective for interim and annual reporting
periods beginning after December 15, 2017 and should be applied prospectively with a cumulative adjustment
to opening retained earnings. We do not anticipate adoption to have a material impact to our consolidated
ﬁnancial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The update
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersedes most current revenue recognition guidance, including industry-speciﬁc guidance.
ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or
services to customers in an amount that reﬂects the consideration the entity expects to be entitled to in
exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective
date, to make it effective for annual and interim reporting periods beginning after December 15, 2017. The
standard allows for either a full retrospective or a modiﬁed retrospective transition method. The FASB has
issued subsequent ASUs related to ASU No. 2014-09, which detail amendments to the ASU, implementation
considerations, narrow-scope improvements and practical expedients. Through our evaluation of the impact of
this ASU, we have identiﬁed certain changes that are expected to be made to our accounting policies,
practices, systems and controls including: revenue related to our online sales will be recognized at
the
shipping point rather than upon receipt by the customer; the timing of our recognition of advertising expenses,
whereby certain expenses that are currently amortized over their expected period of future beneﬁt will be
expensed the ﬁrst time the advertisement appears; and presentation of estimated merchandise returns as both
an asset, equal to the inventory value net of processing costs, and a corresponding return liability, compared to
the current practice of recording an estimated net return liability. We plan to adopt this ASU under the
modiﬁed retrospective approach beginning in the ﬁrst quarter of ﬁscal 2018 with a cumulative adjustment to
opening retained earnings as opposed to retrospectively adjusting prior periods. Based on our progress to date,
we do not anticipate adoption to have a material impact to our consolidated ﬁnancial statements.

30

Forward-Looking Statements

including but without

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,
limitation, statements regarding our plans, objectives, and the future
success of our store concepts and our business initiatives. These statements may address items such as future
including expected savings,
sales and sales initiatives, gross margin expectations, SG&A expectations,
operating margin expectations, earnings per share expectations, planned store openings, closings and
expansions, proposed business ventures, new channels of sales or distribution, expected impact of ongoing
litigation, future stock repurchase plans, future plans to pay dividends, future comparable sales, future product
sourcing plans, future inventory levels, planned marketing expenditures, planned capital expenditures and
future cash needs.

These statements relate to expectations concerning matters that are not historical fact and may include the
words or phrases such as ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘believes,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘intends,’’
‘‘estimates,’’ ‘‘approximately,’’ ‘‘our planning assumptions,’’ ‘‘future outlook’’ and similar expressions. Except
for historical
information, matters discussed in this Form 10-K are forward-looking statements. These
forward-looking statements are based largely on information currently available to our management and on
our current expectations, assumptions, plans, estimates, judgments and projections about our business and our
industry, and are subject to various risks and uncertainties that could cause actual results to differ materially
from historical results or those currently anticipated. Although we believe our expectations are based on
reasonable estimates and assumptions, they are not guarantees of performance and there are a number of
known and unknown risks, uncertainties, contingencies and other factors (many of which are outside our
control) that could cause actual results to differ materially from those expressed or implied by such
forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, occur or that
our estimates or assumptions will be correct, and we caution investors and all others not to place undue
reliance on such forward-looking statements. Factors that could cause or contribute to such differences
those described in Item 1A, ‘‘Risk Factors’’ in this Annual Report on
include, but are not
Form 10-K and the following:

limited to,

The ﬁnancial strength of retailing in particular and the economy in general; the extent of ﬁnancial
difficulties or economic uncertainty that may be experienced by customers; our ability to secure and maintain
customer acceptance of styles and in-store and online concepts; the ability to effectively manage and maintain
an appropriate level of inventory; the extent and nature of competition in the markets in which we operate; the
ability to remain competitive with customer shipping terms and costs pertaining to product deliveries and
returns; the extent of the market demand and overall level of spending for women’s private branded clothing
and related accessories; the effectiveness of our brand awareness and marketing programs; the ability to
coordinate product development with buying and planning; the quality and timeliness of merchandise received
from suppliers; the ability to efficiently, timely and successfully manage our business in the face of signiﬁcant
economic, labor, political or other shifts in the countries from which our merchandise is supplied; the changes
in the costs of manufacturing, raw materials, transportation, distribution, labor and advertising; the availability
of quality store sites; our ability to manage our store ﬂeet and the risk that our investments in merchandise or
marketing initiatives may not deliver the results we anticipate; our ability to successfully navigate the
increasing use of on-line retailers for fashion purchases and the pressure that puts on traffic and transactions in
our physical stores; the ability to operate our own retail websites in a manner that produces proﬁtable sales;
the ability to successfully identify and implement additional sales and distribution channels; the ability to
successfully execute our business strategies and to achieve the expected results from them; the continuing
performance, implementation and integration of management information systems; the impact of any systems
failures, cyber security or other data or security breaches, including any security breaches that result in theft,
transfer, or unauthorized disclosure of customer, employee, or company information or our compliance with
information security and privacy laws and regulations in the event of such an incident; the ability to hire,
train, motivate and retain qualiﬁed sales associates, managerial employees and other employees; the successful
integration of the new members of our senior management team; the ability to respond effectively to actions
of activist shareholders and others; the ability to utilize our distribution center and other support facilities in
an efficient and effective manner; the ability to secure and protect trademarks and other intellectual property

31

rights and to protect our reputation and brand images; and the risk that natural disasters, public health crises,
political uprisings, uncertainty or unrest, or other catastrophic events could adversely affect our operations and
ﬁnancial results; the impact of unanticipated changes in legal, regulatory or tax laws; the potential risks and
uncertainties that are related to our reliance on sourcing from foreign suppliers, including the impact of
changes in tariffs, taxes or other import regulations; and changes in governmental policies in or towards
foreign countries; currency exchange rates and other similar factors.

All forward-looking statements that are made or attributable to us are expressly qualiﬁed in their entirety
by this cautionary notice. 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk of our ﬁnancial instruments as of February 3, 2018 has not signiﬁcantly changed since
January 28, 2017. We are exposed to market risk from changes in interest rates on any future indebtedness
and our marketable securities and from foreign currency exchange rate ﬂuctuations.

Our primary exposure to interest rate risk relates in part to our revolving line of credit with our bank. On
May 4, 2015, we entered into a new credit agreement and repaid, with no prepayment penalties, the then
outstanding obligation under our 2011 credit facility. The new agreement, which matures on May 4, 2020, has
borrowing options which accrue interest by reference, at our election, at either an adjusted eurodollar rate tied
to LIBOR or an Alternate Base Rate plus an interest rate margin, as deﬁned in the Credit Agreement. As of
February 3, 2018, $68.6 million in net borrowings under the term loan were outstanding under the Credit
Agreement, and are reﬂected as $15.0 million in current debt and $53.6 million in long-term debt in the
accompanying consolidated balance sheet. An increase or decrease in market interest rates of 100 basis points
would not have a material effect on annual interest expense. This hypothetical analysis may differ from the
actual experience or market developments that could result in a change in interest rates under the Credit
Agreement.

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 corporate bonds,
municipal bonds, and U.S. government and agency securities. The marketable securities portfolio as of
February 3, 2018, consisted of $34.0 million of securities with maturity dates within one year or less and
$26.1 million with maturity dates over one year and less than or equal to two years. We consider all securities
available-for-sale,
including those with maturity dates beyond 12 months, and therefore classify these
securities as short-term investments within current assets on the consolidated balance sheets as they are
available to support current operational liquidity needs. As of February 3, 2018, an increase or decrease of
100 basis points in interest rates would not have a material effect on the fair value of our marketable
securities portfolio.

32

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Certiﬁed Public Accounting Firm

To the Shareholders and the Board of Directors of Chico’s FAS, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Chico’s FAS, Inc. and subsidiaries as
of February 3, 2018 and January 28, 2017, and the related consolidated statements of income, comprehensive
income, stockholders’ equity and cash ﬂows for each of the three ﬁscal years in the period ended February 3,
2018, and the related notes (collectively referred to as the ‘‘consolidated ﬁnancial statements’’). In our
opinion, the consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial position of
the Company at February 3, 2018 and January 28, 2017, and the results of its operations and its cash ﬂows
for each of the three ﬁscal years in the period ended February 3, 2018, 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) (‘‘PCAOB’’), the Company’s internal control over ﬁnancial reporting as of February 3,
2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13,
2018 expressed an unqualiﬁed opinion thereon.

Basis for Opinion

These ﬁnancial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s ﬁnancial statements based on our audits. We are a public accounting
to the Company in
ﬁrm registered with the PCAOB and are required to be independent with respect
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess
the risks of material misstatement of the ﬁnancial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the ﬁnancial statements. Our audits also included evaluating the
accounting principles used and signiﬁcant estimates made by management, as well as evaluating the overall
presentation of the ﬁnancial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ ERNST & YOUNG LLP

We have served as the Company’s auditor since 2002.
Tampa, Florida
March 13, 2018

33

CHICO’S FAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

FISCAL YEAR ENDED

February 3, 2018
(53 weeks)

January 28, 2017
(52 weeks)

January 30, 2016
(52 weeks)

.

.

.

.

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

.
.
.

. .
.
.
.
.

Net Sales .
.
Cost of goods sold .
Gross Margin .
.

.
.
.
.
.
.
.
.
.
Selling, general and administrative expenses .
Goodwill and intangible impairment charges .
.
Restructuring and strategic charges .
.
.
.
.
.
.
.
.
.
.

.
.
Income before Income Taxes .
.
.

Income tax provision (beneﬁt)
.

Income from Operations
.

Interest expense, net

Net Income .

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.
.
.
.
.

.
.

.
.

.
.

.

.

.

.

.

.

.

.

.

.

.

Amount

. $ 2,282,379
1,417,602
.
864,777
.
719,607
.
—
.
—
.
145,170
.
(1,570)
.
143,600
.
42,600
.
101,000
. $

% of
Sales
100.0%
62.1
37.9
31.5
0.0
0.0
6.4
(0.1)
6.3
1.9
4.4%

Per Share Data:
Net income per common share-basic .

Net income per common and common
.

equivalent share–diluted

.

.

.

.

.

Weighted average common shares
.

outstanding–basic .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Weighted average common and common

equivalent shares outstanding–diluted .

Dividends declared and paid per share .

.

.

.

.

.

.

.

.

.

.

.

. $

0.79

. $

0.79

.

.

125,341

125,403

. $

0.33

% of
Sales
100.0%
61.4
38.6
33.0
4.3
1.8
(0.5)
0.0
(0.5)
(0.6)
0.1%

Amount
$ 2,476,410
1,529,574
946,836
775,107
—
31,027
140,702
(1,973)
138,729
47,500
91,229

$

$

$

0.69

0.69

% of
Sales
100.0%
61.8
38.2
31.2
0.0
1.3
5.7
(0.1)
5.6
1.9
3.7%

Amount
$ 2,660,635
1,633,764
1,026,871
878,699
112,455
48,801
(13,084)
(1,870)
(14,954)
(16,900)
1,946

$

$

$

0.01

0.01

128,995

138,366

129,237

$

0.32

138,741

$

0.31

The accompanying notes are an integral part of these consolidated statements.

34

CHICO’S FAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

Net Income
Other comprehensive income:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

February 3, 2018
(53 weeks)
$ 101,000

FISCAL YEAR ENDED
January 28, 2017
(52 weeks)
91,229
$

January 30, 2016
(52 weeks)
1,946
$

Unrealized losses on marketable securities, net of taxes . .
. . . . . . . . . .
Foreign currency translation gains (losses)
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . .

(135)
119
$ 100,984

(39)
(29)
91,161

$

(21)
(501)
1,424

$

The accompanying notes are an integral part of these consolidated statements.

35

CHICO’S FAS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands)

February 3,
2018

January 28,
2017

Current Assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Current Assets
Property and Equipment, net

$

160,071
60,060
233,726
60,668
514,525
421,038

$

142,135
50,370
232,363
52,758
477,626
477,185

Other Assets:

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96,774
38,930
16,338
152,042
$ 1,087,605

96,774
38,930
18,479
154,183
$ 1,108,994

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Noncurrent Liabilities:

Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Noncurrent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

118,253
15,000
133,715
266,968

53,601
103,282
7,372
164,255

$

116,378
16,250
170,232
302,860

68,535
118,543
9,883
196,961

Commitments and Contingencies

Shareholders’ Equity:

Preferred stock, $.01 par value; 2,500 shares authorized; no shares issued

and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Common stock, $.01 par value; 400,000 shares authorized; 156,585 and
155,170 shares issued; and 127,471 and 128,753 shares outstanding,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Treasury stock, at cost, 29,114 shares and 26,417 shares, respectively . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,275
468,806
(413,465)
599,810
(44)
656,382
$ 1,087,605

1,288
452,756
(386,094)
541,251
(28)
609,173
$ 1,108,994

The accompanying notes are an integral part of these consolidated statements.

36

CHICO’S FAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)

Common Stock

Shares

Par Value

Additional
Paid-in
Capital

Treasury
Stock

Shares

Amount

Accumulated
Other
Comprehensive
Income

Retained
Earnings

Total

152,916
—

$

1,529
—

$ 407,275
—

— $
—

— $ 534,255
1,946
—

$ 562
—

$

943,621
1,946

—

—
1,716

—

—

—
17

—

—

—
10,596

—

—

—
—

—

—

—
—

—

—

—
—

(43,876)

stock .

Repurchase of common
.
.
.

.
.
Stock-based compensation .
Excess tax beneﬁt from

.

.

.

.

.

.

(19,101)
—

(191)
—

(12,845)
30,062

18,307
—

(289,813)
—

stock-based compensation

—

—

793

—

—

—
—

—

.
.

.

.
.

.

.
.

.

BALANCE, January 31,
.
.
.

2015 .
.
.
Net income
.
Unrealized loss on

.
.

.
.

.
.

.
.

.
.

.
.

.

.

.

.

.

.

adjustment .

marketable securities, net
.
.
.
of taxes
Foreign currency translation
.

.
Issuance of common stock .
Dividends paid on common
stock ($0.31 per share) .

.

.

.

.

.

.

.

BALANCE, January 30,
.
.
.

2016 .
.
.
Net income
.
Unrealized loss on

.
.

.
.

.
.

.
.

.
.

.
.

.

.

.

.

.

.

adjustment .

marketable securities, net
.
.
.
of taxes
Foreign currency translation
.

.
Issuance of common stock .
Dividends paid on common
stock ($0.32 per share) .

.

.

.

.

.

.

.

stock .

Repurchase of common
.
.
.

.
.
Stock-based compensation .
Excess tax beneﬁt from

.

.

.

.

.

.

BALANCE, January 28,
.
.
.

2017 .
.
.
.
Net income
Unrealized loss on

.
.

.
.

.
.

.
.

.
.

.
.

.

.

.

.

.

.

adjustment .

marketable securities, net
.
.
.
of taxes
Foreign currency translation
.

.
Issuance of common stock .
Dividends paid on common
stock ($0.33 per share) .

.

.

.

.

.

.

.

.

.

.

stock .

Repurchase of common
.
.
.

.
.
Stock-based compensation .
BALANCE, February 3,
.
.

2018 .

.

.

.

.

.

.

.

.

.

.

.

.

stock-based compensation

—

135,531
—

1,355
—

435,881
—

18,307
—

(289,813)
—

492,325
91,229

—

—
1,763

—

(8,541)
—

—

—
18

—

(85)
—

—

—

—
4,341

—

—

—
—

—

—

—
—

—

—

—
—

(42,303)

(5,512)
21,249

8,110
—

(96,281)
—

(3,203)

—

—

—
—

—

128,753
—

1,288
—

452,756
—

26,417
—

(386,094)
—

541,251
101,000

—

—
1,931

—

—

—
19

—

—

—
2,108

—

—

—
—

—

—

—
—

—

—

—
—

(42,441)

(3,213)
—

(32)
—

(6,735)
20,677

2,697
—

(27,371)
—

—
—

(21)

(501)
—

—

—
—

—

40
—

(39)

(29)
—

—

—
—

—

(28)
—

(135)

119
—

—

—
—

(21)

(501)
10,613

(43,876)

(302,849)
30,062

793

639,788
91,229

(39)

(29)
4,359

(42,303)

(101,878)
21,249

(3,203)

609,173
101,000

(135)

119
2,127

(42,441)

(34,138)
20,677

127,471

$

1,275

$ 468,806

29,114

$ (413,465) $ 599,810

$

(44)

$

656,382

The accompanying notes are an integral part of these consolidated statements.

37

CHICO’S FAS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjustments to reconcile net income to net cash provided by

operating activities:
Goodwill and intangible impairment charges, pre-tax . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . .
Loss on disposal and impairment of property and

equipment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax beneﬁt
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . .
Deferred rent and lease credits . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities:

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .

Net cash provided by operating activities

Cash Flows from Investing Activities:

Purchases of marketable securities . . . . . . . . . . . . . . . .
Proceeds from sale of marketable securities
. . . . . . . . .
Purchases of property and equipment, net . . . . . . . . . . .
Proceeds from sale of land . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of Boston Proper net assets . . . . . . .
Net cash (used in) provided by investing activities . . .

Cash Flows from Financing Activities:

Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . .
Payments on borrowings
. . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . .
Payments of tax withholdings related to stock-based

awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in ﬁnancing activities . . . . . . . . . . . . .
Effects of exchange rate changes on cash and cash

February 3,
2018
(53 weeks)

FISCAL YEAR ENDED
January 28,
2017
(52 weeks)

January 30,
2016
(52 weeks)

$ 101,000

$

91,229

$

1,946

—
96,310

7,042
(2,070)
20,677
(19,692)

(1,363)
(4,584)
(311)
1,950
(32,086)
166,873

(39,794)
30,045
(48,530)
—
—
(58,279)

—
(16,250)
2,127
(42,516)
(27,398)

(6,740)
(90,777)

—
109,251

10,523
(8,427)
21,249
(18,811)

1,472
(7,565)
26,749
(13,015)
18,659
231,314

(50,717)
50,508
(47,836)
16,217
—
(31,828)

—
(7,500)
4,359
(42,254)
(96,363)

(5,515)
(147,273)

(29)
52,184
89,951
$ 142,135

112,455
118,800

23,744
(34,415)
30,062
(21,741)

(6,719)
358
(28,562)
(12,101)
16,248
200,075

(52,668)
129,000
(84,841)
—
9,000
491

124,000
(31,500)
10,613
(43,729)
(289,995)

(12,854)
(243,465)

(501)
(43,400)
133,351
$ 89,951

equivalents

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . .
Cash and Cash Equivalents, Beginning of period . . . . . . . .
Cash and Cash Equivalents, End of period . . . . . . . . . . . .

119
17,936
142,135
$ 160,071

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest
Cash paid for income taxes, net

. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .

$
$

2,546
49,758

$
$

2,316
25,863

$
2,375
$ 47,342

The accompanying notes are an integral part of these consolidated statements.

38

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 SUMMARY OF 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 an
omni-channel specialty retailer of women’s private branded, sophisticated, casual-to-dressy clothing, intimates
and complementary accessories. We currently sell our products through retail stores, catalogs and via our
at www.chicos.com, www.chicosofftherack.com, www.whbm.com and www.soma.com. As of
websites
February 3, 2018, we had 1,460 stores located throughout the United States, Puerto Rico, the U.S. Virgin
Islands and Canada, and sold merchandise through 94 franchise locations in Mexico.

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 consolidated ﬁnancial statements are the
ﬁscal years ended February 3, 2018 (‘‘ﬁscal 2017’’ or ‘‘current period’’), January 28, 2017 (‘‘ﬁscal 2016’’ or
‘‘prior period’’) and January 30, 2016 (‘‘ﬁscal 2015’’). Fiscal 2017 contained 53 weeks while ﬁscal 2016 and
2015 each 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, White House Black Market (‘‘WHBM’’) and Soma have been identiﬁed as separate
operating segments and aggregated into one reportable segment due to the similarities of the economic and
operating characteristics of the brands.

Adoption of New Accounting Pronouncements

In the ﬁrst quarter of 2017, we adopted the guidance of Accounting Standard Update (‘‘ASU’’) 2016-09,
the
Improvements to Employee Share-Based Payment Accounting, which simpliﬁes several aspects of
accounting for employee share-based payment
including the accounting for income taxes,
forfeitures and statutory tax withholding requirements, as well as classiﬁcation in the statement of cash ﬂows.
The provision of ASU 2016-09 related to the recognition of excess tax beneﬁts and deﬁciencies in the income
statement was adopted on a prospective basis whereas the provision related to the classiﬁcation in the
statement of cash ﬂows was adopted retrospectively, and the prior periods were adjusted accordingly. The
Company has elected to continue estimating forfeitures of share-based awards when determining compensation
cost to be recognized each period. The adoption of ASU 2016-09 did not have a material impact on the
accompanying consolidated ﬁnancial statements.

transactions,

Use of Estimates

The preparation of consolidated ﬁnancial statements in conformity with accounting principles generally
accepted in the United States of America 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in banks, short-term highly liquid investments with
original maturities of three months or less and payments due from banks for third-party credit card and debit
transactions for approximately 3 to 5 days of sales.

39

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

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 in accumulated other comprehensive income until
realized. For the purposes of computing realized and unrealized gains and losses, cost and fair value are
determined on a speciﬁc identiﬁcation basis. We consider all securities available-for-sale, including those with
maturity dates beyond 12 months, and therefore classify these securities within current assets on the
consolidated balance sheets as they are available to support current operational liquidity needs.

Fair Value of Financial Instruments

Our consolidated ﬁnancial instruments consist of cash, money market accounts, marketable securities,
assets held in our non-qualiﬁed deferred compensation plan, accounts receivable, accounts payable and debt.
Cash, accounts receivable and accounts payable are carried at cost, which approximates their fair value due to
the short-term nature of the instruments.

Inventories

We use the weighted average cost method to determine the cost of merchandise inventories. We identify
potentially excess and slow-moving inventories by evaluating inventory aging, turn rates and inventory levels
in conjunction with our overall sales trend. Further,
inventory realization exposure is identiﬁed through
analysis of gross margins and markdowns in combination with changes in current business trends. We record
excess and slow-moving inventories at net realizable value and may liquidate certain slow-moving inventory
through third parties. We estimate our expected shrinkage of inventories between physical inventory counts by
using average store shrinkage experience rates, which are updated on a regular basis. Substantially all of our
inventories consist of ﬁnished goods.

Costs associated with sourcing are generally capitalized while merchandising, distribution and product
development costs are generally expensed as incurred, and are included in the accompanying consolidated
statements of income as a component of cost of goods sold. Approximately 23% of total purchases in ﬁscal
2017 and 2016 were made from one supplier. In ﬁscal 2017 and 2016, approximately 52% and 55% of our
merchandise cost originated in China, respectively.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization. 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 cost associated with
non-renewal.

Our property and equipment is generally depreciated using the following estimated useful lives:

Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment, furniture and ﬁxtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Estimated Useful Lives
15 − 35 years
20 − 35 years
2 − 20 years
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
income.

40

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Operating Leases

We lease retail stores and a limited amount of 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. Rent escalation clauses, ‘‘rent-free’’
periods and other rental expenses are amortized on a straight-line basis over the term of the leases, including
the construction period. This is generally 60 − 90 days prior to the store opening date, when 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 it is determined that achieving the speciﬁed levels during the lease year is probable.

Goodwill and Other Intangible Assets

Goodwill and other indeﬁnite-lived intangible assets are assessed for impairment at least annually. We
test during the fourth quarter, or more frequently should events or

perform our annual
circumstances change that would indicate that impairment may have occurred.

impairment

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. 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 the goodwill associated with the WHBM acquisition should be assigned to the
WHBM reporting unit.

We evaluate the appropriateness of performing a qualitative assessment, on a reporting unit level, based
on current circumstances. A two-step impairment
is performed only if the results of the qualitative
test
assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. We may elect to skip the qualitative assessment and perform the two-step impairment test. The ﬁrst
step of the impairment
test 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 both an income
approach and market approach. The income approach is based on estimated future cash ﬂows, discounted at a
rate that approximates the cost of capital of a market participant, while the market approach is based on sales
or EBITDA multiples of similar companies and transactions or other available indications of value. For 2017
and 2016, we performed a qualitative assessment of the goodwill associated with the Chico’s and WHBM
reporting units and concluded it was more likely than not that the fair value exceeded the carrying amount as
of the annual assessment dates. In ﬁscal 2015, we performed a goodwill impairment assessment of the Boston
impairment charges of $48.9 million. We
Proper reporting unit and recorded pre-tax, non-cash goodwill
completed the sale of the Boston Proper direct-to-consumer (‘‘DTC’’) business in January 2016.

We test indeﬁnite-lived intangible assets for impairment by ﬁrst assessing qualitative factors to determine
whether it is more likely than not that the fair value of the intangible is less than its carrying amount. If the
results of the qualitative assessment indicate that it is more likely than not that the fair value of the intangible
is less than its carrying amount, we calculate the value of the indeﬁnite-lived intangible assets using a
discounted cash ﬂow method, based on the relief from royalty concept, and compare the fair value to the
carrying value to determine if the asset is impaired. We may elect to skip the qualitative assessment when
appropriate based on current circumstances. For 2017 and 2016, we performed a qualitative assessment of the
WHBM trade name and concluded it was more likely than not that the fair value exceeded the carrying

41

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

amount as of the annual assessment dates. In ﬁscal 2015 we performed an impairment assessment of Boston
Proper indeﬁnite-lived intangible assets and recorded pre-tax, non-cash impairment charges of $39.4 million
on the Boston Proper trade name.

Intangible assets subject to amortization consisted of the value of Boston Proper customer relationships.
In ﬁscal 2015, we performed an impairment assessment of the Boston Proper customer relationships and
recorded pre-tax, non-cash impairment charges of $24.2 million. All remaining Boston Proper intangible
assets, including the Boston Proper trade name and customer relationships were included in the sale of the
Boston Proper DTC business in ﬁscal 2015. In ﬁscal 2017 and 2016, we did not have any intangible assets
subject to amortization.

Accounting for the Impairment of Long-lived Assets

Long-lived assets, including deﬁnite-lived intangibles, 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. 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 impairment loss recorded is the amount by which the carrying value of the asset exceeds its fair value. In
ﬁscal 2017, 2016 and 2015, we completed an evaluation of long-lived assets at certain underperforming stores
for indicators of impairment and, as a result, recorded impairment charges of approximately $6.0 million,
$2.5 million and $1.4 million, respectively, which are included in costs of goods sold in the accompanying
consolidated statements of income. Impairment charges in ﬁscal 2017 included $2.9 million resulting from
hurricanes Harvey, Irma and Maria (collectively,
in connection with the
restructuring program initiated in ﬁscal 2014 as further discussed in Note 2, we identiﬁed approximately
150 stores, including the Boston Proper stores, to be closed from ﬁscal 2015 through ﬁscal 2017. As a result,
in ﬁscal 2015, we recorded additional impairment charges of approximately $12.5 million which are included
in restructuring and strategic charges in the accompanying consolidated statements of income. As of the end
of ﬁscal 2017, we have closed a majority of the stores identiﬁed for closure in connection with our
restructuring and strategic activities and did not incur any material additional impairment charges.

the ‘‘Hurricanes’’). Additionally,

Revenue Recognition

Retail sales by our stores are recorded at the point of sale and are net of estimated customer returns,
sales discounts under rewards programs and company issued coupons, promotional discounts and employee
discounts. For sales from our websites and catalogs, revenue is recognized at the time we estimate the
customer receives the product, which is typically within a few days of shipment. Amounts related to shipping
and handling costs billed to customers are recorded in net sales and the related shipping and handling costs
are recorded in cost of goods sold in the accompanying consolidated statements of income. Amounts paid by
customers to cover shipping and handling costs are immaterial.

We sell gift cards in stores, on our e-commerce website and through third parties. Our 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 for the amount of gift cards expected to go unredeemed (commonly referred to as 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. We recognize revenue on the
remaining 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.

Soma offers a points based loyalty program in which customers earn points based on purchases. Attaining
speciﬁed loyalty point levels results in the issuance of reward coupons to discount future purchases. As
program members accumulate points, we accrue the estimated future liability, adjusted for expected
redemption rates and expirations. The liability is relieved and revenue is recognized for loyalty point reward

42

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

coupons upon redemption. In addition, we recognize revenue on unredeemed points when it can be determined
that the likelihood of the point being redeemed is remote and there is no legal obligation to remit the point
value. We determined the loyalty point breakage rate based on historical and redemption patterns.

As part of the normal sales cycle, we receive customer merchandise returns related to store, website and
catalog sales. To account for the ﬁnancial impact of potential customer merchandise returns, 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.

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.

Advertising Costs

Costs associated with the production of non-catalog advertising, such as writing, copying, 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. 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. For ﬁscal 2017, 2016 and 2015, advertising expense
was approximately $94.5 million, $115.4 million and $159.9 million, respectively, and is included within
SG&A in the accompanying consolidated statements of income.

Stock-Based Compensation

Stock-based compensation for all awards is based on the grant date fair value of the award, net of
estimated forfeitures, and is recognized over the requisite service period of the awards. The fair value of
restricted stock awards and performance-based awards is determined by using the closing price of the
Company’s common stock on the date of the grant. Compensation expense for performance-based awards is
recorded based on the amount of the award ultimately expected to vest, depending on the level and likelihood
of the performance condition being met.

Shipping and Handling Costs

Shipping and handling costs to transport goods to customers, amounted to $40.5 million, $35.9 million
and $37.3 million in ﬁscal 2017, 2016 and 2015, respectively, and are included within cost of goods sold in
the accompanying consolidated statements of income.

Store Occupancy and Pre-Opening Costs

Store occupancy and pre-opening costs (including store-related costs and training expenses) incurred prior
to the opening of new stores are expensed as incurred and are included within cost of sales in the
accompanying consolidated statements of income.

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.
to recognize, measure, present and disclose in our
Additionally, we follow a comprehensive model
consolidated ﬁnancial statements the estimated 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.

43

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Foreign Currency

The functional currency of our foreign operations is generally the applicable local currency. Assets and
liabilities are translated into U.S. dollars using the current exchange rates in effect as of the balance sheet
date, while revenues and expenses are translated at the average exchange rates for the period. The resulting
translation adjustments are recorded as a component of comprehensive income in the consolidated statements
of comprehensive income. Transaction gains and losses that arise from exchange rate ﬂuctuations on
transactions denominated in a currency other
functional currency are included in the
consolidated statements of income.

than the local

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. While we do
not expect the amount we will ultimately pay to differ signiﬁcantly from our estimates, self-insurance accruals
could be affected if future claims experience differs signiﬁcantly from the historical trends and assumptions.

Supplier Allowances

From time to time, we receive allowances and/or credits from certain of our suppliers. The aggregate
to our

amount of such allowances and credits, which is included in cost of goods sold,
consolidated results of operations.

is immaterial

Earnings Per Share

In accordance with relevant accounting 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 earnings per common share pursuant to the
‘‘two-class’’ method. For us, participating securities are composed entirely of unvested restricted stock awards
and performance-based restricted stock units (‘‘PSU’s’’) that have met their relevant performance criteria.

Under the two-class method, net income is reduced by the amount of dividends declared in the period for
common stock and participating securities. The remaining undistributed earnings are then allocated to common
stock and participating securities as if all of the net income for the period had been distributed. Basic EPS
excludes dilution 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 non-participating securities
such as stock options, PSU’s and restricted stock units.

Newly Issued Accounting Pronouncements

In October 2016,

the Financial Accounting Standards Board (‘‘FASB’’) issued ASU No. 2016-16,
Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. ASU 2016-16 is
effective for ﬁscal years, and interim periods within those years, beginning after December 15, 2017.
ASU 2016-16 requires companies to recognize the income tax effects of intercompany sales or transfers of
other assets in the income statement as income tax expense (beneﬁt) in the period the sale or transfer occurs.
Additionally, companies would evaluate whether the tax effects of the intercompany sales of transfers of
non-inventory assets should be included in their estimates of annual effective tax rates by using today’s
interim guidance on income tax accounting. ASU 2016-16 will require modiﬁed retrospective transition with a
cumulative catch-up adjustment
to opening retained earnings in the period of adoption, which we will
implement in the ﬁrst quarter of ﬁscal 2018. At February 3, 2018, the Company had $5.7 million in assets
related to the transfer of intra-entity asset transfers.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which replaces the existing guidance in
Accounting Standard Codiﬁcation 840, Leases. ASU 2016-02 is effective for ﬁscal years, and interim periods

44

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

within those years, beginning after December 15, 2018 and should be applied on a modiﬁed retrospective
basis. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for
leases as ﬁnance leases or operating leases. Both ﬁnance leases and operating leases will result in the lessee
the lessee would
recognizing a right-of-use asset and corresponding lease liability. For ﬁnance leases,
recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would
recognize straight-line total rent expense. Upon adoption of the standard in ﬁscal 2019, we expect to record
material right-of-use assets and lease liabilities on the balance sheet approximating the present value of future
lease payments.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets
and Financial Liabilities, under which entities will no longer be able to recognize unrealized holding gains and
losses on equity securities they classify as available-for-sale in other comprehensive income but
instead
recognize the change in fair value in net income. The standard is effective for interim and annual reporting
periods beginning after December 15, 2017 and should be applied prospectively with cumulative adjustment to
opening retained earnings. We do not anticipate adoption to have a material impact to our consolidated
ﬁnancial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The update
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersedes most current revenue recognition guidance, including industry-speciﬁc guidance.
ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or
services to customers in an amount that reﬂects the consideration the entity expects to be entitled to in
exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective
date, to make it effective for annual and interim reporting periods beginning after December 15, 2017. The
standard allows for either a full retrospective or a modiﬁed retrospective transition method. The FASB has
issued subsequent ASUs related to ASU No. 2014-09, which detail amendments to the ASU, implementation
considerations, narrow-scope improvements and practical expedients. Through our evaluation of the impact of
this ASU, we have identiﬁed certain changes that are expected to be made to our accounting policies,
practices, systems and controls including: revenue related to our online sales will be recognized at
the
shipping point rather than upon receipt by the customer; the timing of our recognition of advertising expenses,
whereby certain expenses that are currently amortized over their expected period of future beneﬁt will be
expensed the ﬁrst time the advertisement appears; and presentation of estimated merchandise returns as both
an asset, equal to the inventory value net of processing costs, and a corresponding return liability, compared to
the current practice of recording an estimated net return liability. We plan to adopt this ASU under the
modiﬁed retrospective approach beginning in the ﬁrst quarter of ﬁscal 2018 with a cumulative adjustment to
opening retained earnings as opposed to retrospectively adjusting prior periods. Based on our progress to date,
we do not anticipate adoption to have a material impact to our consolidated ﬁnancial statements.

2. RESTRUCTURING AND STRATEGIC CHARGES:

During the fourth quarter of ﬁscal 2014, we initiated a restructuring program, including the acceleration
of domestic store closures and an organizational realignment, to ensure that resources align with long-term
growth initiatives, including omni-channel.

In ﬁscal 2015, we completed an evaluation of the Boston Proper brand, completed the sale of the Boston
Proper DTC business and closed its stores. We assessed the disposal group and determined that the sale of the
Boston Proper DTC business did not have a major effect on our consolidated results of operations, ﬁnancial
the disposal group is not presented in the consolidated ﬁnancial
position or cash ﬂows. Accordingly,
statements as a discontinued operation. Pretax losses for the Boston Proper DTC business for ﬁscal 2015 was
$11.8 million. The loss recorded in ﬁscal 2015 upon disposition of the Boston Proper assets held for sale was
not material.

During the ﬁrst quarter of ﬁscal 2016, we expanded our restructuring program to include components of
our strategic initiatives that further align the organizational structure with long-term growth initiatives and to

45

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

reduce cost of goods sold (‘‘COGS’’) and selling, general and administrative expenses (‘‘SG&A’’) through
strategic initiatives. These strategic initiatives include realigning marketing and digital commerce, improving
supply chain efficiency, reducing non-merchandise expenses, optimizing marketing spend and transition of
executive leadership. We also adjusted the estimated store closures to 150 through ﬁscal 2017 in connection
with the restructuring and strategic activities. In ﬁscal 2016, the Company recorded pre-tax restructuring and
strategic charges of $31.0 million, primarily related to outside services, severance and proxy solicitation costs.
In ﬁscal 2016, we substantially completed our restructuring program. As of the end of ﬁscal 2017, we have
closed a majority of the stores identiﬁed for closure in connection with our restructuring and strategic
activities and did not incur any material additional expenses related to lease terminations or restructuring and
strategic charges.

A summary of the restructuring and strategic charges is presented in the table below:

Fiscal 2016

Fiscal 2015

(in thousands)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges
. . . . . . . . . . . . . . . . . . . . . . . .
Continuing employee-related costs
Severance charges
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proxy solicitation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges
Restructuring and strategic charges, pre-tax . . . . . . . . . . . . . . . . .

$ 1,453
1,796
9,485
5,697
427
12,013
156
$ 31,027

$ 22,001
8,330
6,863
—
9,578
—
2,029
$ 48,801

As of February 3, 2018, a reserve of $0.5 million related to restructuring and strategic activities was
included in other current and deferred liabilities in the accompanying consolidated balance sheets. A
roll-forward of the reserve is presented as follows:

Continuing
Employee-
Related
Costs

Severance
Charges

Lease
Termination
Charges
(in thousands)

Outside
Services

Total

Ending Balance, January 28, 2017 . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending Balance, February 3, 2018 . . . . . . . . . . . . . . . .

3. MARKETABLE SECURITIES:

$

$

671
—
(671)
$ — $

$

2,413
—
(2,413)

— $

846
—
(332)
514

$

$

7,299
—
(7,299)
—

$ 11,229
—
(10,715)
514

$

Marketable securities are classiﬁed as available-for-sale and as of February 3, 2018 generally consist of
corporate bonds, U.S. government agencies, municipal securities and commercial paper with $34.0 million of
securities with maturity dates within one year or less and $26.1 million with maturity dates over one year and
less than two years. As of January 28, 2017, marketable securities generally consisted of U.S. government
agencies and corporate bonds.

The following tables summarize our investments in marketable securities at February 3, 2018 and

January 28, 2017:

February 3, 2018
(in thousands)

Gross
Unrealized
Gains
$ —

Gross
Unrealized
Losses
$ (301)

Amortized
Cost
$ 60,361

Estimated
Fair Value
$ 60,060

Total marketable securities

. . . . . . . . . . . . . . . . . . . .

46

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Total marketable securities

. . . . . . . . . . . . . . . . . . . .

4. FAIR VALUE MEASUREMENTS:

January 28, 2017
(in thousands)

Gross
Unrealized
Gains
3
$

Gross
Unrealized
Losses
$ (93)

Amortized
Cost
$ 50,460

Estimated
Fair Value
$ 50,370

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.

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
accounts and assets held in our non-qualiﬁed 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. government securities 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. This includes the
evaluation of long-lived assets, goodwill and other intangible assets for impairment using company-speciﬁc
assumptions which would fall within Level 3 of the fair value hierarchy.

To assess the fair value of goodwill, we utilize both an income approach and a market approach. Inputs
used to calculate the fair value based on the income approach primarily include estimated future cash ﬂows,
discounted at a rate that approximates the cost of capital of a market participant. Inputs used to calculate the
fair value based on the market approach include identifying sales and EBITDA multiples based on guidelines
for similar publicly traded companies and recent transactions.

To assess the fair value of trade names, we utilize a relief from royalty approach. Inputs used to calculate
the fair value of the trade names primarily include future sales projections, discounted at a rate that
approximates the cost of capital of a market participant and an estimated royalty rate.

To assess the fair value of long-term debt, we utilize a discounted future cash ﬂow model using current

borrowing rates for similar types of debt of comparable maturities.

Fair value calculations contain signiﬁcant judgments and estimates, which may differ from actual results
due to, among other things, economic conditions, changes to the business model or changes in operating
performance.

47

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

During ﬁscal 2017, we did not make any transfers between Level 1 and Level 2 ﬁnancial assets. Furthermore,
during ﬁscal 2017 and ﬁscal 2016 we did not have any Level 3 ﬁnancial assets measured on a recurring basis. 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.

In accordance with the provisions of the guidance, we categorized our ﬁnancial assets and liabilities
which are valued on a recurring basis, based on the priority of the inputs to the valuation technique for the
instruments, as follows:

Fair Value Measurements at Reporting Date Using

Balance as of
February 3,
2018

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Signiﬁcant Other
Observable
Inputs (Level 2)

Signiﬁcant
Unobservable
Inputs
(Level 3)

(in thousands)

Financial Assets:
Current Assets

Cash equivalents:

Money market accounts . . . . . . .

$

1,250

$ 1,250

$

—

$ —

Marketable securities:
. . . . . . . . .
Municipal securities
. . . . .
U.S. government agencies
Corporate bonds . . . . . . . . . . . .
Commercial paper . . . . . . . . . . .

6,557
12,744
37,030
3,729

Noncurrent Assets

—
—
—
—

6,557
12,744
37,030
3,729

—
—
—
—

Deferred compensation plan . . . .
. . . . . . . . . . . . . . . . . . . . . . .

Total

7,315
$ 68,625

7,315
$ 8,565

—
$ 60,060

—
$ —

Financial Liabilities:
Long-term debt(1) . . . . . . . . . . . . . . .

$ 68,601

$ —

$ 69,036

$ —

Fair Value Measurements at Reporting Date Using

Balance as of
January 28,
2017

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Signiﬁcant Other
Observable
Inputs (Level 2)

Signiﬁcant
Unobservable
Inputs
(Level 3)

(in thousands)

Financial Assets:
Current Assets

Cash equivalents:

Money market accounts . . . . . . .

$

471

$

471

$

—

$ —

Marketable securities:
. . . . . . . . .
Municipal securities
U.S. government agencies
. . . . .
Corporate bonds . . . . . . . . . . . .
Commercial paper . . . . . . . . . . .

5,634
23,071
15,799
5,866

Noncurrent Assets

—
—
—
—

5,634
23,071
15,799
5,866

—
—
—
—

Deferred compensation plan . . . .
. . . . . . . . . . . . . . . . . . . . . . .

Total

7,523
$ 58,364

7,523
$ 7,994

—
$ 50,370

—
$ —

Financial Liabilities:

Long-term debt(1) . . . . . . . . . . . .

$ 84,785

$ —

$ 85,139

$ —

(1) The carrying value of long-term debt includes the current and long-term portions and the remaining unamortized

debt issuance costs.

48

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and accounts receivable consisted of the following:

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . .

$ 52,189
8,479
$ 60,668

$ 39,847
12,911
$ 52,758

February 3,
2018

January 28,
2017

(in thousands)

6. PROPERTY AND EQUIPMENT, NET:

Property and equipment, net, consisted of the following:

Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and building improvements . . . . . . . . . . . . . . . . . . . . . . .
Equipment, furniture and ﬁxtures . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .

Total property and equipment

Property and equipment, net

February 3,
2018

January 28,
2017

(in thousands)

$

30,572
125,504
636,542
529,835
1,322,453
(901,415)
$ 421,038

$

31,103
127,398
617,311
538,735
1,314,547
(837,362)
$ 477,185

Total depreciation expense for ﬁscal 2017, 2016 and 2015 was $96.2 million, $109.1 million and

$116.6 million, respectively.

7. OTHER CURRENT AND DEFERRED LIABILITIES:

Other current and deferred liabilities consisted of the following:

Allowance for customer returns, gift cards and store credits

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 55,948

$

59,893

Accrued payroll, beneﬁts, bonuses and severance costs and

February 3,
2018

January 28,
2017

(in thousands)

Current portion of deferred rent and lease credits
Other

termination beneﬁts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

Other current and deferred liabilities

29,685
19,158
28,924
$ 133,715

45,512
22,451
42,376
$ 170,232

49

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

8. DEBT:

In ﬁscal 2015, we entered into a credit agreement (the ‘‘Credit Agreement’’) among the Company,
JPMorgan Chase Bank, N.A. as Administrative Agent, Bank of America, N.A., as Syndication Agent and
the other lenders. Our obligations under the Credit Agreement are guaranteed by certain of our material
U.S.
in the amount of
$100.0 million, of which $100.0 million was drawn at closing, and matures on May 4, 2020, payable in
quarterly installments, as deﬁned in the Credit Agreement, with the remainder due at maturity.

subsidiaries. The Credit Agreement provides

for a term loan commitment

The Credit Agreement also provides for a $100.0 million revolving credit facility, of which $24.0 million
was drawn at closing and repaid in the second quarter of ﬁscal 2015. There were no amounts outstanding on
the revolving credit facility as of February 3, 2018. The revolving credit facility matures on May 4, 2020.

The Credit Agreement contains various covenants and restrictions, including maximum leverage ratio, as
deﬁned, of no more than 3.50 to 1.00 until July 31, 2018, and 3.25 to 1.00 after July 31, 2018, and minimum
ﬁxed charge coverage ratio, as deﬁned, of not less than 1.20 to 1.00. If the Company failed to comply with
these ﬁnancial covenants, a default would trigger and all principal and outstanding interest would be due and
payable. At February 3, 2018, the Company was in compliance with all ﬁnancial covenant requirements of the
Credit Agreement.

The Credit Agreement has borrowing options which accrue interest by reference, at our election, at either
an adjusted eurodollar rate tied to LIBOR or an Alternate Base Rate (‘‘ABR’’) plus an interest rate margin, as
deﬁned in the Credit Agreement. The interest rate on borrowings and our commitment fee rate vary based on
the maximum leverage ratio as follows:

Category 1:
Category 2:

. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .

Category 3:

. . . . . . . . . . . . . . . .

Maximum Leverage
Ratio:
< 2.25 to 1.00
≥ 2.25 to 1.00 but
< 3.00 to 1.00
≥ 3.00 to 1.00

Eurodollar
Spread
1.25%

ABR Spread
0.25%

Commitment
Fee Rate
0.20%

1.50%
1.75%

0.50%
0.75%

0.25%
0.30%

As of February 3, 2018, $68.6 million in borrowings were outstanding under the Credit Agreement, and
are reﬂected as $15.0 million in current debt and $53.6 million in long-term debt in the accompanying
consolidated balance sheets.

The following table provides details on our debt outstanding as of February 3, 2018 and

January 28, 2017:

February 3,
2018

January 28,
2017

(in thousands)

Credit Agreement, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt

$

68,601
(15,000)
$ 53,601

$

$

84,785
(16,250)
68,535

Aggregate future maturities of long-term debt are as follows:

FISCAL YEAR ENDING:
(in thousands)
February 2, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,000
15,000
38,750

50

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

9. NONCURRENT DEFERRED LIABILITIES:

Deferred liabilities consisted of the following:

February 3,
2018

January 28,
2017

(in thousands)

Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred lease credits, net
Other deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion of deferred rent and lease credits
. . . . . . . . .
Noncurrent deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

$

50,529
63,932
7,979
122,440
(19,158)
$ 103,282

$

$

51,909
80,217
8,868
140,994
(22,451)
118,543

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 appropriate respective terms of the 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.

10. COMMITMENTS AND CONTINGENCIES:

Leases

We lease retail stores, a limited amount of office space and certain office equipment under operating
leases expiring in various years through the ﬁscal year ending 2028. Certain operating leases provide for
renewal options that generally approximate ﬁve years at a pre-determined rental value. In the normal course of
business, operating leases are typically 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 February 3, 2018, are approximately as follows:

FISCAL YEAR ENDING:
(in thousands)
February 2, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 29, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 28, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 191,075
172,797
156,051
136,810
106,563
168,179
931,475

$

Certain leases provide that we may cancel the lease if our retail sales at that location fall below an
established level. 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 met or exercised a signiﬁcant number of these cancellation clauses and,
therefore, have included commitments for the full lease terms of such leases in the above table. For ﬁscal
rent expense under operating leases was approximately $263.7 million,
2017, 2016 and 2015,
including common area maintenance charges of
$268.5 million and $266.2 million,
approximately $47.9 million, $47.6 million and $46.7 million,
rental charges of
approximately $40.3 million, $41.2 million and $40.1 million, respectively, and contingent rental expense,
based on sales, of approximately $4.3 million, $5.2 million and $5.8 million, respectively.

respectively, other

respectively,

total

51

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Open Purchase Orders

At February 3, 2018 and January 28, 2017, we had approximately $316.5 million and $356.7 million,

respectively, of open purchase orders for inventory, in the normal course of business.

Legal Proceedings

In July 2015, White House Black Market, Inc. (WHBM) was named as a defendant in Altman v. White
House Black Market, Inc., a putative class action ﬁled in the United States District Court for the Northern
District of Georgia. The complaint alleges that WHBM, in violation of federal law, willfully published more
than the last ﬁve digits of a credit or debit card number on customers’ point-of-sale receipts. Plaintiff seeks an
award of statutory damages of $100 to $1,000 for each alleged willful violation of the law, as well as
attorneys’ fees, costs and punitive damages. The Company denies the material allegations of the complaint and
believes the case is without merit. On October 25, 2017, the magistrate in the matter recommended that the
class be certiﬁed. On November 8, 2017, WHBM ﬁled objections to such recommendation. On February 12,
2018, the District Court issued an order certifying the class. On February 26, 2018, the Company ﬁled a
petition with the District Court for permission to appeal its decision to the Eleventh Circuit Court of Appeals.
including a planned motion for summary
The Company will continue to vigorously defend the matter,
judgment to dismiss all claims. At this time, the Company is unable to reasonably estimate the potential loss
or range of loss, if any, related to the lawsuit because there are a number of unknown facts and unresolved
legal issues that may impact the amount of any potential liability, including, without limitation, (a) whether
the action will ultimately be permitted to proceed as a class, (b) if the action proceeds as a class, the
resolution of certain disputed statutory interpretation issues that may impact the size of the putative class and
(c) whether or not the plaintiff is entitled to statutory damages. No assurance can be given that these issues
will be resolved in the Company’s favor or that the Company will be successful in its defense on the merits or
otherwise. If the case were to proceed as a class action and the Company were to be unsuccessful in its
defense on the merits,
the ultimate resolution of the case could have a material adverse effect on the
Company’s consolidated ﬁnancial condition or results of operations.

Other than as noted above, we are not currently a party to any material legal proceedings other than
claims and lawsuits arising in the normal course of business. All such matters are subject to uncertainties, and
outcomes may not be predictable. Consequently, the ultimate aggregate amounts of monetary liability or
ﬁnancial impact with respect to these matters as of February 3, 2018 are not estimable. However, while such
matters could affect our consolidated operating results when resolved in future periods, management believes
that upon ﬁnal disposition, any monetary liability or ﬁnancial impact to us would not be material to our
annual consolidated ﬁnancial statements.

11. STOCK COMPENSATION PLANS AND CAPITAL STOCK TRANSACTIONS:

General

In April 2017, the Board approved the Amended and Restated 2012 Omnibus Stock and Incentive Plan
(the ‘‘Amended Omnibus Plan’’), which replaced the Chico’s FAS, Inc. 2012 Omnibus Stock and Incentive
Plan, effective upon shareholder approval on June 22, 2017. The aggregate number of shares of our common
stock that may be issued under the Amended Omnibus Plan (since inception) is 15.5 million shares plus any
shares represented by awards granted under prior plans that are forfeited, expired or canceled without delivery
of shares. Awards under the Amended Omnibus Plan may be in the form of restricted stock, restricted
stock units, performance-based restricted stock, performance-based stock units, stock options and stock
appreciation rights, in accordance with the terms and conditions of the Amended Omnibus Plan. The terms of
each award will be determined by the Human Resources, Compensation and Beneﬁts Committee of the Board
of Directors or by the Board of Directors.

We have historically issued restricted stock, including non-vested restricted stock, performance-based
stock units and stock options. Shares of non-vested 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

52

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

issued and outstanding. Performance-based stock units are entitled to dividend equivalents only to the extent
certain Company-speciﬁc performance goals are met and are entitled to voting rights only upon the issuance
of shares after meeting these Company-speciﬁc performance goals. Generally, stock-based awards vest evenly
over three years; stock options generally have a 10-year term. As of February 3, 2018, approximately
0.4 million nonqualiﬁed stock options are outstanding under a predecessor plan and approximately 9.3 million
shares remain available for future grants of stock-based awards.

Stock-based compensation expense for all awards is based on the grant date fair value of the award, net
of estimated forfeitures, and is recognized over the requisite service period of the awards. Compensation
expense for restricted stock awards and stock options with a service condition is recognized on a straight-line
basis over the requisite service period. Compensation expense for performance-based awards with a service
condition is recognized ratably for each vesting tranche based on our estimate of the level and likelihood of
meeting certain Company-speciﬁc performance goals. We estimate the expected forfeiture rate for all
stock-based awards, 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. Total compensation expense
related to stock-based awards in ﬁscal 2017, 2016 and 2015 was $20.7 million, $21.2 million and
$30.1 million, respectively. The total tax beneﬁt associated with stock-based compensation for ﬁscal 2017,
2016 and 2015 was $7.6 million, $8.1 million and $11.5 million, respectively.

Restricted Stock Awards

Restricted stock activity for ﬁscal 2017 was as follows:

Unvested, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares
2,463,186
1,441,300
(1,249,122)
(327,105)
2,328,259

Weighted
Average Grant
Date Fair
Value
$ 13.87
13.23
14.46
14.39
13.08

Total fair value of shares of restricted stock that vested during ﬁscal 2017, 2016 and 2015 was
$15.6 million, $14.7 million and $34.8 million, respectively. The weighted average grant date fair value of
restricted stock granted during ﬁscal 2017, 2016 and 2015 was $13.23, $12.38 and $16.97, respectively. As of
February 3, 2018, there was $17.3 million of unrecognized stock-based compensation expense related to
non-vested restricted stock awards. That cost is expected to be recognized over a weighted average remaining
period of 1.7 years.

Performance-based Stock Units

Performance-based stock unit activity for ﬁscal 2017 was as follows:

Unvested, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53

Number of
Shares
652,248
601,137
(310,901)
(251,534)
690,950

Weighted
Average Grant
Date Fair
Value
$ 13.28
13.93
13.67
13.33
13.65

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Total fair value of performance-based stock units that vested during ﬁscal 2017, 2016 and 2015 was
$4.2 million, $2.9 million and $3.9 million, respectively. There was $3.6 million of unrecognized stock-based
compensation expense related to performance-based stock units expected to vest. That cost is expected to be
recognized over a weighted average period of approximately 1.6 years.

Stock Option Awards

We used the Black-Scholes option-pricing model to value our stock options. No stock options have been
issued since ﬁscal 2011 and all have been fully vested since ﬁscal 2014. Using this option-pricing model, the
fair value of each stock option award was estimated on the date of grant. The fair value of the stock option
awards, which are subject to pro-rata vesting generally over three years, was expensed on a straight-line basis
over the vesting period of the stock options.

Stock option activity for ﬁscal 2017 was as follows:

Outstanding, beginning of period . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . .
Outstanding, end of period . . . . . . . . . . . . . . . . .
Vested at February 3, 2018 . . . . . . . . . . . . . . . . .
Exercisable at February 3, 2018 . . . . . . . . . . . . . .

Number of
Shares
577,246
—
(13,000)
(195,501)
368,745
368,745
368,745

Weighted
Average
Exercise
Price
$ 13.58
—
9.07
16.21
12.36
12.36
12.36

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(in thousands)

2.50
2.50
2.50

$253
253
253

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 2017 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 February 3, 2018. This amount changes based on the fair market value of
our common stock. Total intrinsic value of options exercised during ﬁscal 2017, 2016 and 2015 (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 $0.01 million, $0.7 million and $4.6 million, respectively.

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 shares of our common stock during each of the two speciﬁed
offering periods each 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 2017, 2016 and 2015, approximately 232,000, 191,000
and 174,000 shares, respectively, were purchased under the ESPP. Cash received from purchases under the
ESPP for ﬁscal 2017 was $2.0 million.

Share Repurchase Program

In ﬁscal 2017 and ﬁscal 2016, we repurchased 2.7 million and 8.1 million shares at a total cost of
$27.4 million and $96.4 million, respectively, under the Company’s $300 million share repurchase program
announced in November 2015. As of February 3, 2018, $136.2 million remains under the share repurchase
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.

54

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

12. RETIREMENT PLANS:

We have a 401(k) deﬁned contribution employee retirement beneﬁt plan (the ‘‘Plan’’) covering all
employees upon the completion of one year of service, working 1000 hours or more, and are at least age 21.
fully upon completing ﬁve years of service, with
Employees’ rights to Company contributions vest
incremental vesting starting in service year two. Under the Plan, employees may contribute up to 75 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 2017, 2016 and 2015, our costs under
the Plan were approximately $3.3 million, $3.4 million and $3.8 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 highly compensated employees. Eligible participants may
elect to defer up to 80 percent of their base salary and 100 percent of their bonus earned under an approved
bonus plan pursuant to the terms and conditions of the Deferred Plan. The Deferred Plan generally provides
for payments upon retirement, death, disability 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
purchase of corporate owned life insurance (COLI), cash and other securities held within a rabbi
trust
established on behalf of the employee participating in the plan. The trust assets are reﬂected in other assets in
the accompanying consolidated balance sheets.

13. INCOME TAXES:

The income tax provision consisted of the following:

Fiscal 2017

Fiscal 2016
(in thousands)

Fiscal 2015

Current:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 39,376
266
4,877

$ 49,994
260
5,654

$ 15,622
210
1,683

Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision (beneﬁt) . . . . . . . . . . . . . .

(3,669)
1,750
$ 42,600

(8,483)
75
$ 47,500

(25,004)
(9,411)
$ (16,900)

The foreign component of pre-tax income (loss), arising principally from operating foreign stores and
other management and cost sharing charges we are required to allocate under U.S. tax law, for ﬁscal 2017,
2016 and 2015 was $0.1 million, $0.1 million and $(0.8) million, respectively.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the ‘‘Tax Act’’) was signed into law making
signiﬁcant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate
decrease from 35% to 21% effective January 1, 2018. As a result, the Company’s blended federal tax rate for
ﬁscal 2017 was 33.8%. In addition, the Company recognized a tax beneﬁt in the fourth quarter related to
adjusting its deferred tax balance to reﬂect the new corporate tax rate. As a result, income tax expense in the
fourth quarter reﬂects a decrease in tax expense of $9.7 million, comprised of a $1.7 million reduction in
income tax expense for the ﬁscal year ended February 3, 2018 and $8.0 million from the application of the
newly enacted rates to existing deferred balances. As of February 3, 2018,
the Company performed a
preliminary analysis of information necessary to estimate the accounting for the impacts of the Tax Act. We
information and guidance related to the Tax Act as supplemental
will continue to analyze additional
interpretations become available. Consequently,
legislation,

regulatory guidance, or evolving technical

55

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

reasonable estimates of the impact of the Tax Act on the Company’s deferred tax balances and executive
compensation deductions have been reported as provisional, as deﬁned in Staff Accounting Bulletin No. 118.
We expect to complete our analysis no later than the fourth quarter of ﬁscal 2018.

A reconciliation between the statutory federal income tax rate and the effective income tax rate follows:

Federal income tax rate (blended rate for ﬁscal 2017

due to the Tax Act) . . . . . . . . . . . . . . . . . . . . . . .
State income tax, net of federal tax beneﬁt . . . . . . . . .
Impact of the Tax Act . . . . . . . . . . . . . . . . . . . . . . .
Excess share based compensation . . . . . . . . . . . . . . .
Goodwill impairment
. . . . . . . . . . . . . . . . . . . . . . .
Outside basis difference − Boston Proper sale . . . . . . .
Other state beneﬁts associated with sale and liquidation
of Boston Proper . . . . . . . . . . . . . . . . . . . . . . . . .
Enhanced charitable contribution . . . . . . . . . . . . . . .
Executive compensation limitation . . . . . . . . . . . . . .
Foreign losses with full valuation allowance . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Federal tax credits
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items, net
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal 2017

Fiscal 2016

Fiscal 2015

33.8%
3.2
(5.6)
0.9
—
—

—
(1.1)
0.7
0.1
(1.2)
(1.1)
29.7%

35.0%
3.4
—
—
—
(2.8)

(0.3)
(1.9)
1.2
0.2
(0.5)
(0.1)
34.2%

35.0%
4.3
—
—
(124.2)
165.2

20.1
19.3
(7.3)
(2.9)
3.4
0.4
113.3%

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 February 3, 2018 and January 28, 2017:

February 3,
2018

January 28,
2017

(in thousands)

Deferred tax assets:

Accrued liabilities and allowances . . . . . . . . . . . . . . . . . . . . . . .
Accrued straight-line rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charitable contribution limitation carryforwards . . . . . . . . . . . . . .
State tax credits and net operating loss carryforwards . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets
Valuation allowance
Net deferred tax assets

$

9,690
13,364
5,606
2,009
2,604
5,548
1,879
40,700
(444)
40,256

Deferred tax liabilities:

Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(119)
(4,823)
(23,961)
(16,666)
(45,569)
$ (5,313)

$ 17,790
20,361
10,329
1,816
5,109
5,105
3,376
63,886
(749)
63,137

—
(2,976)
(43,271)
(24,197)
(70,444)
(7,307)

$

56

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

As of February 3, 2018, the Company had available for state income tax purposes net operating loss and

tax credit carryovers which expire, if unused, in the years 2020 − 2035 and 2019 − 2026, respectively.

The Tax Act requires a one-time transition tax that is based on total post-1986 earnings and proﬁts (‘‘E &
P’’) previously deferred from U.S.
income taxes. As the Company does not have material amounts of
post-1986 E & P in its foreign subsidiaries, no one-time transition tax has been recorded in its fourth quarter
provision.

No additional income taxes have been provided for any remaining undistributed foreign earnings not
subject to the one-time transition tax, or any additional outside basis difference inherent in these entities, as
these amounts continue to be indeﬁnitely reinvested in foreign operations. There were no signiﬁcant
undistributed foreign earnings at February 3, 2018, January 28, 2017 and January 30, 2016.

The Tax Act also subjects a U.S. shareholder to tax on global intangible low-taxed income (‘‘GILTI’’)
earned by certain foreign subsidiaries. The FASB Staff Q & A, Topic 740, No. 5, Accounting for Global
Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize
deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the
tax expense related to GILTI in the year the tax is incurred. Given the complexity of the GILTI provisions, the
Company is still evaluating the effects and has not yet determined its accounting policy. At February 3, 2018,
since the Company is still evaluating the GILTI provisions and its analysis of future taxable income that is
subject to GILTI, the Company is unable to make a reasonable estimate and has not reﬂected any adjustments
related to GILTI in its ﬁnancial statements. The Company does not anticipate the impact of GILTI to be
material.

Accumulated other comprehensive income is shown net of deferred tax assets and deferred tax liabilities.

The amount is not signiﬁcant at February 3, 2018 or January 28, 2017.

A reconciliation of the beginning and ending amounts of uncertain tax positions for each of ﬁscal 2017,

ﬁscal 2016 and ﬁscal 2015 is as follows:

Balance at beginning of year
. . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . .
Additions for tax positions for the current year . . . . . .
Settlements/payments with tax authorities . . . . . . . . . .
Reductions due to lapse of applicable statutes of

Fiscal 2017

$

5,158
—
(105)
289
(3,667)

Fiscal 2016
(in thousands)
4,840
$
1,280
(1)
246
(850)

Fiscal 2015

$

2,532
2,618
(56)
259
—

limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .

Balance at end of year

(153)
1,522

$

(357)
5,158

$

(513)
4,840

$

At February 3, 2018, January 28, 2017 and January 30, 2016, balances included $1.2 million,
$4.4 million and $4.0 million respectively, of unrecognized tax beneﬁts that, if recognized, would favorably
impact the effective tax rate in future periods. We do not expect any events to occur that would cause a
change to our unrecognized tax beneﬁts or income tax expense within the next twelve months.

Our continuing practice is to recognize potential accrued interest and penalties relating to unrecognized
tax beneﬁts in the income tax provision. For ﬁscal 2017, 2016 and 2015, we accrued $0.1 million,
$0.2 million and $0.2 million, respectively for interest and penalties. We had approximately $0.3 million,
$0.5 million and $0.4 million, respectively for the payment of interest and penalties accrued at February 3,
2018, January 28, 2017 and January 30, 2016, respectively. The amounts included in the reconciliation of
uncertain tax positions do not include accruals for interest and penalties.

57

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

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 an agreement as to the proper reporting treatment when the
federal return is ﬁled. Previous years through ﬁscal 2015 have been accepted. Fiscal 2016 is in the post-ﬁling
review process.

We are no longer subject to state and local examinations for years before ﬁscal 2011. Various state
examinations are currently underway for ﬁscal periods spanning from 2011 through 2016; however, we do not
expect any signiﬁcant change to our uncertain tax positions within the next year.

14. NET INCOME PER SHARE:

The following table sets forth the computation of basic and diluted net income per share shown on the

face of the accompanying consolidated statements of income (in thousands, except per share amounts):

February 3,
2018

January 28,
2017

January 30,
2016

Numerator

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income and dividends declared allocated to

$ 101,000

$

91,229

participating securities

. . . . . . . . . . . . . . . . . . .
Net income available to common shareholders . . . . .

(2,300)
98,700

$

(1,915)
89,314

$

$

$

1,946

—
1,946

Denominator

Weighted average common shares

outstanding − basic . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of non-participating securities . . . . . .
Weighted average common and common equivalent

125,341
62

128,995
242

138,366
375

shares outstanding − diluted . . . . . . . . . . . . . . . .

125,403

129,237

138,741

Net income per common share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.79
0.79

$
$

0.69
0.69

$
$

0.01
0.01

In ﬁscal 2017, 2016 and 2015, 0.7 million, 0.7 million and 0.3 million potential shares of common stock,
respectively, were excluded from the diluted per share calculation relating to non-participating securities,
because the effect of including these potential shares was antidilutive.

58

CHICO’S FAS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):

Net Sales

Gross
Margin
(dollars in thousands, except per share amounts)

Net Income

Net Income
Per Common
Share − Basic

Fiscal year ended February 3, 2018:

First quarter . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . .
Fourth quarter (fourteen weeks)(1) . .

$ 583,728
578,581
532,287
587,783

$ 237,413
209,101
196,702
221,561

$ 33,619
22,716
16,690
27,975

Fiscal year ended January 28, 2017:

First quarter . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . .
Fourth quarter (thirteen weeks) . . . .

$ 642,977
635,732
596,912
600,789

$ 262,335
240,810
230,294
213,397

$ 31,084
23,039
23,598
13,508

$ 0.26
0.18
0.13
0.22

$ 0.23
0.17
0.18
0.10

Net Income
Per Common
and Common
Equivalent
Share − Diluted

$ 0.26
0.18
0.13
0.22

$ 0.23
0.17
0.18
0.10

(1) Fourth quarter ﬁscal 2017 results include the favorable impact of

the Tax Act of approximately

$10 million, after-tax.

16. SUBSEQUENT EVENTS:

On February 21, 2018, we announced that our Board of Directors declared a quarterly dividend of $0.085
per share on our common stock. The dividend will be payable on April 2, 2018 to shareholders of record at
the close of business on March 19, 2018. 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.

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure 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 Exchange Act of 1934, as amended (the
‘‘Exchange Act’’), is recorded, processed, summarized and reported within the time periods speciﬁed in the
SEC’s rules and forms. 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.

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
Rule 13a-15(e) under the Exchange Act). 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.

Changes in Internal Control over Financial Reporting

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) under the Exchange Act. 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 February 3,
2018 as required by Rule 13a-15(c) under the Exchange Act. In making this assessment, we used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control — Integrated Framework (2013 framework). Based on our evaluation, management concluded that our
internal control over ﬁnancial reporting was effective as of February 3, 2018.

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, 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 and procedures may deteriorate.

The Company’s independent registered certiﬁed public accounting ﬁrm, Ernst & Young LLP, that audited
the consolidated ﬁnancial statements included in this Annual Report on Form 10-K, issued an attestation
report on the Company’s internal control over ﬁnancial reporting as of February 3, 2018, which follows.

60

Report of Independent Registered Certiﬁed Public Accounting Firm

To the Shareholders and the Board of Directors of Chico’s FAS, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Chico’s FAS, Inc. and subsidiaries’ internal control over ﬁnancial reporting as of
February 3, 2018, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Chico’s FAS, Inc. and subsidiaries’ (the Company) maintained,
in all material respects,
effective internal control over ﬁnancial reporting as of February 3, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of Chico’s FAS, Inc. and subsidiaries as of
February 3, 2018 and January 28, 2017, and the related consolidated statements of income, comprehensive
income, stockholders’ equity and cash ﬂows for each of the three ﬁscal years in the period ended February 3,
2018 and the related notes and our report dated March 13, 2018 expressed an unqualiﬁed opinion thereon.

Basis for Opinion

The Company’s 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 are a
public accounting ﬁrm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
to obtain reasonable assurance about whether effective internal control over

plan and perform the audit
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.

Deﬁnition and Limitations of Internal Control Over Financial Reporting

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.

/s/ ERNST & YOUNG LLP

Tampa, Florida
March 13, 2018

61

ITEM 9B. OTHER INFORMATION

None.

62

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information about our executive officers, 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 2018 Annual Meeting proxy statement is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information about executive compensation, compensation committee interlocks and insider participation,
and the Human Resources, Compensation and Beneﬁts Committee report in our 2018 Annual Meeting proxy
statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

Except as provided below, the information required by this item is included in our 2018 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 February 3, 2018:

Plan Category

Equity compensation plans approved

by security holders(1)

. . . . . . . . . .

Equity compensation plans not
approved by security holders

. . . .
. . . . . . . . . . . . . . . . . . . . . .

Total

Number of
Securities to be
Issued upon
Exercise
of Outstanding
Options, Warrants
and Rights
(a)

Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights
(b)(2)

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reﬂected in
Column (a))
(c)(3)

1,076,255

—
1,076,255

$12.36

—
$12.36

10,019,354

—
10,019,354

(1) Consists of

the Amended and Restated 2012 Omnibus Stock and Incentive Plan,

the Amended and
Restated 2002 Omnibus Stock and Incentive Plan, and the Second Amended and Restated 2002 Employee
Stock Purchase Plan.

(2) The weighted average exercise price is calculated based solely on the outstanding stock options. It does
the shares issuable upon vesting of outstanding restricted stock, restricted

not
stock units or performance stock units, which have no exercise price.

take into account

(3) Consists of (i) 9.3 million shares that were available for future issuance under the Amended and Restated
2012 Omnibus Stock and Incentive Plan as of February 3, 2018 and (ii) 0.7 million shares that were
available for future issuance under the Second Amended and Restated 2002 Employee Stock Purchase
Plan as of February 3, 2018, including shares subject to purchase during the current offering period.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item is included in our 2018 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 2018 Annual Meeting proxy statement and is

incorporated herein by reference.

63

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents ﬁled as part of this Report.

(1) The following consolidated ﬁnancial statements are contained in Item 8:

Consolidated Financial Statements

Report of Ernst & Young LLP, independent registered certiﬁed public accounting ﬁrm . . . . . .

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The following Financial Statement Schedules are included herein:

Page in this
Report

33

34

35

36

37

38

39

Schedules are not submitted because they are not applicable, 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:

3.1

3.2

4.1*

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

Inc.

Incorporation of Chico’s FAS,

Amended and Restated By-laws of Chico’s FAS, Inc. (incorporated by reference to Exhibit 3.1 to
the Company’s Form 10-Q, as ﬁled with the Commission on November 22, 2016)
Amended and Restated Articles of
(incorporated by
reference to Exhibit 3.2 to the Company’s Form 10-Q, as ﬁled with the Commission on
November 22, 2016)
Form of specimen Common Stock Certiﬁcate (incorporated by reference to Exhibit 4.9 to the
Company’s Form 10-K, as ﬁled with the Commission on March 14, 2014)
Amended and Restated 2002 Omnibus Stock and Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Form 8-K, as ﬁled with the Commission on July 2, 2008)
Form of 2002 Omnibus Stock and Incentive Plan Non-Qualiﬁed Stock Option Certiﬁcate for
Employees (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, as ﬁled with
the Commission on February 3, 2005)
Revised Form of 2002 Omnibus Stock and Incentive Plan Non-Qualiﬁed Stock Option Certiﬁcate
for Employees (incorporated by reference to Exhibit 10.22 to the Company’s Form 10-K, as ﬁled
with the Commission on March 22, 2011)

Inc. Second Amended and Restated 2002 Employee Stock Purchase Plan
Chico’s FAS,
(incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, as ﬁled with the
Commission on August 24, 2011)

Indemniﬁcation Agreement with David F. Walker (incorporated by reference to Exhibit 10.1 to
the Company’s Form 10-Q, as ﬁled with the Commission on November 29, 2005)

Indemniﬁcation Agreement with Ross E. Roeder (incorporated by reference to Exhibit 10.8 to the
Company’s Form 8-K as ﬁled with the Commission on December 9, 2005)

Indemniﬁcation Agreement with John J. Mahoney (incorporated by reference to Exhibit 10.1 to
the Company’s Form 8-K as ﬁled with the Commission on July 25, 2008)

Indemniﬁcation Agreement with Andrea M. Weiss (incorporated by reference to Exhibit 10.43 to
the Company’s Form 10-K, as ﬁled with the Commission on March 22, 2011)
Indemniﬁcation Agreement with Stephen E. Watson (incorporated by reference to Exhibit 10.44
to the Company’s Form 10-K, as ﬁled with the Commission on March 22, 2011)

64

10.10*

10.11*

10.12

10.13*

10.14*

10.15

10.16*

10.17*

10.18*

10.19*

10.20*

10.21*

10.22*

10.23*

10.24*

10.25*

10.26*

10.27*

10.28*

Chico’s FAS, Inc. Deferred Compensation Plan effective April 1, 2002 (incorporated by reference
to Exhibit 10.53 to the Company’s Form 10-K, as ﬁled with the Commission on April 24, 2002)

Chico’s FAS, Inc. 2005 Deferred Compensation Plan effective January 1, 2005 (amended and
restated January 1, 2008)
(incorporated by reference to Exhibit 10.1 to the Company’s
Form 10-Q, as ﬁled with the Commission on December 10, 2008)

Lease Agreement between Joint Development Authority of Winder-Barrow County and Chico’s
Real Estate, LLC dated as of March 25, 2002 (incorporated by reference to Exhibit 10.54 to the
Company’s Form 10-K, as ﬁled with the Commission on April 24, 2002)

Indemniﬁcation Agreement with Janice L. Fields (incorporated by reference to Exhibit 10.1 to
the Company’s Form 8-K, as ﬁled with the Commission on May 7, 2013)

Participation Agreement between the Company and Todd E. Vogensen (incorporated by reference
to Exhibit 10.2 to the Company’s Form 8-K, as ﬁled with the Commission on April 1, 2015)

Credit Agreement by and among the Company, JP Morgan Chase Bank, N.A. and the Lenders
parties thereto dated as of May 4, 2015 (incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K, as ﬁled with the Commission on May 8, 2015)

Chico’s FAS, Inc. Cash Bonus Incentive Plan (incorporated by reference to Appendix A to the
Company’s deﬁnitive proxy statement, as ﬁled with the Commission on May 8, 2015)

Employment letter agreement between the Company and Todd E. Vogensen, dated as of March 3,
2015 (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q, as ﬁled with the
Commission on May 28, 2015)
Employment
letter agreement between the Company and Shelley Broader (incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K, as ﬁled with the Commission on
October 30, 2015)
Amendment No.1 to Second Amended and Restated 2002 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.59 to the Company’s Form 10-K, as ﬁled with the
Commission on March 8, 2016)
Participation Agreement between the Company and Shelley Broader (incorporated by reference to
Exhibit 10.61 to the Company’s Form 10-K, as ﬁled with the Commission on March 8, 2016)
Amendment to employment letter agreement between the Company and Shelley Broader dated
April 14, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, as ﬁled
with the Commission on April 14, 2016)
Employment
letter agreement between the Company and Diane M. Ellis (incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K, as ﬁled with the Commission on
October 7, 2016)
Restrictive covenant agreement between the Company and Diane M. Ellis (incorporated by
reference to Exhibit 10.2 to the Company’s Form 8-K, as ﬁled with the Commission on
October 7, 2016)
Amended Form of 2012 Omnibus Stock and Incentive Plan Restricted Stock Agreement
(Non-Soma Officers) (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, as
ﬁled with the Commission on November 22, 2016)

Amended Form of 2012 Omnibus Stock and Incentive Plan Restricted Stock Agreement (Soma
Officers) (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, as ﬁled with
the Commission on November 22, 2016)

Indemniﬁcation Agreement with Bonnie R. Brooks (incorporated by reference to Exhibit 10.46 to
the Company’s Form 10-K, as ﬁled with the Commission on March 7, 2017)

Indemniﬁcation Agreement with William S. Simon (incorporated by reference to Exhibit 10.47 to
the Company’s Form 10-K, as ﬁled with the Commission on March 7, 2017)
Officer Severance Plan (as amended and restated September 1, 2016) (incorporated by reference
to Exhibit 10.49 to the Company’s Form 10-K, as ﬁled with the Commission on March 7, 2017)

65

10.29*

10.30*

10.31*

10.32*

10.33*

10.34*

10.35*

10.36*

10.37*

10.38*

10.39*

10.40*

10.41*

10.42*

10.43*

Form of 2012 Omnibus Stock and Incentive Plan Restricted Stock Agreement (incorporated by
reference to Exhibit 10.50 to the Company’s Form 10-K, as ﬁled with the Commission on
March 7, 2017)

Form of 2012 Omnibus Stock and Incentive Plan Performance Award Agreement for Restricted
Stock Units (incorporated by reference to Exhibit 10.51 to the Company’s Form 10-K, as ﬁled
with the Commission on March 7, 2017)

Incentive Compensation Clawback Policy, effective April 6, 2017 (incorporated by reference to
Exhibit 10.1 to the Company’s Form 10-Q, as ﬁled with the Commission on May 25, 2017)

Separation Agreement and Release between the Company and Laurie Van Brunt dated April 7,
2017 (incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K, as ﬁled with the
Commission on April 10, 2017)

Chico’s FAS, Inc. Amended and Restated 2012 Omnibus Stock and Incentive Plan (incorporated
by reference to Exhibit 10.55 to the Company’s Form 8-K as ﬁled with the Commission on
June 27, 2017)

Form of Amended and Restated 2012 Omnibus Stock and Incentive Plan Restricted Stock
Agreement for Employees (for awards on or after June 22, 2017) (incorporated by reference to
Exhibit 10.1 to the Company’s Form 10-Q, as ﬁled with the Commission on August 31, 2017)

Form of Amended and Restated 2012 Omnibus Stock and Incentive Plan Restricted Stock
Agreement for Non-Employee Directors (for awards on or after June 22, 2017) (incorporated by
reference to Exhibit 10.2 to the Company’s Form 10-Q, as ﬁled with the Commission on
August 31, 2017)
Form of Amended and Restated 2012 Omnibus Stock and Incentive Plan Restricted Stock Unit
Agreement for Non-Employee Directors (for awards on or after June 22, 2017) (incorporated by
reference to Exhibit 10.3 to the Company’s Form 10-Q, as ﬁled with the Commission on
August 31, 2017)
Amended and Restated Indemniﬁcation Agreement with Shelley G. Broader, dated June 19, 2017
(incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q, as ﬁled with the
Commission on August 31, 2017)
Amended and Restated Indemniﬁcation Agreement with Todd E. Vogensen, dated July 6, 2017
(incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q, as ﬁled with the
Commission on August 31, 2017)
Indemniﬁcation Agreement with Susan S. Lanigan, dated June 28, 2017 (incorporated by
reference to Exhibit 10.6 to the Company’s Form 10-Q, as ﬁled with the Commission on
August 31, 2017)
Employment Letter Agreement between the Company and Mary van Praag, dated August 1, 2017
(incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, as ﬁled with the
Commission on November 22, 2017)

Restrictive Covenant Agreement between the Company and Mary van Praag, dated August 22,
2017 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, as ﬁled with the
Commission on November 22, 2017)

Indemniﬁcation Agreement with Deborah L. Kerr, dated November 15, 2017 (incorporated by
reference to Exhibit 10.3 to the Company’s Form 10-Q, as ﬁled with the Commission on
November 22, 2017)

Form of Amended and Restated 2012 Omnibus Stock and Incentive Plan Performance Award
Agreement for Performance Share Units for Employees (for awards on or after March 1, 2018)
(incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, as ﬁled with the
Commission on February 16, 2018)

10.44*

Form of Amended and Restated 2012 Omnibus Stock and Incentive Plan Restricted Stock
Agreement for Employees (for awards on or after March 1, 2018)

66

10.45*

10.46*

10.47*

21

23

31.1

31.2

32.1

32.2

Employment
December 11, 2017

letter agreement between the Company and David Pastrana, dated as of

Restrictive covenant agreement between the Company and David Pastrana, dated as of
December 12, 2017

Separation Agreement and Release between the Company and Donna Colaco, dated as of
January 31, 2018

Subsidiaries of the Registrant

Consent of Ernst & Young LLP

Chico’s FAS, Inc. and Subsidiaries Certiﬁcation Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 — Chief Executive Officer

Chico’s FAS, Inc. and Subsidiaries Certiﬁcation Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 — Chief Financial Officer

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

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

*

Denotes management contract

ITEM 16. FORM 10-K SUMMARY

Not applicable.

67

SIGNATURES

Pursuant

the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,

CHICO’S FAS, INC.

By: /s/ Shelley G. Broader
Shelley G. Broader
Chief Executive Officer, President
and Director

Date: March 13, 2018

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

Title

Date

/s/ Shelley G. Broader
Shelley G. Broader

/s/ Todd E. Vogensen
Todd E. Vogensen

/s/ David M. Oliver
David M. Oliver

/s/ David F. Walker
David F. Walker

/s/ Bonnie R. Brooks
Bonnie R. Brooks

/s/ Janice L. Fields
Janice L. Fields

/s/ Deborah L. Kerr
Deborah L. Kerr

/s/ John J. Mahoney
John J. Mahoney

/s/ William S. Simon
William S. Simon

/s/ Stephen E. Watson
Stephen E. Watson

/s/ Andrea M. Weiss
Andrea M. Weiss

Chief Executive Officer, President and Director
(Principal Executive Officer)

March 13, 2018

Executive Vice President, Chief Financial Officer
and Assistant Corporate Secretary

March 13, 2018

Senior Vice President-Finance, Controller
and Chief Accounting Officer

March 13, 2018

Chairman of the Board

March 13, 2018

March 13, 2018

March 13, 2018

March 13, 2018

March 13, 2018

March 13, 2018

March 13, 2018

March 13, 2018

Director

Director

Director

Director

Director

Director

Director

68

Executive Officers

SHELLEY G. BROADER
Chief Executive Officer and President

TODD E. VOGENSEN
Executive Vice President – 
Chief Financial Officer and Assistant Corporate Secretary 

DIANE M. ELLIS
Brand President – Chico’s

DAVID PASTRANA
Brand President – White House Black Market

MARY VAN PRAAG
Brand President – Soma

KRISTIN L. OLIVER
General Counsel and Executive Vice President – 
Human Resources and Store Operations

ANN E. JOYCE
Chief Information Officer and Executive Vice President -
Advanced Analytics, Customer Experience and Technology

JOHN R. LUND
Senior Vice President of Supply Chain & Operations

DAVID M. OLIVER
Senior Vice President – Finance, Controller and Chief Accounting Officer

Board of Directors

SHELLEY G. BROADER (5)
Chief Executive Officer and President

DAVID F. WALKER (1) (4)
Chairman of the Board
Retired Director of the Program of Accountancy,
The University of South Florida 

BONNIE R. BROOKS (6)
Retired Vice Chair of Hudson’s Bay Co.

JANICE L. FIELDS (2) (5)
Retired President of McDonald’s USA, LLC

DEBORAH L. KERR (6)
Retired Executive Vice President, Chief Product & Technology Officer 
of Sabre Corporation

JOHN J. MAHONEY (3) (5) (8)
Retired Vice Chairman, Staples, Inc. 

WILLIAM S. SIMON (7)
Retired President and Chief Executive Officer of Walmart U.S.

STEPHEN E. WATSON (7)
Retired Chief Executive Officer of Gander Mountain Company

ANDREA M. WEISS (8)
Founder and Chief Executive Officer, Retail Consulting, Inc.

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 website address below:

Chico’s FAS, Inc. National Store Support Center

11215 Metro Parkway, Fort Myers, Florida 33966-1206
239-277-6200  |  Web site: www.chicosfas.com

Transfer Agent and Registrar:

American Stock Transfer & Trust Company, LLC (AST)
6201 15th Avenue, Brooklyn, NY  11219
Phone 888-490-1287  |  email: info@amstock.com
Website: www.amstock.com

Stock Exchange Listing:

The common stock of Chico’s FAS, Inc. is listed 
for trading on the New York Stock Exchange 
under the symbol CHS.

Independent Public Accountants:

Ernst & Young LLP  |  Tampa, Florida

Annual Shareholders Meeting:

June 21, 2018
Chico’s FAS, Inc. National Store Support Center
Fort Myers, Florida

Brand Web Sites:

www.chicos.com
www.whbm.com
www.soma.com
www.chicosofftherack.com

(1) Chair of the Executive Committee
(2) Chair of the Corporate Governance and Nominating Committee
(3) Chair of the Human Resources, Compensation and Benefits Committee
(4) Chair of the Audit Committee
(5) Member of the Executive Committee
(6) Member of the Corporate Governance and Nominating Committee
(7) Member of the Human Resources, Compensation and Benefits Committee
(8) Member of the Audit Committee