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Investors Cheer Chico's FAS Q2 Earnings

Shares of Chico's FAS, Inc. CHS gained more than 5 percent after the company delivered better-than-expected earnings for the second quarter.

The specialty retailer reported net income of $23.0 million, or $0.17 a share, sharply higher than $2.1 million, or $0.02 a share, recorded in the year-ago quarter. However, on an adjusted basis, net income fell from $37.6 million to $33.3 million and EPS from $0.26 to $0.25., which was $0.03 a share higher than the Street estimates of $0.22 a share.

Chico's FAS net sales dipped 7.3 percent from $685.8 million to $635.7 million. Excluding Boston Proper from last year's sales number, its sales would have dropped 3.6 percent hurt by 3.1 percent fall in comparable sales.

CEO and President, Shelley Broader, said, "The initiatives we announced last quarter are already driving cost savings and improving our operating efficiency. In addition, we believe that the organizational redesign announced today will enable us to be more nimble and responsive to our customers' evolving needs."

Going forward, Chico's expects low single-digit comparable sales drop in the second half. The company lower sales to drag its gross margin citing deleverage of store occupancy costs, partly offset by higher merchandise margin rate.

The stock traded up by $0.60, or 5.31 percent, to $11.90 in the pre-market on Wednesday.

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