Still Looking Chic at Chico's

Retail stocks have been hard hit lately--with the Standard & Poor's Retail Stores Composite down 10% in the past three months. But some clothiers are dressed for success. Chico's FAS (CHS ) targets women who favor stylish yet comfortable outfits. The company, which spends more on employee training than rivals do, boosts sales with on-site shopping parties and club programs. On Sept. 4, the stock hit a 52-week high of 39, having tripled in 2001. Since then, it has taken a sharp tumble. Before the retrenchment, Chico's 255 U.S. stores boasted big increases: For the 26 weeks ended Aug. 4, net sales were up 56%, and profits more.

But just as investors have bid Chico down on anticipated weaker sales, analysts are trimming their forecasts. Jennifer Black of Wells Fargo Van Kasper has dropped her 2001 estimates from $1.88 a share to $1.43 and expects flat to slightly negative results for the year--a minor glitch compared with "some other pretty nasty same-store sales out there," she says. Nevertheless, she says, "we think the stock is going to rock." Her near-term price target is 48.

Richard Driehaus of Driehaus Capital Management says Chico's is one of the best-positioned speciality retailers, serving those with the highest discretionary income. "The markets are overreacting on a short-term basis," he says. Chico's has "a good underlying matrix, even though the growth rate may slow down."

By Mara Der Hovanesian

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