UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM			10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October ~~30, 2021~~29, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-16435



Chico's FAS, Inc.
(Exact name of registrant as specified in its charter)


Florida						59-2389435
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

11215 Metro Parkway, Fort Myers, Florida 33966

(Address of principal executive offices) (Zip Code)

239-277-6200

(Registrant's telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share	CHS	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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

☐☑

Accelerated filer

☑☐

Non-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 Exchange Act). Yes ☐ No ☑

At November ~~22, 2021,~~14, 2022, the registrant had ~~122,542,092~~ 125,069,318shares of Common Stock, $0.01 par value per share, outstanding.

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE

FISCAL THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER ~~30, 2021~~29, 2022

TABLE OF CONTENTS


PART I – Financial Information

Item 1.	Financial Statements:

	Condensed Consolidated Statements of Income ~~(Loss)~~ for the Thirteen and Thirty-Nine Weeks Ended October ~~30, 2021~~29, 2022 (Unaudited) and October ~~31, 2020~~30, 2021 (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Thirteen and Thirty-Nine Weeks Ended October ~~30, 2021~~29, 2022 (Unaudited) and October ~~31, 2020~~30, 2021 (Unaudited)	4

	Condensed Consolidated Balance Sheets – October ~~30, 2021~~29, 2022 (Unaudited), January ~~30, 2021~~29, 2022 (Audited), and October ~~31, 2020~~30, 2021 (Unaudited)	5

	Condensed Consolidated Statements of Shareholders’ Equity for the Thirteen and Thirty-Nine Weeks Ended October ~~30, 2021~~29, 2022 (Unaudited) and October ~~31, 2020~~30, 2021 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 30 , ~~2021~~29, 2022 (Unaudited) and October ~~31, 2020~~30, 2021 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2318

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3530

Item 4.	Controls and Procedures	3530

PART II – Other Information

Item 1.	Legal Proceedings	3631

Item 1A.	Risk Factors	3631



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3631



Item 6.	Exhibits	3732

Signatures		3833

Table of Contents

PART I – FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(Unaudited)

(Dollars in thousands, except per share amounts)


		Thirteen Weeks Ended								Thirty-Nine Weeks Ended									Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		October 30, 2021				October 31, 2020				October 30, 2021				October 31, 2020					October 29, 2022				October 30, 2021				October 29, 2022				October 30, 2021

		Amount		% of Sales		Amount		% of Sales		Amount		% of Sales		Amount		% of Sales			Amount		% of Sales		Amount		% of Sales		Amount		% of Sales		Amount		% of Sales
Net Sales	Net Sales	$	453,644	100.0	%	$	351,416	100.0	%	$	1,313,664	100.0	%	$	937,854	100.0	%	Net Sales	$	518,332	100.0	%	$	453,644	100.0	%	$	1,617,967	100.0	%	$	1,313,664	100.0	%
Cost of goods sold	Cost of goods sold	269,205		59.3		274,252		78.0		820,973		62.5		827,019		88.2		Cost of goods sold	310,892		60.0		269,205		59.3		962,448		59.5		820,973		62.5
Gross Margin	Gross Margin	184,439		40.7		77,164		22.0		492,691		37.5		110,835		11.8		Gross Margin	207,440		40.0		184,439		40.7		655,519		40.5		492,691		37.5
Selling, general and administrative expenses	Selling, general and administrative expenses	162,469		35.8		153,096		43.6		442,637		33.7		390,571		41.6		Selling, general and administrative expenses	175,841		33.9		162,469		35.8		520,296		32.1		442,637		33.7
Goodwill and intangible impairment charges		—		0.0		—		0.0		—		0.0		113,180		12.1

Income (Loss) from Operations		21,970		4.9		(75,932)		(21.6)		50,054		3.8		(392,916)		(41.9)

Income from Operations																		Income from Operations	31,599		6.1		21,970		4.9		135,223		8.4		50,054		3.8
Interest expense, net	Interest expense, net	(1,744)		(0.4)		(536)		(0.2)		(5,170)		(0.4)		(1,387)		(0.1)		Interest expense, net	(1,080)		(0.2)		(1,744)		(0.4)		(3,111)		(0.2)		(5,170)		(0.4)
Income (Loss) before Income Taxes		20,226		4.5		(76,468)		(21.8)		44,884		3.4		(394,303)		(42.0)
Income tax provision (benefit)		2,000		0.5		(20,600)		(5.9)		9,400		0.7		(113,300)		(12.0)
Net Income (Loss)		$	18,226	4.0	%	$	(55,868)	(15.9)	%	$	35,484	2.7	%	$	(281,003)	(30.0)	%
Income before Income Taxes																		Income before Income Taxes	30,519		5.9		20,226		4.5		132,112		8.2		44,884		3.4
Income tax provision																		Income tax provision	5,900		1.2		2,000		0.5		30,600		1.9		9,400		0.7
Net Income																		Net Income	$	24,619	4.7	%	$	18,226	4.0	%	$	101,512	6.3	%	$	35,484	2.7	%
Per Share Data:	Per Share Data:																	Per Share Data:
Net income (loss) per common share - basic		$	0.15			$	(0.48)			$	0.30			$	(2.43)
Net income (loss) per common and common equivalent share – diluted		$	0.15			$	(0.48)			$	0.29			$	(2.43)
Net income per common share - basic																		Net income per common share - basic	$	0.20			$	0.15			$	0.84			$	0.30
Net income per common and common equivalent share – diluted																		Net income per common and common equivalent share – diluted	$	0.20			$	0.15			$	0.82			$	0.29
Weighted average common shares outstanding – basic	Weighted average common shares outstanding – basic	117,304				116,174				117,005				115,887				Weighted average common shares outstanding – basic	120,333				117,304				119,776				117,005
Weighted average common and common equivalent shares outstanding – diluted	Weighted average common and common equivalent shares outstanding – diluted	123,166				116,174				121,897				115,887				Weighted average common and common equivalent shares outstanding – diluted	124,887				123,166				124,016				121,897

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

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Unaudited)

(In thousands)

Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
Net income (loss) $ 18,226 $ (55,868) $ 35,484 $ (281,003)
Other comprehensive income (loss):
Unrealized (losses) gains on marketable securities, net of taxes (10) (32) (64) (61)
Foreign currency translation adjustment — — — 580
Comprehensive income (loss) $ 18,216 $ (55,900) $ 35,420 $ (280,484)


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net income	$	24,619	$	18,226	$	101,512	$	35,484
Other comprehensive loss:
Unrealized losses on marketable securities, net of taxes	(233)		(10)		(228)		(64)

Comprehensive income	$	24,386	$	18,216	$	101,284	$	35,420

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

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)


		October 30, 2021		January 30, 2021		October 31, 2020			October 29, 2022		January 29, 2022		October 30, 2021
ASSETS	ASSETS							ASSETS
Current Assets:	Current Assets:							Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	134,458	$	90,791	$	126,497	Cash and cash equivalents	$	117,726	$	115,105	$	134,458
Marketable securities, at fair value	Marketable securities, at fair value	3,006		18,559		18,667		Marketable securities, at fair value	23,017		—		3,006
Inventories	Inventories	277,738		203,983		256,542		Inventories	304,127		323,389		277,738
Prepaid expenses and other current assets	Prepaid expenses and other current assets	51,841		30,565		36,766		Prepaid expenses and other current assets	47,208		41,871		51,841
Income tax receivable	Income tax receivable	13,125		58,140		56,774		Income tax receivable	15,430		13,698		13,125

Total Current Assets	Total Current Assets	480,168		402,038		495,246		Total Current Assets	507,508		494,063		480,168
Property and Equipment, net	Property and Equipment, net	199,853		241,370		256,715		Property and Equipment, net	183,153		195,332		199,853
Right of Use Assets	Right of Use Assets	494,808		586,061		582,074		Right of Use Assets	432,018		463,077		494,808
Other Assets:	Other Assets:							Other Assets:
Goodwill	Goodwill	16,360		16,360		16,360		Goodwill	16,360		16,360		16,360
Other intangible assets, net	Other intangible assets, net	5,000		5,000		6,164		Other intangible assets, net	5,000		5,000		5,000
Other assets, net	Other assets, net	25,413		24,049		37,839		Other assets, net	18,890		23,005		25,413
Total Other Assets	Total Other Assets	46,773		45,409		60,363		Total Other Assets	40,250		44,365		46,773
		$	1,221,602	$	1,274,878	$	1,394,398		$	1,162,929	$	1,196,837	$	1,221,602
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:	Current Liabilities:							Current Liabilities:
Accounts payable	Accounts payable	$	172,897	$	116,506	$	147,354	Accounts payable	$	107,400	$	180,828	$	172,897
Current lease liabilities	Current lease liabilities	177,563		194,551		208,351		Current lease liabilities	157,687		172,506		177,563

Other current and deferred liabilities	Other current and deferred liabilities	140,982		120,729		123,474		Other current and deferred liabilities	155,133		134,051		140,982

Total Current Liabilities	Total Current Liabilities	491,442		431,786		479,179		Total Current Liabilities	420,220		487,385		491,442
Noncurrent Liabilities:	Noncurrent Liabilities:							Noncurrent Liabilities:
Long-term debt	Long-term debt	99,000		149,000		149,000		Long-term debt	69,000		99,000		99,000
Long-term lease liabilities	Long-term lease liabilities	415,458		515,797		509,118		Long-term lease liabilities	346,560		381,081		415,458
Other noncurrent and deferred liabilities	Other noncurrent and deferred liabilities	6,647		11,863		14,284		Other noncurrent and deferred liabilities	2,612		7,867		8,147
Deferred taxes		1,500		1,313		52

Total Noncurrent Liabilities	Total Noncurrent Liabilities	522,605		677,973		672,454		Total Noncurrent Liabilities	418,172		487,948		522,605
Commitments and Contingencies (see Note 13)		0		0		0
Commitments and Contingencies (see Note 10)								Commitments and Contingencies (see Note 10)
Shareholders’ Equity:	Shareholders’ Equity:							Shareholders’ Equity:
Preferred stock, $0.01 par value; 2,500 shares authorized; no shares issued and outstanding	Preferred stock, $0.01 par value; 2,500 shares authorized; no shares issued and outstanding	—		—		—		Preferred stock, $0.01 par value; 2,500 shares authorized; no shares issued and outstanding	—		—		—
Common stock, $0.01 par value; 400,000 shares authorized; 163,806 and 161,032 and 161,219 shares issued respectively; and 122,509 and 119,735 and 119,922 shares outstanding, respectively		1,225		1,197		1,199
Common stock, $0.01 par value; 400,000 shares authorized; 166,326 and 163,823 and 163,806 shares issued respectively; and 125,029 and 122,526 and 122,509 shares outstanding, respectively								Common stock, $0.01 par value; 400,000 shares authorized; 166,326 and 163,823 and 163,806 shares issued respectively; and 125,029 and 122,526 and 122,509 shares outstanding, respectively	1,250		1,225		1,225
Additional paid-in capital	Additional paid-in capital	505,419		498,488		496,993		Additional paid-in capital	510,374		508,654		505,419
Treasury stock, at cost, 41,297 shares, respectively	Treasury stock, at cost, 41,297 shares, respectively	(494,395)		(494,395)		(494,395)		Treasury stock, at cost, 41,297 shares, respectively	(494,395)		(494,395)		(494,395)
Retained earnings	Retained earnings	195,306		159,765		238,877		Retained earnings	307,536		206,020		195,306
Accumulated other comprehensive gain		—		64		91
Accumulated other comprehensive loss								Accumulated other comprehensive loss	(228)		—		—
Total Shareholders’ Equity	Total Shareholders’ Equity	207,555		165,119		242,765		Total Shareholders’ Equity	324,537		221,504		207,555
		$	1,221,602	$	1,274,878	$	1,394,398		$	1,162,929	$	1,196,837	$	1,221,602

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

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands, except per share amounts)


		Thirteen Weeks Ended																					Thirteen Weeks Ended
		Common Stock			Additional Paid-in Capital			Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Gain								Common Stock					Additional Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Gain (Loss)
																			Shares				Par Value				Shares			Amount					Total
BALANCE, July 30, 2022																						BALANCE, July 30, 2022	125,184		$	1,252		$	508,105	41,297	$	(494,395)	$	282,910		$	5	$	297,877

Net income																						Net income	—		—			—		—	—		24,619			—		24,619
Unrealized losses on marketable securities, net of taxes																						Unrealized losses on marketable securities, net of taxes	—		—			—		—	—		—			(233)		(233)

Issuance of common stock																						Issuance of common stock	3		—			83		—	—		—			—		83
Dividends on common stock																						Dividends on common stock	—		—			—		—	—		7			—		7
Repurchase of common stock & tax withholdings related to share-based awards																						Repurchase of common stock & tax withholdings related to share-based awards	(158)		(2)			(978)		—	—		—			—		(980)
Share-based compensation																						Share-based compensation	—		—			3,164		—	—		—			—		3,164
BALANCE, October 29, 2022																						BALANCE, October 29, 2022	125,029		$	1,250		$	510,374	41,297	$	(494,395)	$	307,536		$	(228)	$	324,537
		Shares	Par Value				Additional Paid-in Capital		Shares			Amount			Retained Earnings					Accumulated Other Comprehensive Gain				Total
BALANCE, July 31, 2021	BALANCE, July 31, 2021	122,565	$	1,226				41,297		$	(494,395)						$	187,086				BALANCE, July 31, 2021	122,565		$	1,226		$	503,168	41,297	$	(494,395)	$	177,077		$	10	$	187,086

Net income	Net income	—	—		—			—		—			18,226		—					18,226		Net income	—		—			—		—	—		18,226			—		18,226
Unrealized losses on marketable securities, net of taxes	Unrealized losses on marketable securities, net of taxes	—	—		—			—		—			—		(10)					(10)		Unrealized losses on marketable securities, net of taxes	—		—			—		—	—		—			(10)		(10)

Issuance of common stock	Issuance of common stock	94	—		(1)			—		—			—		—					(1)		Issuance of common stock	94		—			(1)		—	—		—			—		(1)
Dividends on common stock	Dividends on common stock	—	—		—			—		—			3		—					3		Dividends on common stock	—		—			—		—	—		3			—		3
Repurchase of common stock & tax withholdings related to share-based awards	Repurchase of common stock & tax withholdings related to share-based awards	(150)	(1)		(895)			—		—			—		—					(896)		Repurchase of common stock & tax withholdings related to share-based awards	(150)		(1)			(895)		—	—		—			—		(896)
Share-based compensation	Share-based compensation	—	—		3,147			—		—			—		—					3,147		Share-based compensation	—		—			3,147		—	—		—			—		3,147
BALANCE, October 30, 2021	BALANCE, October 30, 2021	122,509	$	1,225	$	505,419		41,297		$	(494,395)		$	195,306	$	—				$	207,555	BALANCE, October 30, 2021	122,509		$	1,225		$	505,419	41,297	$	(494,395)	$	195,306		$	—	$	207,555

BALANCE, August 1, 2020		119,891	$	1,199	$	495,163		41,297		$	(494,395)		$	294,708	$	123				$	296,798

Net loss		—	—		—			—		—			(55,868)		—					(55,868)
Unrealized losses on marketable securities, net of taxes		—	—		—			—		—			—		(32)					(32)

Issuance of common stock		132	1		160			—		—			—		—					161
Dividends on common stock		—	—		—			—		—			37		—					37
Repurchase of common stock & tax withholdings related to share-based awards		(101)	(1)		(137)			—		—			—		—					(138)
Share-based compensation		—	—		1,807			—		—			—		—					1,807
BALANCE, October 31, 2020		119,922	$	1,199	$	496,993		41,297		$	(494,395)		$	238,877	$	91				$	242,765

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

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands, except per share amounts)


		Thirty-Nine Weeks Ended																					Thirty-Nine Weeks Ended
		Common Stock			Additional Paid-in Capital			Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Gain (Loss)								Common Stock					Additional Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Gain (Loss)
																			Shares				Par Value				Shares			Amount					Total
BALANCE, January 29, 2022																						BALANCE, January 29, 2022	122,526		$	1,225		$	508,654	41,297	$	(494,395)	$	206,020		$	—	$	221,504

Net income																						Net income	—		—			—		—	—		101,512			—		101,512
Unrealized losses on marketable securities, net of taxes																						Unrealized losses on marketable securities, net of taxes	—		—			—		—	—		—			(228)		(228)

Issuance of common stock																						Issuance of common stock	4,258		43			196		—	—		—			—		239
Dividends on common stock																						Dividends on common stock	—		—			—		—	—		4			—		4
Repurchase of common stock & tax withholdings related to share-based awards																						Repurchase of common stock & tax withholdings related to share-based awards	(1,755)		(18)			(8,797)		—	—		—			—		(8,815)
Share-based compensation																						Share-based compensation	—		—			10,321		—	—		—			—		10,321
BALANCE, October 29, 2022																						BALANCE, October 29, 2022	125,029		$	1,250		$	510,374	41,297	$	(494,395)	$	307,536		$	(228)	$	324,537
		Shares	Par Value				Additional Paid-in Capital		Shares			Amount			Retained Earnings					Accumulated Other Comprehensive Gain (Loss)				Total
BALANCE, January 30, 2021	BALANCE, January 30, 2021	119,735	$	1,197				41,297		$	(494,395)						$	165,119				BALANCE, January 30, 2021	119,735		$	1,197		$	498,488	41,297	$	(494,395)	$	159,765		$	64	$	165,119

Net income	Net income	—	—		—			—		—			35,484		—					35,484		Net income	—		—			—		—	—		35,484			—		35,484
Unrealized losses on marketable securities, net of taxes	Unrealized losses on marketable securities, net of taxes	—	—		—			—		—			—		(64)					(64)		Unrealized losses on marketable securities, net of taxes	—		—			—		—	—		—			(64)		(64)

Issuance of common stock	Issuance of common stock	3,242	33		(33)			—		—			—		—					—		Issuance of common stock	3,242		33			(33)		—	—		—			—		—
Dividends on common stock	Dividends on common stock	—	—		—			—		—			57		—					57		Dividends on common stock	—		—			—		—	—		57			—		57
Repurchase of common stock & tax withholdings related to share-based awards	Repurchase of common stock & tax withholdings related to share-based awards	(468)	(5)		(1,872)			—		—			—		—					(1,877)		Repurchase of common stock & tax withholdings related to share-based awards	(468)		(5)			(1,872)		—	—		—			—		(1,877)
Share-based compensation	Share-based compensation	—	—		8,836			—		—			—		—					8,836		Share-based compensation	—		—			8,836		—	—		—			—		8,836
BALANCE, October 30, 2021	BALANCE, October 30, 2021	122,509	$	1,225	$	505,419		41,297		$	(494,395)		$	195,306	$	—				$	207,555	BALANCE, October 30, 2021	122,509		$	1,225		$	505,419	41,297	$	(494,395)	$	195,306		$	—	$	207,555

BALANCE, February 1, 2020		118,418	$	1,184	$	492,129		41,297		$	(494,395)		$	531,602	$	(428)				$	530,092
Cumulative effect of adoption of ASU 2016-13		—	—		—			—		—			(838)		—					(838)
BALANCE, February 1, 2020, as adjusted		118,418	1,184		492,129			41,297		(494,395)			530,764		(428)					529,254
Net loss		—	—		—			—		—			(281,003)		—					(281,003)
Unrealized losses on marketable securities, net of taxes		—	—		—			—		—			—		(61)					(61)
Foreign currency translation adjustment		—	—		—			—		—			—		580					580
Issuance of common stock		1,940	19		393			—		—			—		—					412
Dividends on common stock ($0.09 per share)		—	—		—			—		—			(10,884)		—					(10,884)
Repurchase of common stock & tax withholdings related to share-based awards		(436)	(4)		(1,129)			—		—			—		—					(1,133)
Share-based compensation		—	—		5,600			—		—			—		—					5,600
BALANCE, October 31, 2020		119,922	$	1,199	$	496,993		41,297		$	(494,395)		$	238,877	$	91				$	242,765

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

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CHICO'S FAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


		Thirty-Nine Weeks Ended					Thirty-Nine Weeks Ended
		October 30, 2021		October 31, 2020			October 29, 2022		October 30, 2021
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income (loss)		$	35,484	$	(281,003)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Goodwill and intangible impairment charges		—		113,180
Net income						Net income	$	101,512	$	35,484
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:

Inventory write-offs	Inventory write-offs	374		59,687		Inventory write-offs	826		374
Depreciation and amortization	Depreciation and amortization	39,662		48,536		Depreciation and amortization	33,350		39,662
Non-cash lease expense	Non-cash lease expense	139,116		163,072		Non-cash lease expense	137,184		139,116
Exit of frontline Canada operations		—		498
Right of use asset impairment		—		3,236

Loss on disposal and impairment of property and equipment, net	Loss on disposal and impairment of property and equipment, net	1,432		27,554		Loss on disposal and impairment of property and equipment, net	1,804		1,432
Deferred tax benefit	Deferred tax benefit	190		(18,409)		Deferred tax benefit	(381)		190
Share-based compensation expense	Share-based compensation expense	8,836		5,600		Share-based compensation expense	10,321		8,836

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Inventories	Inventories	(74,129)		(71,004)		Inventories	18,436		(74,129)
Prepaid expenses and other assets	Prepaid expenses and other assets	(13,830)		(2,704)		Prepaid expenses and other assets	(2,591)		(13,830)
Income tax receivable	Income tax receivable	45,015		(49,643)		Income tax receivable	(1,732)		45,015
Accounts payable	Accounts payable	56,503		12,923		Accounts payable	(73,120)		56,503
Accrued and other liabilities	Accrued and other liabilities	16,643		19,097		Accrued and other liabilities	13,583		16,643
Lease liability	Lease liability	(166,990)		(94,500)		Lease liability	(155,561)		(166,990)
Net cash provided by (used in) operating activities		88,306		(63,880)
Net cash provided by operating activities						Net cash provided by operating activities	83,631		88,306
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Purchases of marketable securities	Purchases of marketable securities	(269)		(5,351)		Purchases of marketable securities	(26,376)		(269)
Proceeds from sale of marketable securities	Proceeds from sale of marketable securities	15,753		50,500		Proceeds from sale of marketable securities	3,083		15,753
Purchases of property and equipment	Purchases of property and equipment	(8,246)		(9,537)		Purchases of property and equipment	(21,207)		(8,246)
Proceeds from sale of assets						Proceeds from sale of assets	2,772		—
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(41,728)		7,238
Cash Flows from Financing Activities:						Cash Flows from Financing Activities:

Net cash provided by investing activities		7,238		35,612
Cash Flows from Financing Activities:
Proceeds from borrowings		—		255,500
Payments on borrowings	Payments on borrowings	(50,000)		(149,000)		Payments on borrowings	(30,000)		(50,000)
Payments of debt issuance costs	Payments of debt issuance costs	—		(4,279)		Payments of debt issuance costs	(706)		—
Proceeds from issuance of common stock	Proceeds from issuance of common stock	—		412		Proceeds from issuance of common stock	239		—
Dividends paid		—		(10,701)

Payments of tax withholdings related to share-based awards	Payments of tax withholdings related to share-based awards	(1,877)		(1,133)		Payments of tax withholdings related to share-based awards	(8,815)		(1,877)
Net cash (used in) provided by financing activities		(51,877)		90,799
Effects of exchange rate changes on cash and cash equivalents		—		(6)
Net cash used in financing activities						Net cash used in financing activities	(39,282)		(51,877)

Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	43,667		62,525		Net increase in cash and cash equivalents	2,621		43,667
Cash and Cash Equivalents, Beginning of period	Cash and Cash Equivalents, Beginning of period	90,791		63,972		Cash and Cash Equivalents, Beginning of period	115,105		90,791
Cash and Cash Equivalents, End of period	Cash and Cash Equivalents, End of period	$	134,458	$	126,497	Cash and Cash Equivalents, End of period	$	117,726	$	134,458

Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	Cash paid for interest	$	4,590	$	6,456	Cash paid for interest	$	3,686	$	4,590
Cash received for income taxes, net		$	42,084	$	(45,397)
Cash (paid) received for income taxes, net						Cash (paid) received for income taxes, net	$	(26,426)	$	42,084

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

Table of Contents

CHICO'S FAS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and where otherwise indicated)

(Unaudited)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements of Chico's FAS, Inc., a Florida corporation, and its wholly-owned subsidiaries (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, such interim financial statements reflect all normal, recurring adjustments considered necessary to present fairly the condensed consolidated financial position, the results of operations and cash flows for the interim periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. The fiscal year ended January ~~30, 2021~~29, 2022 balance sheet data was derived from audited consolidated financial statements. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January ~~30, 2021,~~29, 2022, included in the Company's Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021~~29, 2022 filed with the Securities and Exchange Commission ("SEC") on March 9, 15, 2022 ("2021 ~~("2020~~ Annual Report on Form 10-K").

As used in this report, all references to "we," "us," "our", "the Company" and "Chico's FAS," refer to Chico's FAS, Inc. and all of its wholly-owned subsidiaries.

Our fiscal years end on the Saturday closest to January 31 and are designated by the calendar year in which the fiscal year commences. Operating results for the thirteen and thirty-nine weeks ended October ~~30, 2021~~29, 2022 are not necessarily indicative of the results that may be expected for the entire year.

COVID-19 Pandemic Update

The ~~COVID-19~~novel strain of coronavirus (‘‘COVID-19’’) pandemic (the ~~"pandemic"~~‘‘COVID-19 pandemic’’ or the ‘‘pandemic’’) ~~has~~ resulted in significant challenges across our business since March 2020 and is expected to continue to ~~disrupt~~impact our business operations for the ~~balance~~remainder of fiscal ~~2021. Many~~2022 to varying degrees. In response to the pandemic, many of our markets imposed limitations, varying by market and in frequency, on the access to the ~~Company's~~Company’s store fleet, including temporary store closures and/or a reduction in hours, staffing and capacity. We continue to focus on evolving consumer demand emerging from the pandemic and have accelerated our transformation to a digital-first company, fast-tracking numerous innovation and technology investments across all three of our brands. Even as governmental restrictions have relaxed and markets are primarily open, we expect continued uncertainty and volatility on our business operations, operating results and operating cash flows as the ongoing economic impacts and health concerns associated with the pandemic continue to affect consumer behavior, spending levels and shopping preferences and cause disruptions to the supply chain and increase our raw materials and freight costs. Due to the ~~above circumstance,~~uncertainty over the ~~Company’s results~~duration and severity of ~~operations for~~the economic and operational impacts of the pandemic, the adverse impacts of the pandemic may continue throughout our fiscal year 2022.

Reclassifications

Certain reclassifications have been made to the prior period's financial statements to enhance the comparability with the current year's financial statements. As a result, certain line items have been amended in the unaudited condensed consolidated balance sheets to conform to the current period's presentation.

Adoption of New Accounting Pronouncements

There were no new accounting pronouncements adopted by the Company during the thirteen and thirty-nine weeks ended October ~~30, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.~~29, 2022.

~~Use of Estimates~~

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. 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. The pandemic has had a significant material adverse impact on our business operations, operating results and operating cash flows starting in March 2020 and is expected to continue to disrupt our business operations for the balance of fiscal 2021. The Company assessed the impact that the pandemic has had on our estimates, assumptions and accounting policies and made additional disclosures, if and as necessary.

~~Exit of Canada Frontline Operations~~

On July 30, 2020, Chico’s FAS Canada, Co., an immaterial subsidiary of the Company, filed for bankruptcy with the Ontario, Canada office of the Superintendent in Bankruptcy. This action resulted in the permanent closure of 4 Chico’s and 6 White House Black Market ("WHBM") boutiques in Ontario, Canada. The permanent closure of the Canadian boutiques, which constituted all of the Company’s Canadian boutiques, was part of the Company’s cost-savings measures taken to mitigate the impact of the pandemic during fiscal 2020 and address the operational and financial challenges associated with operating in Canada. In connection with this effort, in the second quarter of fiscal 2020, we exited our Canada frontline operations and recorded on a net basis a non-material charge, including the realization of a cumulative foreign currency translation adjustment.

~~Table of Contents~~

~~Adoption of New Accounting Pronouncements~~

~~In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~ ("ASU 2019-12"), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this new guidance in the first quarter of fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on our unaudited condensed consolidated financial statements.

~~In January 2021, the FASB issued ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848)~~ (“ASU 2021-01”). The amendments in ASU 2021-01 provide optional expedients and exceptions for applying Generally Accepted Accounting Principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of the reference rate reform. This guidance is effective upon issuance (January 7, 2021). The Company adopted this new guidance in the first quarter of fiscal 2021. The adoption of ASU 2021-01 did not have a material impact on our unaudited condensed consolidated financial statements.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company currently has no material recent accounting pronouncements yet to be adopted.

~~3. GOODWILL AND INTANGIBLE IMPAIRMENT CHARGES~~

During the thirteen weeks ended May 2, 2020 ("last year's first quarter"), the Company experienced a significant decline in its market capitalization and disruptions to its operations as a result of the pandemic. Consequently, the Company reduced its level of forecasted earnings for fiscal 2020 and future periods across all of its brands. In light of the decline in the Company's stock price and market capitalization, the Company concluded that these factors, among other factors, represented impairment indicators which required the Company to test its goodwill and indefinite-lived intangible assets for impairment during last year's first quarter.

The Company performed its valuation of its goodwill and indefinite-lived intangible assets using a quantitative approach as of April 4, 2020 (the "interim test"), which was the last day in the second month of last year's first quarter. Changes in key assumptions and the resulting reduction in projected future cash flows included in the interim test resulted in a decrease in the fair values of our Chico's and WHBM reporting units such that their fair values were less than their carrying values. As a result, the Company recognized the following pre-tax goodwill impairment charges during the thirty-nine weeks ended October 31, 2020: a charge of $20.0 million at the Chico's reporting unit and a charge of $60.4 million at the WHBM reporting unit. The carrying values of goodwill at the Chico's and WHBM reporting units were $16.4 million and zero, respectively, and are included in goodwill in the accompanying unaudited condensed consolidated balance sheet as of October 31, 2020. In addition, the Company recognized pre-tax impairment charges during the thirty-nine weeks ended October 31, 2020 to write down the carrying values of its other indefinite-lived intangible assets to their fair values as follows: $28.0 million of our WHBM trademark and $4.8 million of our Chico's franchise rights. The carrying values of the trademark and franchise rights were $6.0 million and $0.2 million, respectively, and are included in other intangible assets, net, in the accompanying unaudited condensed consolidated balance sheet as of October 31, 2020. Collectively, these impairment charges are included in goodwill and intangible impairment charges in the accompanying unaudited condensed consolidated statements of income (loss).

The Company evaluated the need to perform an interim impairment test for its goodwill and indefinite-lived intangible assets during the thirteen and thirty-nine weeks ended October 30, 2021 and during the thirteen weeks ended October 31, 2020. We considered macroeconomic, industry-specific and Company-specific factors in addition to the estimates and assumptions used in the most recently completed goodwill and indefinite-lived intangible assets analysis. Based on review of both quantitative and qualitative factors, we determined that we did not have a triggering event that would require an interim impairment test of goodwill and indefinite-lived intangible assets, and accordingly, we did not record any goodwill and intangible impairment charges during the thirteen and thirty-nine weeks ended October 30, 2021 and during the thirteen weeks ended October 31, 2020.

~~Table of Contents~~

~~The following table details the changes in goodwill and other indefinite-lived intangible assets, net:~~
October 30, 2021
Gross Carrying Amount Accumulated Impairment Charge Net Carrying Amount
Goodwill:
Chico's reporting unit $ 36,403 $ (20,043) $ 16,360
WHBM reporting unit 60,371 (60,371) —
$ 96,774 $ (80,414) $ 16,360
Other intangible assets:
WHBM trademark $ 34,000 $ (29,000) $ 5,000
Chico's franchise rights 4,930 (4,930) —
$ 38,930 $ (33,930) $ 5,000
January 30, 2021
Gross Carrying Amount Accumulated Impairment Charge Net Carrying Amount
Goodwill:
Chico's reporting unit $ 36,403 $ (20,043) $ 16,360
WHBM reporting unit 60,371 (60,371) —
$ 96,774 $ (80,414) $ 16,360
Other intangible assets:
WHBM trademark $ 34,000 $ (29,000) $ 5,000
Chico's franchise rights 4,930 (4,930) —
$ 38,930 $ (33,930) $ 5,000
October 31, 2020
Gross Carrying Amount Accumulated Impairment Charge Net Carrying Amount
Goodwill:
Chico's reporting unit $ 36,403 $ (20,043) $ 16,360
WHBM reporting unit 60,371 (60,371) —
$ 96,774 $ (80,414) $ 16,360
Other intangible assets:
WHBM trademark $ 34,000 $ (28,000) $ 6,000
Chico's franchise rights 4,930 (4,766) 164
$ 38,930 $ (32,766) $ 6,164

~~4. LONG-LIVED ASSET IMPAIRMENT CHARGES~~

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. The Company uses market participant rent assumptions to calculate the fair value of right of use ("ROU") assets and discounted future cash flows of the asset or asset group using projected financial information and a discount rate that approximates the cost of capital of a market participant to quantify fair value for other long-lived assets. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores, is primarily at the store level.

~~Table of Contents~~

~~Fiscal 2021 Long-Lived Asset Impairment Charges~~

During the thirteen and thirty-nine weeks ended October 30, 2021, the Company considered whether events or changes in circumstances existed that would indicate the carrying amount of long-lived assets at retail stores may not be recoverable. Based on a review of both quantitative and qualitative factors, only a small number of underperforming stores had triggering events and were assessed for impairment during the thirteen and thirty-nine weeks ended October 30, 2021. Pre-tax impairment charges for long-lived assets at retail stores during the thirteen and thirty-nine weeks ended October 30, 2021 were immaterial.

We recorded $1.2 million in impairment expense during the thirty-nine weeks ended October 30, 2021 related to certain Company-owned real estate which is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of income (loss).

~~We did not record impairment charges related to our operating lease assets during the thirteen and thirty-nine weeks ended October 30, 2021.~~

~~Fiscal 2020 Long-Lived Asset Impairment Charges Related to the Pandemic~~

The Company experienced varying degrees of business disruptions and periods of store closures or reduced operating hours as a result of the pandemic during the thirteen and thirty-nine weeks ended October 31, 2020. In light of the pandemic and lower-than-expected earnings for fiscal 2020 and future periods, the Company concluded that these factors, among other factors, represented impairment indicators which required the Company to test certain of its long-lived assets and operating lease assets for impairment during the thirteen and thirty-nine weeks ended October 31, 2020.

As a result of the impact of the pandemic during the thirteen and thirty-nine weeks ended October 31, 2020, we recorded pre-tax impairment charges of approximately $8.8 million and $27.3 million, respectively, upon completion of our evaluation of long-lived assets, which primarily consisted of leasehold improvements at certain underperforming stores, capitalized implementation costs related to our cloud computing arrangements, and other technology-related assets. For the thirteen weeks ended October 31, 2020, these charges are reflected in the financial statements as $0.4 million in cost of goods sold ("COGS") and $8.4 million in selling, general and administrative ("SG&A") expenses in the accompanying unaudited condensed consolidated statements of income (loss). For the thirty-nine weeks ended October 31, 2020, these charges are reflected in the financial statements as $18.4 million in COGS and $8.9 million in SG&A expenses in the accompanying unaudited condensed consolidated statements of income (loss). These charges reduced the net carrying value of certain long-lived assets to their estimated fair value, as determined using a discounted cash flow model.

As a result of the impact of the pandemic during the thirty-nine weeks ended October 31, 2020, we completed an evaluation of our operating lease assets for indicators of impairment, and consequently, recorded pre-tax impairment charges of approximately $3.2 million, which is included in COGS in the accompanying unaudited condensed consolidated statements of income (loss). We did not record impairment charges related to our operating lease assets during the thirteen weeks ended October 31, 2020.

~~5. INVENTORY~~

We use the moving 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.

We recorded no inventory write-offs for the thirteen weeks and $0.4 million in inventory write-offs for the thirty-nine weeks ended October 30, 2021, which is included in COGS in the accompanying unaudited condensed consolidated statements of income (loss). Inventory adjustments made in ordinary course are presented in inventories in the accompanying unaudited condensed consolidated statements of cash flows.

Inventory write-offs for the thirteen weeks ended October 31, 2020 were $5.4 million. Inventory write-offs for the thirty-nine weeks ended October 31, 2020 were $59.7 million, including $55.4 million in significant inventory write-offs as a result of changes in the market for those inventories and the resulting slowdown in sell through rates due to the impact of the pandemic. These inventory write-offs are included in COGS in the accompanying unaudited condensed consolidated statements of income (loss).

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6.3. REVENUE RECOGNITION

Disaggregated Revenue

The following table disaggregates our operating segment revenue by brand, which we believe provides a meaningful depiction of the nature of our revenue. Amounts shown include licensing and wholesale revenue, which is not a significant component of total revenue, and is aggregated within the respective brands in the table below.


		Thirteen Weeks Ended								Thirty-Nine Weeks Ended									Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		October 30, 2021				October 31, 2020				October 30, 2021				October 31, 2020					October 29, 2022				October 30, 2021				October 29, 2022				October 30, 2021
Chico's	Chico's	$	203,505	44.9	%	$	163,847	46.6	%	$	601,914	45.8	%	$	434,868	46.4	%	Chico's	$	255,341	49.3	%	$	203,505	44.9	%	$	801,584	49.5	%	$	601,914	45.8	%
WHBM	WHBM	138,159		30.4		104,024		29.6		364,250		27.7		270,197		28.8		WHBM	157,451		30.4		138,159		30.4		485,061		30.0		364,250		27.7
Soma	Soma	111,980		24.7		83,545		23.8		347,500		26.5		232,789		24.8		Soma	105,540		20.3		111,980		24.7		331,322		20.5		347,501		26.5

Total Net Sales	Total Net Sales	$	453,644	100.0	%	$	351,416	100.0	%	$	1,313,664	100.0	%	$	937,854	100.0	%	Total Net Sales	$	518,332	100.0	%	$	453,644	100.0	%	$	1,617,967	100.0	%	$	1,313,664	100.0	%

Contract Liability

Contract liabilities in the unaudited condensed consolidated balance sheets are comprised of obligations associated with our gift card and customer loyalty programs. As of October ~~30, 2021,~~29, 2022, January ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, contract liabilities primarily consisted of gift cards of $31.9 million, $43.5 million and $32.4 million, ~~$40.4~~respectively.

For the thirteen and thirty-nine weeks ended October 29, 2022, the Company recognized $7.0 million and ~~$31.5~~$27.0 million, ~~respectively.~~

respectively, of revenue that was previously included in the gift card contract liability as of January 29, 2022. For the thirteen and thirty-nine weeks ended October 30, 2021, the Company recognized $3.0 million and $18.7 million, respectively, of revenue that was previously included in the gift card contract liability as of January 30, 2021. For the thirteen and thirty-nine weeks ended October 31, 2020, the Company recognized $4.1 million and $16.9 million, respectively, of revenue that was previously included in the gift card contract liability as of February 1, 2020. The contract liability for our loyalty program was not material as of October ~~30, 2021,~~29, 2022, January ~~30, 2021~~29, 2022 or October ~~31, 2020.~~30, 2021.

Performance Obligation

For the thirteen and thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, revenue recognized from performance obligations related to prior periods ~~was~~were not material. Revenue to be recognized in future periods related to performance obligations is not expected to be material.

7.4. LEASES

We lease retail stores, a limited amount of office space and certain equipment under operating leases expiring in various years through the fiscal year ending ~~2031.~~2033. All of our leases have been classified as operating leases and are recognized and measured as such.

Certain operating leases provide for renewal options that are at a pre-determined period and rental value. Furthermore, certain leases provide that we may cancel the lease if our retail sales at that location fall below an established level. Within the first few years of the initial lease term, 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. In the normal course of business, operating leases are typically renewed or replaced by other leases.

Escalation of operating lease payments of certain leases depend on an existing index or rate, such as the consumer price index or the market interest rate. These are considered variable lease payments and are included in lease payments when the escalation is known.

The Company deferred substantially all rent payments due in the months of April, May and June 2020 and otherwise made reduced rent payments where and when applicable during fiscal 2020 as a result of the impact of the pandemic. In April 2020, the FASB granted a practical expedient permitting an entity to choose to forgo the evaluation of the enforceable rights and obligations of the original lease contract, specifically in situations where rent concessions have been agreed to with landlords as a result of the pandemic. Instead, the entity may account for pandemic-related rent concessions, whatever their form (e.g. rent deferral, abatement or other) either: a) as if they were part of the enforceable rights and obligations of the parties under the existing lease contract; or b) as lease modifications. During the thirteen and thirty-nine weeks ended October 30, 2021, ~~and October 31, 2020,~~ we received concessions from certain landlords in the form of rent deferrals, rent abatements and other lease or rent modifications as a result of the ongoing impact of the pandemic. In accordance with the practical expedient allowed by the FASB, the Company ~~has~~ elected to treat all pandemic-related rent concessions and related amendments, including pandemic-related lease amendments that extended the lease term, as lease modifications under ASC 842, Leases. In ~~addition, the~~

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addition, the Company continued recording lease expense during deferral periods, as applicable, in accordance with its existing policies.~~The Company made rent payments in accordance with its lease terms during the thirteen and thirty-nine weeks ended October 30, 2021.~~

Operating lease expense was as follows:

Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
Operating lease cost (1)
$ 53,448 $ 58,710 $ 164,195 $ 179,273


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Operating lease cost (1)	$	55,608	$	53,448	$	163,271	$	164,195

(1) ~~For the~~The thirteen and thirty-nine weeks ended October 29, 2022, includes $9.7 million and $28.5 million, respectively, in variable lease costs. The thirteen and thirty-nine weeks ended October 30, 2021, includes $9.5 million and $28.7 million, respectively, in variable lease costs. ~~For the thirteen and thirty-nine weeks ended October 31, 2020, includes $9.8 million and $25.9 million, respectively, in variable lease costs.~~

Supplemental balance sheet information related to operating leases was as follows:


		October 30, 2021			January 30, 2021			October 31, 2020				October 29, 2022			January 29, 2022			October 30, 2021
Right of use assets	Right of use assets	$	494,808		$	586,061		$	582,074		Right of use assets	$	432,018		$	463,077		$	494,808

Current lease liabilities	Current lease liabilities	$	177,563		$	194,551		$	208,351		Current lease liabilities	$	157,687		$	172,506		$	177,563
Long-term lease liabilities	Long-term lease liabilities	415,458			515,797			509,118			Long-term lease liabilities	346,560			381,081			415,458
Total operating lease liabilities	Total operating lease liabilities	$	593,021		$	710,348		$	717,469		Total operating lease liabilities	$	504,247		$	553,587		$	593,021

Weighted Average Remaining Lease Term (years)	Weighted Average Remaining Lease Term (years)	4.1			4.5			4.6			Weighted Average Remaining Lease Term (years)	4.1			4.0			4.1

Weighted Average Discount Rate (1)	Weighted Average Discount Rate (1)	4.5		%	4.9		%	5.5		%	Weighted Average Discount Rate (1)	5.0		%	4.5		%	4.5		%

(1) The incremental borrowing rate used by the Company is based on the rate at which the Company could borrow funds using its credit rating for a collateralized loan of similar term to the lease. The weighted average discount rate represents a weighted average of the incremental borrowing rate for each lease weighted based on the remaining fixed lease obligations.

Supplemental cash flow information related to operating leases was as follows:


		Thirty-Nine Weeks Ended						Thirty-Nine Weeks Ended
		October 30, 2021		October 31, 2020				October 29, 2022		October 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:						Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows	Operating cash outflows	$	166,990	$	94,500	(1)	Operating cash outflows	$	155,561	$	166,990
Right of use assets obtained in exchange for lease obligations, non-cash	Right of use assets obtained in exchange for lease obligations, non-cash	27,510		75,938			Right of use assets obtained in exchange for lease obligations, non-cash	88,484		27,510

~~(1)~~ ~~The Company suspended or deferred rental payments when and where applicable as a result of the impact of the pandemic during the thirteen and thirty-nine weeks ended October 31, 2020.~~

Maturities of operating lease liabilities as of October ~~30, 2021~~29, 2022 were as follows:


Fiscal Year Ending:
January ~~29, 2022~~28, 2023	$	~~52,959~~
~~January 28, 2023~~	~~192,698~~49,988
February 4, 2024	~~149,453~~172,974
February 1, 2025	~~107,390~~128,373
January 31, 2026	~~69,107~~85,693
January 30, 2027	56,845
Thereafter	~~79,291~~74,454
Total future minimum lease payments	$	~~650,898~~568,327
Less imputed interest	~~(57,877)~~(64,080)
Total	$	~~593,021~~504,247

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8.5. SHARE-BASED COMPENSATION

For the thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, share-based compensation expense was ~~$8.8~~$10.3 million and ~~$5.6~~$8.8 million, respectively. As of October ~~30, 2021,~~29, 2022, approximately ~~7.9~~6.8 million shares remain available for future grants of equity awards under our 2020 Omnibus Stock and Incentive Plan.

Restricted Stock Awards

Restricted stock awards vest in equal annual installments over a three-year period from the date of grant, except for a restricted stock award granted to our then Chief Executive Officer in fiscal 2019, which vests over a four-year period from the date of grant, and restricted stock awards granted in March 2021, which vest 50% one year from the date of grant, 30% two years from the date of grant and 20% three years from the date of grant.

Restricted stock award activity for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 was as follows:


		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Unvested, beginning of period	Unvested, beginning of period	3,419,645	$	3.75	Unvested, beginning of period	5,140,240	$	3.18
Granted	Granted	3,730,651	2.96		Granted	2,745,698	4.80
Vested	Vested	(1,498,137)	4.03		Vested	(2,709,403)	3.29
Forfeited	Forfeited	(483,901)	2.89		Forfeited	(532,942)	3.68
Unvested, end of period	Unvested, end of period	5,168,258	3.17		Unvested, end of period	4,643,593	4.01

Restricted Stock Units

Restricted stock units vest 100% one year from the date of grant with certain rights to defer settlement in shares of our common stock, except for restricted stock units granted in March 2021, which vest 50% one year from the date of grant, 30% two years from the date of grant and 20% three years from the date of grant, and restricted stock units granted in March 2022, which vest in equal annual installments over a three-year period from the date of grant.

Restricted stock unit activity for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 was as follows:


		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Unvested, beginning of period	Unvested, beginning of period	163,930	$	2.49	Unvested, beginning of period	647,350	$	2.38
Granted	Granted	500,000	2.56		Granted	47,468	4.74
Vested	Vested	(16,580)	8.75		Vested	(288,600)	2.66

Unvested, end of period	Unvested, end of period	647,350	2.38		Unvested, end of period	406,218	2.46

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Performance-based Restricted Stock Units

During the ~~third quarter,~~thirty-nine weeks ended October 29, 2022, we granted performance-based restricted stock units ("PSUs") contingent upon the achievement of Company-specific performance goals during the three fiscal years ~~2021~~2022 through ~~2023.~~2024. Any units earned as a result of the achievement of the performance goals of the PSUs will vest three years from the date of grant and will be settled in shares of our common stock.

PSU activity for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 was as follows:


		Number of Units/ Shares	Weighted Average Grant Date Fair Value			Number of Units/ Shares	Weighted Average Grant Date Fair Value
Unvested, beginning of period	Unvested, beginning of period	2,782,457	$	2.04	Unvested, beginning of period	3,734,207	$	2.24
Granted	Granted	1,171,170	2.67		Granted	1,127,256	3.90

Vested					Vested	(1,697,130)	1.16
Forfeited	Forfeited	(209,420)	2.10		Forfeited	(489,106)	3.10
Unvested, end of period	Unvested, end of period	3,744,207	2.23		Unvested, end of period	2,675,227	3.46

9.6. INCOME TAXES

The provision for income taxes is based on a current estimate of the annual effective tax rate and is adjusted as necessary for quarterly events. Our effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in our assessment of certain tax contingencies, valuation allowances, changes in tax law, outcomes of administrative audits, the impact of discrete items and the mix of earnings across jurisdictions.

For the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, the Company's effective tax rate was ~~9.9%~~19.3% and ~~26.9%~~9.9%, respectively. The effective tax rate of 19.3% for the thirteen weeks ended October 29, 2022 primarily reflects a fiscal 2021 provision to return benefit resulting from changes in estimates due to the reversal of a valuation allowance related to fiscal 2021 temporary differences. The 9.9% effective tax rate for the thirteen weeks ended October 30, 2021 primarily reflects a change in estimate from the second quarter of fiscal 2021 due to an increase in annual projected deferred tax assets on which a full valuation allowance ~~exists,~~existed, offset by a fiscal 2020 ~~fiscal~~ provision to return benefit resulting from changes in estimates due to the reversal of a valuation allowance related to fiscal 2020 temporary differences and the rate differential provided by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The 26.9% effective tax rate for the thirteen weeks ended October 31, 2020 includes the annual benefit of the fiscal 2020 pre-tax loss due to the CARES Act, which was slightly offset by the impact of nondeductible book goodwill impairment charges.

For the thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, the Company's effective tax rate was ~~20.9%~~23.2% and ~~28.7%~~20.9%, respectively. The effective tax rate of 23.2% for the thirty-nine weeks ended October 29, 2022 primarily reflects a fiscal 2021 provision to return benefit due to the reversal of a valuation allowance related to fiscal 2021 temporary differences and a favorable share-based compensation benefit. The 20.9% effective tax rate for the thirty-nine weeks ended October 30, 2021 primarily reflects an annual projected deferred tax assets on which a full valuation allowance ~~exists,~~existed, offset by a fiscal 2020 ~~fiscal~~ provision to return benefit due to the reversal of a valuation allowance related to fiscal 2020 temporary differences, the rate differential provided by the CARES Act and favorable state audit settlements. The 28.7% effective tax rate for the thirty-nine weeks ended October 31, 2020 was primarily impacted by the benefits provided by the enactment of the CARES Act, which was reduced by the unfavorable impact of the Company’s book goodwill impairment, a valuation allowance on certain state tax credit carryforwards that are expected to expire unutilized and share-based compensation expense.

As of October ~~30, 2021,~~29, 2022, our unaudited condensed consolidated balance sheet reflected ~~a $10.4~~an $11.4 million income tax receivable ~~after collection of $50.0 million during the thirty-nine weeks ended October 30, 2021,~~ related to the recovery of Federal income taxes paid in prior years and other tax law changes as a result of the CARES Act.

~~10.~~7. INCOME ~~(LOSS)~~ 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 income ~~(loss)~~ per common share pursuant to the "two-class" method. For the Company, participating securities are comprised entirely of unvested restricted stock awards granted prior to fiscal 2020.

Net income ~~(loss)~~ per share is determined using the two-class method when it is more dilutive than the treasury stock method. Basic net income ~~(loss)~~ per share is computed by dividing net income ~~(loss)~~ available to common shareholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted net income ~~(loss)~~ per share reflects the dilutive effect of potential common shares from non-participating securities such as restricted stock awards granted after fiscal 2019, stock options, PSUs and restricted stock units.

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The following table sets forth the computation of net income ~~(loss)~~ per basic and diluted share shown on the face of the accompanying condensed consolidated statements of ~~income (loss):~~income:


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021

Numerator	Numerator									Numerator
Net income (loss)		$	18,226	$	(55,868)	$	35,484	$	(281,003)
Net income and dividends declared allocated to participating securities		(123)		—		(313)		(173)
Net income (loss) available to common shareholders		$	18,103	$	(55,868)	$	35,171	$	(281,176)
Denominator
Net income										Net income	$	24,619	$	18,226	$	101,512	$	35,484
Net income allocated to participating securities										Net income allocated to participating securities	(47)		(123)		(370)		(313)
Net income available to common shareholders										Net income available to common shareholders	$	24,572	$	18,103	$	101,142	$	35,171
Denominator (000's)										Denominator (000's)
Weighted average common shares outstanding – basic	Weighted average common shares outstanding – basic	117,304,112		116,174,306		117,004,683		115,886,832		Weighted average common shares outstanding – basic	120,333		117,304		119,776		117,005
Dilutive effect of non-participating securities	Dilutive effect of non-participating securities	5,862,125		—		4,891,986		—		Dilutive effect of non-participating securities	4,554		5,862		4,239		4,892
Weighted average common and common equivalent shares outstanding – diluted	Weighted average common and common equivalent shares outstanding – diluted	123,166,237		116,174,306		121,896,669		115,886,832		Weighted average common and common equivalent shares outstanding – diluted	124,887		123,166		124,016		121,897
Net income (loss) per common share:
Net income per common share:										Net income per common share:
Basic	Basic	$	0.15	$	(0.48)	$	0.30	$	(2.43)	Basic	$	0.20	$	0.15	$	0.84	$	0.30
Diluted	Diluted	$	0.15	$	(0.48)	$	0.29	$	(2.43)	Diluted	$	0.20	$	0.15	$	0.82	$	0.29

For the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020,~~30, 2021, 0.1 million and ~~2.4~~0.1 million potential shares of common stock, respectively, were excluded from the diluted income ~~(loss)~~ per common share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

For the thirty-nine weeks ended October 29, 2022 and October 30, 2021, ~~and October 31, 2020, 0.2~~0.1 million and ~~2.2~~0.2 million potential shares of common stock, respectively, were excluded from the diluted income ~~(loss)~~ per common share calculation relating to non-participating securities, because the effect of including these potential shares was antidilutive.

~~11.~~8. FAIR VALUE MEASUREMENTS

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

Marketable securities are classified as available-for-sale and as of October ~~30, 2021 generally consist~~29, 2022, consisted of ~~corporate bonds, commercial paper,~~ U.S. government agencies, corporate bonds and ~~municipal securities,~~commercial paper, with ~~$3.0~~$13.8 million of securities with maturity dates within one year or less and no$9.2 millionwith maturity dates over one year.

We consider all marketable securities available-for-sale, including those with maturity dates beyond 12 months, and therefore classify these securities within current assets on the unaudited condensed consolidated balance sheets, as applicable, as they ~~are~~were available to support current operational liquidity needs. Marketable securities are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected in accumulated other comprehensive gain until realized, and any credit risk related losses recognized in net income ~~(loss)~~ during the period incurred. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.

Fair value is defined as the price that would be received to sell an ~~asset~~a set 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.

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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

Assets Measured on a Recurring Basis

We measure certain financial assets at fair value on a recurring basis, including our marketable securities, as applicable, 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.~~plan, as applicable. 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 unaudited condensed consolidated balance sheets.

Assets Measured on a Nonrecurring Basis

From time to time, we measure certain assets at fair value on a nonrecurring basis when carrying value exceeds fair value. 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. Assets that are measured at fair value on a nonrecurring basis are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value.

We assess the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses market participant rents and a market participant discount rate to calculate the fair value of ROU assets. The Company uses discounted future cash flows of the asset or asset group using a discount rate that approximates the cost of capital of a market participant to quantify fair value for other long-lived assets within the asset group, which are primarily leasehold improvements. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail stores, is primarily at the store level.

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

~~Table~~As of ~~Contents~~

~~The following tables present quantitative information about Level 3 significant unobservable inputs for the WHBM trademark, long-lived assets~~October��29, 2022, January 29, 2022 and ~~operating lease assets at retail stores for impairment charges incurred during the periods indicated.~~

~~Thirty-Nine Weeks Ended October 31, 2020~~

~~Valuation Technique~~

~~Unobservable Input~~

~~Range (Weighted Average)~~

~~WHBM Trademark~~

~~Relief from royalty~~

~~Weighted-average cost of capital~~

~~11% to 13%~~

~~Long-term revenue growth rate~~

~~-2.5% to 0%~~

~~Long-lived assets and operating lease assets at retail stores~~ ~~(1)~~

~~Discounted cash flow~~

~~Weighted-average cost of capital~~

~~9.5% to 11.5%~~

~~Long-term revenue growth rate~~

~~-10% to 15%~~

~~(1)~~ ~~Specifically relates to only those locations which had impairment charges related to the pandemic during fiscal 2020.~~

~~Fifty-Two Weeks Ended January 30, 2021~~

~~Valuation Technique~~

~~Unobservable Input~~

~~WHBM Trademark~~

~~Relief from royalty~~

~~Weighted-average cost of capital~~

~~13% to 15%~~

~~Long-term revenue growth rate~~

~~-1% to 16%~~

~~Long-lived assets at retail stores and operating lease assets~~ ~~(1)~~

~~Discounted cash flow~~

~~Weighted-average cost of capital~~

~~11% to 13%~~

~~Long-term revenue growth rate~~

~~2% to 53%~~

~~(1)~~ ~~Specifically relates to only those locations which had impairment charges related to the pandemic during fiscal 2020.~~

~~As of~~ October 30, 2021, ~~January 30, 2021 and October 31, 2020,~~ our revolving loan and letter of credit facility approximates fair value as this instrument has a variable interest rate which approximates current market rates (Level 2 criteria).

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. The most sensitive assumptions in our estimates include short and long-term revenue recoverability rates as a result of the pandemic, which could impact future impairment charges.

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 and nonrecurring basis, based on the priority of the inputs to the valuation technique for the instruments, as follows:

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				Fair Value Measurements at the End of the Reporting Date Using							Thirty-Nine Weeks Ended October 30, 2021					Fair Value Measurements at the End of the Reporting Date Using
		Balance as of October 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Impairment (1)			Balance as of October 29, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements:	Recurring fair value measurements:												Recurring fair value measurements:
Current Assets	Current Assets												Current Assets
Cash equivalents:	Cash equivalents:												Cash equivalents:
Money market accounts	Money market accounts	$	22,388	$	22,388	$	—	$	—				Money market accounts	$	42,596	$	42,596	$	—	$	—
Marketable securities:	Marketable securities:												Marketable securities:
U.S. government agencies													U.S. government agencies	3,479		—		3,479		—
Corporate bonds	Corporate bonds	3,006		—		3,006		—					Corporate bonds	10,709		—		10,709		—
Commercial paper													Commercial paper	8,829		—		8,829		—

Deferred compensation plan													Deferred compensation plan	4,776		4,776		—		—
Total recurring fair value measurements													Total recurring fair value measurements	$	70,389	$	47,372	$	23,017	$	—

																Fair Value Measurements at the End of the Reporting Date Using
														Balance as of January 29, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements:													Recurring fair value measurements:
Current Assets													Current Assets
Cash equivalents:													Cash equivalents:
Money market accounts													Money market accounts	$	25,396	$	25,396	$	—	$	—

Noncurrent Assets	Noncurrent Assets												Noncurrent Assets
Deferred compensation plan	Deferred compensation plan	6,317		6,317		—		—					Deferred compensation plan	6,233		6,233		—		—
Total recurring fair value measurements	Total recurring fair value measurements	$	31,711	$	28,705	$	3,006	$	—				Total recurring fair value measurements	$	31,629	$	31,629	$	—	$	—

				Fair Value Measurements at the End of the Reporting Date Using							Fifty-Two Weeks Ended January 30, 2021					Fair Value Measurements at the End of the Reporting Date Using
		Balance as of January 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Impairment			Balance as of October 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements:	Recurring fair value measurements:												Recurring fair value measurements:
Current Assets	Current Assets												Current Assets
Cash equivalents:	Cash equivalents:												Cash equivalents:
Money market accounts	Money market accounts	$	36,809	$	36,809	$	—	$	—				Money market accounts	$	22,388	$	22,388	$	—	$	—
Marketable securities:	Marketable securities:												Marketable securities:

Corporate bonds	Corporate bonds	18,559		—		18,559		—					Corporate bonds	3,006		—		3,006		—

Noncurrent Assets	Noncurrent Assets												Noncurrent Assets
Deferred compensation plan	Deferred compensation plan	8,993		8,993		—		—					Deferred compensation plan	6,317		6,317		—		—
Total recurring fair value measurements	Total recurring fair value measurements	$	64,361	$	45,802	$	18,559	$	—				Total recurring fair value measurements	$	31,711	$	28,705	$	3,006	$	—
Nonrecurring fair value measurements:
Noncurrent Assets
Goodwill		$	16,360	$	—	$	—	$	16,360		$	(80,414)
Trademark		5,000		—		—		5,000			(29,000)
Long-lived assets		7,090		—		5,990		1,100		(2)	(29,669)
Operating lease assets		88,488		—		—		88,488		(2)	(4,795)
Total nonrecurring fair value measurements		$	116,938	$	—	$	5,990	$	110,948		$	(143,878)

				Fair Value Measurements at the End of the Reporting Date Using							Thirty-Nine Weeks Ended October 31, 2020
		Balance as of October 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Impairment
Recurring fair value measurements:
Current Assets
Cash equivalents:
Money market accounts		$	36,678	$	36,678	$	—	$	—
Marketable securities:

Corporate bonds		18,667		—		18,667		—

Noncurrent Assets
Deferred compensation plan		7,902		7,902		—		—
Total recurring fair value measurements		$	63,247	$	44,580	$	18,667	$	—

Nonrecurring fair value measurements:
Noncurrent Assets

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Goodwill $ 16,360 $ — $ — $ 16,360 $ (80,414)
Trademark 6,000 — — 6,000 (28,000)
Long-lived assets 7,161 — 5,990 1,171 (2) (27,307)
Operating lease assets 88,942 — — 88,942 (2) (3,236)
Total nonrecurring fair value measurements $ 118,463 $ — $ 5,990 $ 112,473 $ (138,957)

~~(1)~~ Impairment charges for assets evaluated for impairment on a nonrecurring basis were not material during the thirty-nine weeks ended October 29, 2022 and October 30, ~~2021.~~

~~(2)~~ ~~The fair value of $1.1 million, $88.5 million, $1.2 million~~2021 and ~~$88.9 million specifically relates to only those locations which had asset impairment charges related to~~for the ~~pandemic.~~fifty-two weeks ended January 29, 2022.

~~12.~~9. DEBT

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Loans drawn under the ABL is equal to ~~2.25%~~Term SOFR plus 1.60% (subject to a further decrease to Term SOFR plus 1.35% or an increase to ~~2.50%~~Term SOFR plus 1.85% based upon average quarterly excess availability under the ABL)~~, with a LIBOR floor of 75 basis points.~~. The Credit Agreement also provides for a $15.0 million first-in last-out ("FILO") loan. The interest rate applicable to the FILO is equal to atTerm SOFR plus 3.60% (subject to a further decrease to Term SOFR plus 3.35% or an increase to Term SOFR plus 3.85% based on average quarterly excess availability under the ~~Company's option, either~~FILO). However, for any ABL or FILO with a ~~base~~SOFR interest rate ~~determined by reference~~period of six months, the interest rate applicable to the ~~federal funds rate, or a LIBOR with a floor of 75~~ABL and FILO is increased by 30 basis points, plus in each case an interest rate margin of 4.5%. The Company expects borrowings to be at a LIBOR, plus an interest rate margin of 4.5%. The FILO includes a prepayment penalty equal to 1.0% in the first year, 0.5% in the second year and none thereafter. The FILO can only be prepaid if there are no outstanding borrowings under the ABL. In addition, the Company will pay a commitment fee per annum on the unused portion of the commitments under the Agreement.points.

The Credit Agreement contains customary representations, warranties, and affirmative covenants, as well as customary negative covenants, that, among other things restrict, subject to certain exceptions, the ability of the Company and certain of its domestic subsidiaries to: (i) incur liens, (ii) make investments, (iii) issue or incur additional indebtedness, (iv) undergo significant corporate changes, including mergers and acquisitions, (v) make dispositions, (vi) make restricted payments, (vii) prepay other indebtedness and (viii) enter into certain other restrictive agreements. The Company may pay cash dividends and repurchase shares under its share buyback program, subject to certain thresholds of available borrowings based upon the lesser of the aggregate amount of commitments under the Credit Agreement and the borrowing base, determined after giving effect to any such transaction or payment, on a pro forma basis. In addition, the Company must pay a commitment fee per annum on the unused portion of the commitments under the Credit Agreement.

As of October ~~30, 2021, our outstanding debt consisted of $99.0~~29, 2022, $69.0 million in net borrowings were outstanding under the Credit Agreement. Availability under the Credit Agreement is determined based upon a monthly borrowing base calculation which includes eligible credit card receivables, real estate and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As of October ~~30, 2021,~~29, 2022, the available additional borrowing capacity under the Credit Agreement was approximately ~~$166.0~~$188.0 million, inclusive of ~~$29.3 million~~the current loan cap of ~~excess availability.~~$30.0 million.

As of October ~~30, 2021,~~29, 2022, deferred financing costs of ~~$3.7~~$3.5 million ~~was~~were outstanding related to the Credit Agreement and is presented in other current assets in the accompanying unaudited condensed consolidated balance sheet.

~~13.~~10. COMMITMENTS AND CONTINGENCIES

In February 2021, the Company was named as a defendant in Mercedes Haldy, et al. v. White House Black Market, Inc. ~~(“WHBM”~~(‘‘WHBM’’), et al., a putative class action filed in the Superior Court of California, Orange County, and subsequently removed to the United States District Court, Central District of California ~~(“Haldy”~~(‘‘Haldy’’). The Haldy complaint ~~alleges~~alleged numerous violations of California law related to payment of wages and other compensation, meal periods, rest periods, and wage statements, among other things. Plaintiff ~~seeks~~sought to represent a class of current and former nonexempt employees of WHBM and Chico’s stores in California.

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In August 2021, the Company was named as a defendant in Margarita Hernandez v. Chico’s FAS, Inc., et al., a putative class action filed in the Superior Court of California, Orange County seeking to represent a class of current and former nonexempt employees of Chico’s, WHBM and Soma stores in California ~~(“Hernandez”~~(‘‘Hernandez’’). The Hernandez complaint ~~alleges~~alleged many of the same wage and labor violations as the Haldy complaint ~~described above,~~ and ~~seeks~~sought the same relief.

During a mediation in September 2021, the Company reached an agreement in principle to settle the above cases. A Memorandum of Understanding was entered into by all parties as of October 18, ~~2021. A~~2021 and a full settlement agreement ~~has been drafted and is being finalized for execution~~was executed by all ~~parties. Based on~~parties as of January 10, 2022. On May 19, 2022, the ~~foregoing,~~Superior Court of California entered an Order granting the parties' unopposed motion for preliminary approval of the class settlement, and set October 14, 2022 as the hearing date for final approval of the settlement. On October 25, 2022, the Court issued an Order Granting Final Approval of the Settlement and the Company ~~does not expect that~~considers the above cases to be resolved. Subsequent to October 29, 2022 the settlement amount was timely transferred to the fund administrator for distribution to participating class members. The resolution of these cases ~~will have a material adverse effect on its results of operations or consolidated financial statements, but if a settlement agreement is~~did not ~~executed or is not approved by the court, the ultimate resolution of these cases could~~ have a material adverse effect on the Company’s business, results of operations or consolidated financial statements.

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 our 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 other matters as of October ~~30, 2021~~29, 2022 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.

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ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q ("this Form 10-Q") and in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2021,~~29, 2022, filed with the Securities and Exchange Commission ("SEC") on March 9, 15, 2022 ("2021 ~~("2020~~ Annual Report on Form 10-K").

Executive Overview

Chico’s FAS is a Florida-based fashion company founded in 1983 on Sanibel Island, Florida. The Company reinvented the fashion retail experience by creating fashion communities anchored by service, which put the customer at the center of everything we do. As one of the leading fashion retailers in North America, Chico’s FAS is a company of three unique brands - Chico’s®, White House Black Market®("WHBM") and Soma® - each thriving in their own white space, founded by women, led by women, providing solutions that millions of women say give them confidence and joy. We sometimes refer to our Chico’s and WHBM brands collectively as our "Apparel Group." Our distinct lifestyle brands serve the needs of fashion-savvy women ~~35 years and older.~~with household incomes in the moderate to high income level. We earn revenue and generate cash through the sale of merchandise in our domestic ~~and international~~ retail stores, our various Company-operated e-commerce websites, social commerce, our call center (which takes orders for all of our brands), and through unaffiliated franchise ~~partners and through third-party channels.~~partners.

We utilize an integrated, omnichannel approach to managing our business. We want our customers to experience our brands holistically and to view the various ~~retail~~commerce 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.

Our growth strategy is supported by the "power of three" unique brands and the "power of three" commerce channels. Our physical stores serve as community centers for entertainment, self-discovery and a home for interactions with our store associate stylists and bra experts. Our digital stores serve as a first impression of our brands and an efficient platform to teach and inspire our customers about our merchandise. Our social brand ambassadors, which are a combination of store associates, social media platform hosts and hyperlocal social stylists who arrange events within their communities, are an additional connection between our physical stores and digital.

Business Highlights

~~Company~~The Company's highlights for the thirteen weeks ended October ~~30, 2021~~29, 2022 (the "third quarter") include:

•~~Robust results:~~ Consistent strong results: Chico's FAS ~~continued its profitable growth, posting $0.15~~posted $0.20 net income per diluted share for the third quarter, ~~compared to a $0.48 net loss per diluted share for~~driven by strong comparable sales growth and selling, general and administrative expenses (“SG&A”) leverage. This performance was more than 30% over the thirteen weeks ended October ~~31, 2020 ("~~30, 2021 (“last ~~year's~~year’s third ~~quarter"~~quarter”) and ~~a $0.07 net loss per diluted share for~~ the ~~thirteen weeks ended November 2, 2019 (the "third~~seventh consecutive quarter of ~~fiscal 2019"; as a pre-pandemic reference). The current quarter~~year-over-year double-digit earnings ~~represent the best third quarter performance since 2016.~~growth.

•~~Continued improving~~Powerful portfolio performance: For the third quarter, total Chico’s FAS net sales ~~performance at Chico's:~~ ~~Comparable~~grew 14.3% and comparable sales ~~at Chico's~~ increased ~~23.3% over~~16.5% versus last ~~year's~~year’s third ~~quarter. Chico's continued to benefit from elevated product styling~~quarter, led by the Company’s apparel brands. Chico’s and ~~quality enhancements,~~WHBM comparable sales grew 28.8% and ~~customers particularly responded enthusiastically to denim, wovens and sweaters. Inventories remained lean, which fueled high productivity and increased full-price sales~~17.0%, respectively, in the third quarter versus last year’s third quarter.

•~~Continued improving~~Solid operating income growth: Third quarter income from operations was $31.6 million, or 6.1% of net sales, ~~performance at White House Black Market ("WHBM"):~~ ~~Comparable sales at WHBM grew 33.4% over last year's third quarter. WHBM continued~~compared to benefit from elevated quality and product enhancements, and customers particularly responded to denim and new jacket silhouettes. Inventories remained lean, which fueled high productivity and increased full-price$22.0 million, or 4.9% of net sales, in ~~the quarter.~~

•~~Continued exceptional~~last year’s third quarter, driven by strong sales growth ~~at Soma:~~ ~~Soma posted a 30.2% comparable sales increase over last year's third quarter~~ and a remarkable 43.5% comparable sales increase over the third quarter of fiscal 2019. Data from market research firm NPD Group Inc. shows that Soma’s growth continues to outpace the market in non-sport bras, panties and sleepwear. Management believes this research, along with Soma’s recent performance, is a clear indication that Soma is well positioned to continue capturing additional market share and grow into a billion dollar brand.

•~~Enhanced marketing continued to drive traffic as well as new customers:~~ Chico's FAS continued to elevate its marketing efforts, allocating more resources to digital storytelling, influencers and other social efforts. These enhanced marketing initiatives are driving more customers to our brands, with our total customer count up nearly 8% from the third quarter last year, and their average age continues to trend younger than existing customers.SG&A leverage, partially offset by higher raw material costs.

•Strong balance sheet:The Company ended the third quarter with ~~more than $137~~$140.7 million in cash and marketable securities, ~~even~~ after repaying ~~$50~~$30.0 million of long-term debt during the quarter.

•~~Improved gross margin:~~ Marketing drove traffic and new customers~~The third gross margin rate rose~~: Chico's FAS continued to ~~40.7%,~~elevate its marketing, focusing more resources on digital. Strategic marketing efforts continue to drive more customers to the ~~best~~Company’s brands, with total year-over-year customer count up high-single digits, spend per customer up over last year’s third quarter ~~performance since fiscal 2014, driven by higher full-price sales, less promotional activity, strategic inventory management~~ and ~~improved leverage~~the average age of ~~occupancy costs on higher sales, partially offset by increases in raw materials~~new customers continuing to trend younger.

•New loyalty programs exceeding expectations: For the third quarter, enrollment, customer sentiment, and ~~freight costs.~~redemption rates continue to exceed expectations.

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•~~Continued cost discipline:~~ Selling, general and administrative ("SG&A") expenses declined to 35.8% of net sales for the third quarter, an improvement over the third quarter rates of both fiscal 2020 and 2019, reflecting the impact of cost savings initiatives put in place in prior years, continued cost discipline efforts and sales leverage.

•~~Obtained additional rent reductions:~~ In the first nine months of fiscal 2021, Chico's FAS obtained approximately $22 million in incremental savings from landlords. This is in addition to the $65 million of reductions and abatements negotiated during fiscal 2020, for a total savings of $87 million. We believe these renegotiated store leases will provide an occupancy tailwind and will further enhance store profitability.

Financial Results

Income per diluted share for the third quarter was ~~$0.15~~$0.20 compared to ~~loss~~income per diluted share of ~~$0.48~~$0.15 for last year's third quarter. Results for ~~the~~last year's third quarter include the unfavorable impact of litigation settlement charges of approximately $4 million, after-tax. ~~Results for last year's third quarter included the after-tax impact of impairment charges of approximately $6 million as a result of the coronavirus ("COVID-19") pandemic (the "pandemic").~~

Income per diluted share for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 was ~~$0.29~~$0.82 compared to ~~loss~~income per diluted share of ~~$2.43~~$0.29 for ~~the~~ thirty-nine weeks ended October ~~31, 2020.~~30, 2021. Results for the thirty-nine weeks ended October 30, 2021 include the unfavorable impact of litigation settlement charges of approximately $4 million, after-tax. ~~Results for the thirty-nine weeks ended October 31, 2020 includes the after-tax impact of impairment charges and inventory write-offs of approximately $154 million as a result of the pandemic.~~

Select Financial Results

The following table depicts select financial results for the thirteen and thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:

Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020
(in millions, except per share amounts)
Net sales $ 454 $ 351 $ 1,314 $ 938
Significant non-cash charges (1):
Inventory write-offs (2)
— — — 55
Long-lived store asset impairment (2)(3)
— — — 18
Right of use asset impairment (2)
— — — 2
Other long-lived asset impairment (2)(4)
8 8
Goodwill impairment (2)
— — — 80
Indefinite-lived asset impairment (2)
— — — 33
Income (loss) from operations 22 (76) 50 (393)
Net income (loss) 18 (56) 35 (281)
Net income (loss) per common and common equivalent share - diluted 0.15 (0.48) 0.29 (2.43)

~~(1)~~ ~~All significant charges relate to the impact of the pandemic. Less significant charges that may have been incurred are not reflected in the table above.~~

~~(2)~~ ~~Presented pre-tax.~~

~~(3)~~ ~~Primarily includes impairment on leasehold improvements at certain underperforming stores.~~

~~(4)~~ ~~Includes impairment on capitalized implementation costs related to our cloud computing arrangements and other technology-related assets.~~


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
	(in millions, except per share amounts)
Net sales	$	518	$	454	$	1,618	$	1,314

Income from operations	32		22		135		50
Net income	25		18		102		35
Net income per common and common equivalent share - diluted	0.20		0.15		0.82		0.29

Current Trends

The novel strain of coronavirus (‘‘COVID-19’’) pandemic (the ‘‘pandemic’’) has resulted in significant challenges across our business starting in March 2020 and is expected to continue to ~~disrupt~~impact our business operations ~~for~~in fiscal 2022 to varying degrees. In response to the ~~balance~~pandemic, many of ~~fiscal 2021. Many~~our markets imposed limitations, varying by market and in frequency, on the access to the ~~Company's~~Company’s store fleet, including temporary store closures and/or a reduction in hours, staffing and capacity. We continue to focus on evolving consumer demand emerging from the pandemic experience and have accelerated our transformation to a digital-first company, fast-tracking numerous innovation and technology investments across all three of our brands. ~~Even as governmental~~

While most government and health authority restrictions ~~become relaxed and markets are primarily open,~~have lifted, we expect continued uncertainty and volatility on our business operations, operating results and operating cash flows as the ongoing ~~economic~~

~~Table~~macro challenges of ~~Contents~~

~~impacts~~the pandemic, supply chain, economic uncertainty and health concerns associated with the pandemic and war in Ukraine continue to affect, among other things, consumer behavior, spending levels and shopping preferences.

Overall economic uncertainty is also affecting consumer behavior. Consumers are experiencing an overall increase in the cost of living and are shifting their spending habits away from discretionary items. In particular, the rise in fuel and grocery costs has had a widespread impact on how consumers are prioritizing their spending. Inflation caused by the pandemic and geopolitical conditions, such as the war in Ukraine, also has contributed to economic concerns including cost of raw materials and products, fuel and freight costs, and labor costs, and is also affecting consumer confidence and spending habits.

The Company remains confident that it currently has sufficient liquidity to repay its obligations as they become due for the foreseeable future as the Company continues to drive operational efficiency and effectiveness, including ~~executing on~~ongoing expense management and actively managing its ~~cost saving initiatives announced in fiscal 2020~~inventory positions and production calendar to mitigate the macro challenges of the ~~pandemic.~~pandemic, supply chain and economic uncertainty. However, the extent to which the pandemic, geopolitical events and overall economic uncertainty caused by the same impacts our business operations, financial results, and liquidity will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the ~~pandemic;~~pandemic, rising inflation and/or geopolitical conditions; our response to and ability to mitigate the ~~impact~~impacts of the ~~pandemic;~~pandemic, inflation and geopolitical conditions; the negative impact the pandemic, ~~has~~inflation and geopolitical conditions have on global and regional economies and economic activity, including the duration and magnitude of ~~its impact~~their impacts on unemployment rates and consumer discretionary ~~spending; its~~spending, among other items; their short- and longer-term impact on the levels of consumer confidence; the ability of our suppliers, vendors and customers to successfully address the impacts of the ~~pandemic;~~pandemic, inflation and geopolitical conditions; supply chain disruptions; actions governments, businesses and individuals take in response to the ~~pandemic;~~pandemic, inflation and geopolitical conditions; how quickly economies recover after the pandemic, ~~subsides.~~

~~Exit of Canada Frontline Operations~~

On July 30, 2020, Chico’s FAS Canada, Co., an immaterial subsidiary of the Company, filed for bankruptcy with the Ontario, Canada office of the Superintendent in Bankruptcy. This action resulted in the permanent closure of four Chico’sinflation and six WHBM boutiques in Ontario, Canada. The permanent closure of the Canadian boutiques, which constituted all of the Company’s Canadian boutiques, is part of the Company’s ongoing cost-savings measures takengeopolitical conditions subside, if at all; and our response to and ability to mitigate the impact of ~~the pandemic and address the operational and financial challenges associated with operating in Canada. In connection with this effort, in the second quarter~~heightened concerns over a possible recession.

Table of ~~fiscal 2020, we exited our Canada frontline operations and recorded on a net basis a non-material charge, including the realization of a cumulative foreign currency translation adjustment.~~Contents

Fiscal ~~2021~~2022 Fourth Quarter and Full Year Outlook

For the fiscal ~~2021~~2022 fourth quarter, the Company currently expects:

•Consolidated net sales of ~~$495~~$535 million to ~~$510~~$555 million;

•Gross margin rate as a percent of net sales of ~~33.0%~~35.4% to ~~34.5%~~35.8%;

•SG&A ~~expenses~~ as a percent of net sales of ~~32.3%~~32.7% to ~~32.8%~~33.2%;

•Effective income tax rate of ~~33.0%~~25.0%; and

•Earnings per diluted share of ~~$0.00~~$0.07 to ~~$0.05.~~$0.10.

For the fiscal 2022 full year, the Company currently expects:

•Consolidated net sales of $2,153 million to $2,173 million;

•Gross margin rate as a percent of net sales of 39.2% to 39.3%;

•SG&A as a percent of net sales of 32.3% to 32.4%;

•Effective income tax rate of 23.0%;

•Earnings per diluted share of $0.89 to $0.92; and

•Capital and cloud-based expenditures of approximately $65 million to $70 million.

Key Performance Indicators

In assessing the performance of our business, we consider a variety of key performance and financial measures to evaluate our business, develop financial forecasts and make strategic decisions. These key measures include comparable sales, gross margin as a percent of sales, diluted income ~~(loss)~~ per share and return on net assets ("RONA"). In light of the pandemic, we have shifted our focus to effectively manage our liquidity position, including aligning our operating cost structure with expected sales. We will continue to evaluate our other key performance and financial measures in addition to our liquidity position. The following describes these measures.

Liquidity

Liquidity is measured through cash flow, which is the measure of cash provided by or used in operating, investing and financing activities. We believe that as a result of the Company’s extensive measures to mitigate the impact of the pandemic discussed above, we were able to, and continue to, effectively manage our liquidity position.

Comparable Sales

Comparable sales is an omnichannel measure of the amount of sales generated from products the Company sells directly to the consumer relative to the amount of sales generated in the comparable prior-year period. 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, and beginning in the third quarter of fiscal 2019, includes international sales. The comparable sales calculation excludes the negative impact of stores closed four or more days. The Company ~~has historically viewed~~views comparable sales as a key performance indicator to measure the performance of our business, however, we are not providing comparable sales figures for the thirty-nine weeks ended October 30, 2021 compared to the thirty-nine weeks ended October 31, 2020 as we do not believe it is ~~not~~ a meaningful measure due to the varying degrees of business disruptions and periods of store closures and/or stores operating at reduced hours as a result of the pandemic during fiscal 2020.

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Gross Margin as a Percentage of Net Sales

Gross margin as a percentage of net sales is computed as gross margin divided by net sales. We believe gross margin as a percentage of net sales is a primary metric to measure the performance of our business as it is used to determine the value of incremental sales, and to guide pricing and promotion decisions.

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Diluted Income ~~(Loss)~~ per Share

Income ~~(loss)~~ per share is determined using the two-class method when it is more dilutive than the treasury stock method. Basic income ~~(loss)~~ per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period, including participating securities. Diluted income ~~(loss)~~ per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options, performance stock units and restricted stock units. Whereas basic income ~~(loss)~~ per share serves as an indicator of the Company's profitability, we believe diluted income ~~(loss)~~ per share is a key performance measure because it gauges the Company's quality of income ~~(loss)~~ per share assuming all potential common shares from non-participating securities are exercised.

Return on Net Assets

RONA is defined as (a) net income ~~(loss)~~ divided by (b) the “five-point average” (based on balances at the beginning of the first quarter plus the final balances for each quarter of the fiscal year) of net working capital less cash and marketable securities plus fixed assets. We believe RONA is a primary metric as it helps to determine how well the Company is utilizing its assets. As such, a higher RONA could indicate that the Company is using its assets and working capital efficiently and effectively.

Our Business Strategy

Our overall business strategy is focused on building a collection of distinct high-performing retail brands primarily serving the fashion needs of women ~~35 and older.~~with moderate to high household income levels.

In fiscal 2020, the Company took actions to rapidly transform into a digital-first company, fast-tracking numerous innovation and digital technology ~~investments.~~investments, and we have continued those investments in fiscal 2022. We have also enhanced our marketing efforts to drive traffic and new customers to our brands, while retaining newly acquired customers at a meaningfully higher rate than the pre-pandemic year of fiscal 2019.

The primary function of the Company is the production and procurement of beautiful merchandise that delivers the brand promise and brand positioning of each of our brands and resonates with customers. To that end, we ~~are further strengthening~~continue to strengthen our merchandise and design capabilities and ~~enhancing~~enhance our sourcing and supply chain to deliver product in a timely manner to our customers while also concentrating on improvements to the quality and aesthetic of our merchandise. 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~~our shareholders.

We pursue improving the performance of our brands by building our omnichannel capabilities, growing our online presence, managing our store base, executing marketing plans, effectively leveraging expenses, considering additional sales channels and markets, and optimizing the merchandise offerings of each of our brands. We continue to invest heavily in our omnichannel capabilities so our customers can 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, independently operated sales channels. As a result, we maintain a shared inventory platform for our primary operations, allowing us to fulfill orders for all channels from our distribution center ("DC") in Winder, Georgia. Our domestic customers can return merchandise to a store or to our DC, regardless of the original purchase location. Using our enhanced ~~"Locate”~~“Locate” tool, we ship in-store orders from other locations directly to the customer, expediting delivery times while reducing our shipping costs. In addition, our shared inventory system, Endless Aisle, enables customers to make purchases online and ship from store. In fiscal 2019, we completed the implementation of our Buy On-Line, Pick-up In-Store (BOPIS) capability across all our brands, further enhancing our omnichannel capabilities, and in fiscal 2020, we completed the implementation of StyleConnect® and MY CLOSETTM, our ~~proprietary~~customized, branded, digital styling software tools that ~~enables~~enable us to communicate directly with the majority of our customers, to drive the frontline business to digital fulfillment.

We seek to acquire new customers and retain existing customers by leveraging existing customer-specific data and through targeted marketing, including digital marketing, social media, ~~television,~~video, catalogs and mailers. We seek to optimize the potential of our brands with ~~improved~~innovative product offerings, potential new merchandise opportunities, and brand extensions that enhance the current offerings, as well as through our continued emphasis on our trademark “Most Amazing Personal Service”

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standard. We also will continue to consider potential alternative sales channels for our brands, including international franchise, wholesale, licensing and other opportunities.

We continue to leverage our digital investments to convert single-channel customers to be omnichannel, or multi-channel, customers, as the average omnichannel customer spends ~~approximately~~more than three times ~~more than a~~the average single-channel customer.

~~In order~~We have four clearly defined strategic pillars that guided our recent strategy and will continue to ~~maximize~~guide us in the ~~opportunities in each of our brands, we are targeting five key focus areas for 2021:~~future.

1.~~Continuing our ongoing digital transformation;~~Customer led;

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2.~~Further refining product through fit, quality, fabric and innovation in each of our brands;~~Product obsessed;

3.~~Driving increased customer engagement through marketing;~~Digital-first; and

4.~~Maintaining our operating and cost discipline; and~~

5.~~Further enhancing the productivity of our real estate portfolio.~~Operationally excellent.

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Results of Operations

Thirteen Weeks Ended October ~~30, 2021~~29, 2022 Compared to the Thirteen Weeks Ended October ~~31, 2020~~30, 2021

Net Income ~~(Loss)~~ and Income ~~(Loss)~~ per Diluted Share

For the third quarter, the Company reported net income of ~~$18~~$25 million, or ~~$0.15~~$0.20 per diluted share, compared to a net ~~loss~~income of ~~$56~~$18 million, or ~~$0.48~~$0.15 per diluted share, in last year's third quarter. Results for ~~the~~last year's third quarter include pre-tax litigation settlement charges of approximately $4 million. Results for last year's third quarter included a pre-tax impairment charge of $8 million as a result of the impact of the pandemic and is reflected in SG&A expenses in the accompanying unaudited condensed consolidated statements of income (loss).

Net Sales

The following table depicts net sales by Chico's, WHBM and Soma in dollars and as a percentage of total net sales for the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:

Thirteen Weeks Ended
October 30, 2021 October 31, 2020

(dollars in millions) (1)
Chico's $ 204 44.9 % $ 164 46.6 %
WHBM 138 30.4 104 29.6
Soma 112 24.7 84 23.8
Total Net Sales $ 454 100.0 % $ 351 100.0 %

~~(1)~~ ~~May not foot due to rounding.~~


	Thirteen Weeks Ended
	October 29, 2022				October 30, 2021

	(dollars in millions)

Chico's	$	255	49.3	%	$	204	44.9	%
WHBM	157		30.4		138		30.4
Soma	106		20.3		112		24.7

Total Net Sales	$	518	100.0	%	$	454	100.0	%

For the third quarter, net sales were ~~$454~~$518 million compared to ~~$351~~$454 million in last year's third quarter. This ~~29.1%~~14.3% improvement primarily reflects ~~the decline in store~~a comparable sales ~~during last year’s third quarter as a result~~increase of ~~the pandemic and higher full-price sales~~16.5%, partially offset by 3118 permanent net ~~permanent~~ store closures since last year’s third quarter. The 16.5% comparable sales improvement was driven by an increase in transaction count, partially offset by a decrease in average dollar sale.

The following table depicts comparable sales percentages by Chico's, WHBM and Soma for the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~

Thirteen Weeks Ended
October 30, 2021 October 31, 2020
Chico's 23.3 % (32.3) %
White House Black Market 33.4 (28.7)
Soma 30.2 10.5
Total Company 27.9 (24.1)
30, 2021:


	Thirteen Weeks Ended
	October 29, 2022		October 30, 2021
	Compared to Fiscal 2021		Compared to Fiscal 2020
Chico's	28.8	%	23.3	%
WHBM	17.0		33.4
Soma	(6.1)		30.2
Total Company	16.5		27.9

Cost of Goods Sold/Gross Margin

The following table depicts cost of goods sold ("COGS") and gross margin in dollars and gross margin as a percentage of total net sales for the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:


		Thirteen Weeks Ended							Thirteen Weeks Ended
		October 30, 2021			October 31, 2020				October 29, 2022			October 30, 2021

		(dollars in millions)							(dollars in millions)
Cost of goods sold	Cost of goods sold	$	269		$	274		Cost of goods sold	$	311		$	269
Gross margin	Gross margin	184			77			Gross margin	207			184
Gross margin percentage	Gross margin percentage	40.7		%	22.0		%	Gross margin percentage	40.0		%	40.7		%

For the third quarter, gross margin was ~~$184~~$207 million, or ~~40.7%~~40.0% of net sales, compared to ~~$77~~$184 million, or ~~22.0%~~40.7% of net sales, in last year's third quarter. The ~~year-over-year improvement~~70 basis point decrease in gross margin rate primarily reflects ~~margin expansion as a result of~~ higher ~~full price sales, less promotional activity, strategic inventory management and improved leverage of occupancy~~raw material costs, ~~on higher sales,~~ partially offset by ~~increases in raw materials~~freight costs, occupancy leverage and ~~freight costs.~~higher average unit retail.

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Selling, General and Administrative Expenses

The following table depicts SG&A, ~~expenses,~~ which includes store and direct operating expenses, marketing expenses and National Store Support Center ("NSSC") expenses, in dollars and as a percentage of total net sales for the thirteen weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:


		Thirteen Weeks Ended							Thirteen Weeks Ended
		October 30, 2021			October 31, 2020				October 29, 2022			October 30, 2021

		(dollars in millions)							(dollars in millions)
Selling, general and administrative expenses	Selling, general and administrative expenses	$	162		$	153		Selling, general and administrative expenses	$	176		$	162
Percentage of total net sales	Percentage of total net sales	35.8		%	43.6		%	Percentage of total net sales	33.9		%	35.8		%

For the third quarter, SG&A ~~expenses were $162~~was $175.8 million, or 33.9% of net sales, compared to $162.5 million, or 35.8% of net sales, ~~compared to $153 million, or 43.6% of net sales,~~ for last ~~year's~~year’s third quarter, primarily reflecting ~~the benefit of fiscal 2020 cost savings initiatives~~ongoing expense management and ~~sales leverage, slightly offset by~~ the impact of $4 million in pre-tax litigation settlement charges ~~for the third quarter and pre-tax impairment charges~~ in last ~~year’s~~year's third quarter.

Income Taxes

For the third quarter, the ~~$2.0~~$5.9 million income tax provision resulted in an effective tax rate of ~~9.9%~~19.3% compared to ~~26.9%~~$2.0 million, or an effective tax rate of 9.9%, for last year’s third quarter. The 19.3% effective tax rate for the third quarter primarily reflects a fiscal 2021 provision to return benefit resulting from changes in estimates due to the reversal of a valuation allowance related to fiscal 2021 temporary differences. The 9.9% effective tax rate for ~~the~~last year's third quarter primarily reflects a change in estimate from the second quarter of fiscal 2021 due to an increase in annual projected deferred tax assets on which a full valuation allowance exists, offset by a 2020 fiscal provision to return benefit resulting from changes in estimates due to the reversal of a valuation allowance related to 2020 temporary differences and the rate differential provided by the ~~CARES~~Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The 26.9% effective tax rate for last year's third quarter includes the annual benefit of the fiscal 2020 pre-tax loss due to the CARES Act, which was slightly offset by the impact of nondeductible book goodwill impairment charges.

Thirty-Nine Weeks Ended October ~~30, 2021~~29, 2022 Compared to the Thirty-Nine Weeks Ended October ~~31, 2020~~30, 2021

Net Income ~~(Loss)~~ and Income ~~(Loss)~~ per Diluted Share

For the thirty-nine weeks ended October ~~30, 2021,~~29, 2022, the Company reported net income of $102 million, or $0.82 per diluted share, compared to net income of $35 million, or $0.29 per diluted share, ~~compared to net loss of $281 million, or $2.43 per diluted share,~~ for the thirty-nine weeks ended October ~~31, 2020.~~30, 2021. Results for the thirty-nine weeks ended October 30, 2021 include pre-tax litigation settlement charges of approximately $4 million. Results for the thirty-nine weeks ended October 31, 2020 included approximately $198 million in pre-tax non-cash charges as a result of the impact of the pandemic and is reflected in the accompanying unaudited condensed consolidated statements of income (loss) as $76 million in COGS, $8 million in SG&A expenses and $113 million in goodwill and intangible impairment charges.

Net Sales

The following table depicts net sales by Chico's, WHBM and Soma in dollars and as a percentage of total net sales for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:


		Thirty-Nine Weeks Ended									Thirty-Nine Weeks Ended
		October 30, 2021				October 31, 2020					October 29, 2022				October 30, 2021

		(dollars in millions)									(dollars in millions)
Chico's	Chico's	$	602	45.8	%	$	435	46.4	%	Chico's	$	802	49.5	%	$	602	45.8	%
WHBM	WHBM	364		27.7		270		28.8		WHBM	485		30.0		364		27.7
Soma	Soma	348		26.5		233		24.8		Soma	331		20.5		348		26.5

Total net sales	Total net sales	$	1,314	100.0	%	$	938	100.0	%	Total net sales	$	1,618	100.0	%	$	1,314	100.0	%

Net sales for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 increased to ~~$1,314~~$1,618 million from ~~$938~~$1,314 million for the thirty-nine weeks ended October ~~31, 2020.~~30, 2021. This 23.2% improvement primarily reflects a comparable sales increase of ~~40.1% primarily reflects disruptions related to the pandemic, including temporary store closures and limited hours, during the thirty-nine weeks ended October 31, 2020,~~24.7%, partially offset by ~~the impact of 31~~18 permanent net store closures since last ~~year's~~year’s third quarter. The 24.7% comparable sales improvement was driven by an increase in transaction count and higher average dollar sale.

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The following table depicts comparable sales percentages by Chico's, WHBM and Soma for the thirty-nine weeks ended October 29, 2022:


	Thirty-Nine Weeks Ended (1)
	October 29, 2022
	Compared to Fiscal 2021
Chico's	36.0	%
WHBM	35.6
Soma	(5.8)
Total Company	24.7

(1) The Company is not providing comparable sales figures for the thirty-nine weeks ended October 30, 2021 compared to the thirty-nine weeks ended October 31, 2020 as we do not believe it is ~~not~~ a meaningful measure due to the significant ~~impact~~impacts of the pandemic during ~~the thirty-nine weeks ended October 31, 2020, including temporary store closures or stores operating at reduced hours.~~fiscal 2020.

Cost of Goods Sold/Gross Margin

The following table depicts COGS and gross margin in dollars and gross margin as a percentage of total net sales for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:


		Thirty-Nine Weeks Ended							Thirty-Nine Weeks Ended
		October 30, 2021			October 31, 2020				October 29, 2022			October 30, 2021

		(dollars in millions)							(dollars in millions)
Cost of goods sold	Cost of goods sold	$	821		$	827		Cost of goods sold	$	962		$	821
Gross margin	Gross margin	493			111			Gross margin	656			493
Gross margin percentage	Gross margin percentage	37.5		%	11.8		%	Gross margin percentage	40.5		%	37.5		%

Gross margin for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 was ~~$493~~$656 million, or ~~37.5%~~40.5% of net sales, compared to ~~$111~~$493 million, or ~~11.8%~~37.5% of net sales, for the thirty-nine weeks ended October ~~31, 2020.~~30, 2021. The ~~year-over-year~~300 basis point improvement in gross margin rate primarily reflects ~~the impact of inventory write-offs~~occupancy leverage combined with higher average unit retail and ~~store impairments as a result of the pandemic during the thirty-nine weeks ended October 31, 2020, improved leverage of occupancy costs with rising~~full price sales, ~~and margin expansion as a result of less promotional activity.~~partially offset by increased raw material costs.

Selling, General and Administrative Expenses

The following table depicts SG&A, ~~expenses,~~ which includes store and direct operating expenses, marketing expenses and NSSC expenses, in dollars and as a percentage of total net sales for the thirty-nine weeks ended October ~~30, 2021~~29, 2022 and October ~~31, 2020:~~30, 2021:


		Thirty-Nine Weeks Ended							Thirty-Nine Weeks Ended
		October 30, 2021			October 31, 2020				October 29, 2022			October 30, 2021

		(dollars in millions)							(dollars in millions)
Selling, general and administrative expenses	Selling, general and administrative expenses	$	443		$	391		Selling, general and administrative expenses	$	520		$	443
Percentage of total net sales	Percentage of total net sales	33.7		%	41.6		%	Percentage of total net sales	32.1		%	33.7		%

For the thirty-nine weeks ended October ~~30, 2021,~~29, 2022, SG&A ~~expenses~~ was ~~$443~~$520 million, or ~~33.7%~~32.1% of net sales, compared to ~~$391~~$443 million, or ~~41.6%~~33.7% of net sales, for the thirty-nine weeks ended October ~~31, 2020.~~30, 2021. The decrease in SG&A ~~expenses~~ as a percent of total net sales primarily ~~reflects the benefit of fiscal 2020 cost savings initiatives~~reflecting ongoing expense management and ~~sales leverage, partially offset by~~ the impact of $4 million in pre-tax litigation settlement charges ~~for the thirty-nine weeks ended October 30, 2021 and pre-tax impairment charges for the thirty-nine weeks ended October 31, 2020.~~in last year's third quarter.

Income Taxes

The effective tax rate for the thirty-nine weeks ended October 29, 2022 and October 30, 2021 was 23.2% and ~~October 31, 2020 was~~ 20.9% ~~and 28.7%~~, respectively. The 23.2% for the thirty-nine weeks ended October 29, 2022 primarily reflects a fiscal 2021 provision to return benefit due to the reversal of a valuation allowance related to fiscal 2021 temporary differences and a favorable share-based compensation benefit. The effective tax rate of 20.9% for the thirty-nine weeks ended October 30, 2021 primarily reflects an annual projected deferred tax assets on which a full valuation allowance ~~exists,~~existed, offset by a 2020 fiscal provision to return benefit due to the reversal of a valuation allowance related to fiscal 2020 temporary differences, the rate differential provided by the CARES Act and favorable state audit settlements. ~~The effective tax rate~~

Table of 28.7% for the thirty-nine weeks ended October 31, 2020 was primarily impacted by the benefits provided by the enactment of the CARES Act, which was reduced by the unfavorable impact of the Company’s book goodwill impairment, a valuation allowance on certain state tax credit carryforwards that are expected to expire unutilized and share-based compensation expense.Contents

Cash, Marketable Securities and Debt

At the end of the third quarter, cash and marketable securities totaled ~~$137~~$141 million compared to ~~$145~~$137 million at the end of last year’s third quarter. Debt at the end of the third quarter totaled $69 million compared to $99 million ~~a $50 million decrease from~~at the end of last year’s third ~~quarter.~~

~~Table~~quarter, reflecting a principal payment of ~~Contents~~

$30 million in the third quarter.

Inventories

At the end of the third quarter, inventories totaled ~~$278~~$304 million compared to ~~$257~~$278 million at the end of last ~~year's~~year’s third quarter. The ~~$21~~$26 million ~~or 8.3%,~~ increase ~~from~~over last year’s third quarter primarily reflects ~~strategic inventory management to align assortments~~early holiday receipts, alignment of on-hand inventories with higher consumer demand, ~~to support the Company’s sales growth.~~strategic investments in basics and higher average unit costs.

Income Tax Receivable

At the end of the third quarter, our unaudited condensed consolidated balance sheet reflected ~~a $10~~an $11 million income tax receivable ~~after collection of $50 million during the thirty-nine weeks ended October 30, 2021,~~ related to the recovery of Federal income taxes paid in prior years and other tax law changes as a result of the CARES Act.

~~Adoption of New Accounting Pronouncements~~

~~As discussed in Note 1 to our unaudited condensed consolidated financial statements included in this Form 10-Q, we adopted Accounting Standards Update ("ASU") 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~ ~~and ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848)~~ ~~as of January 31, 2021. Adoption of ASU 2019-12 and ASU 2021-01 did not have a material impact on our unaudited condensed consolidated financial statements.~~

~~Recently Issued Accounting Pronouncements~~

See Note 2 to our unaudited condensed consolidated financial statements included in this Form 10-Q for a description of certain newly issued accounting pronouncements which may impact our financial statements in future reporting periods, as applicable.

Liquidity and Capital Resources

The Company’s material cash requirements include amounts outstanding under operating leases; open purchase orders for inventory and other operating expenses in the normal course of business; contractual commitments for future capital expenditures; long-term debt obligations; and interest payments on long-term debt. Our ongoing capital requirements will continue to be primarily for enhancing and expanding our omnichannel capabilities, including investments in our stores; information technology; and supply chain.

In response to the pandemic, the Company has taken actions to reinforce its financial position and liquidity. Specific actions include: significantly reducing capital and expense structures, centralizing key functions to create a more nimble organization to better align costs with expected sales; suspending the quarterly dividend commencing April 2020; aligning inventory receipts with expected demand; partnering with suppliers and vendors to reduce operating costs and extend payment terms; and reviewing real estate and actively negotiating with landlords to deliver rent relief in the form of reductions, abatements and other concessions. In October 2020 and February 2022, the Company ~~also~~ amended and extended its credit facility to strengthen its liquidity and enhance its financial stability.

The Company anticipates satisfying its material cash requirements from its cash flows from operating activities, our cash ~~and marketable securities~~ on hand, capacity within our credit facility and other liquidity options.

The following table summarizes cash flows for the year-to-date period October ~~30, 2021~~29, 2022 compared to last year's year-to-date period October ~~31, 2020:~~30, 2021:

Thirty-Nine Weeks Ended
October 30, 2021 October 31, 2020

(dollars in millions) (1)
Net cash provided by (used in) operating activities $ 88 $ (64)
Net cash provided by investing activities 7 36
Net cash (used in) provided by financing activities (52) 91
Net increase in cash and cash equivalents $ 44 $ 63


	Thirty-Nine Weeks Ended
	October 29, 2022		October 30, 2021
	(dollars in millions) (1)
Net cash provided by operating activities	$	84	$	88
Net cash (used in) provided by investing activities	(42)		7
Net cash used in financing activities	(39)		(52)

Net increase in cash and cash equivalents	$	3	$	44

(1) May not foot due to rounding.

Operating Activities

Net cash provided by operating activities for the year-to-date period of fiscal ~~2021~~2022 was ~~$88~~$84 million compared to ~~net cash used in operating activities of $64~~$88 million in last year's year-to-date period. The change in net cash provided by operating activities primarily reflects ~~higher net income,~~ the timing of payables and income ~~taxes and payables, as well as inventory management,~~tax refunds received in last year's year-to-date period, partially offset by ~~normalized rent payments~~the change in inventories to align with consumer demand, higher fiscal 2022 net income and rent ~~settlements.~~settlements made in last year's year-to-date period.

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Investing Activities

Net cash ~~provided by~~used in investing activities for the year-to-date period of fiscal ~~2021~~2022 was $7$42 million compared to ~~$36~~net cash provided by investing activities of $7 million in last year's year-to-date period, reflecting a ~~$30~~net $39 million ~~decrease~~increase in ~~net proceeds from the sale of~~ marketable securities ~~partially offset by reduced~~and a $13 million increase in capital spend.

Financing Activities

Net cash used in financing activities for the year-to-date period of fiscal ~~2021~~2022 was ~~$52~~$39 million compared to ~~net cash provided by financing activities of $91~~$52 million used in last year's year-to-date ~~period,~~period. The change in net cash used in financing activities primarily ~~reflecting~~reflects a ~~$50~~$20 million decrease in payment on borrowings, ~~in the current year-to-date period compared to a $107 million in proceeds from borrowings in last year's year-to-date period,~~ partially offset by ~~an $11~~$7 million ~~dividend payment~~ in ~~last year's year-to-date period.~~payments of tax withholding related to the vesting of share-based awards.

Credit Facility

On ~~October 30, 2020,~~February 2, 2022, the Company and certain material domestic subsidiaries entered into Amendment No. 12 (the "Amendment") to its credit agreement (as amended, the ~~"Agreement"~~"Credit Agreement")~~, dated as of~~ originally entered into on August 2, 2018 and amended October 30, 2020, by and among the Company, certain material domestic subsidiaries as co-borrowers and guarantors, Wells Fargo Bank, National Association ("Wells Fargo Bank"), as Agent, letter of credit issuer and swing line lender, and certain lenders party thereto. Our obligations under the Credit Agreement are guaranteed by the guarantors and are secured by a first priority lien on certain assets of the Company and certain material domestic subsidiaries, including inventory, accounts receivable, cash deposits, certain insurance proceeds, real estate, fixtures and certain intellectual property. The Credit Agreement provides for a five-year asset-based senior secured revolving loan ("ABL") and letter of credit facility of up to $285.0 million, maturing ~~October 30, 2025.~~February 2, 2027. The interest rate applicable to Term Secured Overnight Financing Rate ("SOFR") Loans drawn under the ABL is equal to ~~2.25%~~Term SOFR plus 1.60% (subject to a further decrease to Term SOFR plus 1.35% or an increase to ~~2.50%~~Term SOFR plus 1.85% based upon average quarterly excess availability under the ABL)~~, with a LIBOR floor of 75 basis points.~~. The Credit Agreement also provides for a $15.0 million first-in last-out ("FILO") loan. The interest rate applicable to the FILO is equal to atTerm SOFR plus 3.60% (subject to a further decrease to Term SOFR plus 3.35% or an increase to Term SOFR plus 3.85% based on average quarterly excess availability under the ~~Company's option, either~~FILO). However, for any ABL or FILO with a ~~base~~SOFR interest rate ~~determined by reference~~period of six months, the interest rate applicable to the ~~federal funds rate, or a LIBOR with a floor of 75~~ABL and FILO is increased by 30 basis points, plus in each case an interest rate margin of 4.5%. The Company expects borrowings to be at a LIBOR, plus an interest rate margin of 4.5%. The FILO includes a prepayment penalty equal to 1.0% in the first year, 0.5% in the second year and none thereafter. The FILO can only be prepaid if there are no outstanding borrowings under the ABL. In addition, the Company will pay a commitment fee per annum on the unused portion of the commitments under the Agreement.points.

As of October ~~30, 2021, $99~~29, 2022, $69 million in net borrowings were outstanding under the ~~Agreement, and is reflected as long-term debt in the unaudited condensed balance sheet included in this Form 10-Q.~~Credit Agreement. Availability under the Credit Agreement is determined based upon a monthly borrowing base calculation which includes eligible credit card receivables, real estate and inventory, less outstanding borrowings, letters of credit and certain designated reserves. As of October ~~30, 2021,~~29, 2022, the available additional borrowing capacity under the Credit Agreement was approximately ~~$166~~$188 million, inclusive of ~~$29 million~~the current loan cap of ~~excess availability.~~

The Company is currently evaluating the impact that the pending discontinuation of, or transition away from, LIBOR will have on the Agreement. We have been in discussions with Wells Fargo Bank, regarding this and do not currently expect the transition to have a significant impact on our unaudited condensed consolidated financial statements.$30 million.

Store and Franchise Activity

During the thirty-nine weeks ended October ~~30, 2021,~~29, 2022, we had 235 permanent net store closures, consisting of 118 Chico's ~~stores, 9~~store closures, 7 WHBM ~~stores~~store closures and 310 Soma ~~stores.~~net store openings. As of October ~~30, 2021,~~29, 2022, the Company's franchise operations consisted of 5958 international retail locations in Mexico and 2 domestic airport locations.

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Stores continue to be an important part of our omnichannel strategy, and digital sales are higher in markets where we have a retail presence, but we intend to ~~continue rationalizing~~optimize our real estate portfolio, reflecting our emphasis on digital and our priority for higher profitability standards. We ~~have closed 23 underperforming locations since the beginning of fiscal 2021 and ended the third quarter with 1,279 boutiques. We~~ will continue to ~~shrink~~adjust our store base to align with these standards, primarily as leases come due, lease kickouts are available, or buyouts make economic sense. ~~However,~~We closed net 5 underperforming locations during the thirty-nine weeks ended October 29, 2022 and ended the third quarter with ~~the uncertainty of the pandemic, we intend~~1,261 boutiques. The Company anticipates closing 26 stores in fiscal 2022, which primarily includes underperforming, mall-based Chico's and WHBM boutiques. We also plan to ~~continuously~~invest in opening an additional 14 Soma stores this fiscal year. We will continue to evaluate ~~the appropriate~~our store base in light of economic conditions and our business strategy and may adjust the openings and closures as conditions require or as opportunities arise.

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Critical Accounting ~~Policies and~~ Estimates

The discussion and analysis of our financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, 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 assumptions and estimates, as set forth in our ~~2020~~2021 Annual Report on Form 10-K, are significant to reporting our results of operations and financial position. There have been no material changes to our critical accounting ~~policies~~estimates as disclosed in our ~~2020~~2021 Annual Report on Form 10-K.

Forward-Looking Statements

This Form 10-Q ~~contains~~may contain statements concerning our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry and other statements that are not historical facts. These are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, words or phrases such as “aim,” “anticipates,” “believes,” “confident,” “could,” “estimates,” “expects,” “intends,” “target,” “will,” “plans,” "path," “should,” ~~“approximately,~~“assumptions,” ~~“our planning assumptions,” “future outlook”~~“outlook” and similar expressions identify forward-looking statements. These forward-looking statements are based largely on information currently available to our management and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those expressed or implied by such forward-looking statements. Although we believe our expectations are based on reasonable estimates and assumptions, they are not guarantees of performance. There is no assurance that our expectations will 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 ~~actual results~~or contribute to ~~differ~~such differences include, but are not limited to, those described in Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K and, from time to time, in Item 1A, “Risk Factors” of our Quarterly Reports on Form 10-Q and the following:

~~The~~•the effects of the pandemic, including uncertainties about its depth and duration, new variants of COVID-19 that have emerged, the speed, efficacy and availability of vaccines and treatments, its impact on general economic conditions, human capital management, consumer behavior and discretionary spending, the effectiveness of any actions taken in response to the pandemic, and the impact of the pandemic on our manufacturing ~~operations;~~operations, shipping costs and timelines and the ~~extent, availability and effectiveness of any pandemic stimulus packages or loan programs, including the CARES Act;~~ global supply chain;

•the ability of our suppliers, logistics providers, vendors and landlords, to meet their obligations to us in light of financial stress, ~~staffing~~labor shortages, liquidity challenges, bankruptcy filings by other industry participants, and supply chain and other disruptions;

•increases in unemployment rates and ~~taxes;~~labor shortages;

•our ability to sufficiently staff our retail stores;

•changes in general economic conditions, ~~inflation,~~including, but not limited to, consumer confidence and consumer spending ~~patterns~~patterns;

•the impacts of rising inflation, gasoline prices, and interest rates on consumer spending;

•market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts (such as the war in Ukraine) or other major events, or the prospect of these ~~events;~~ events, including their impact on consumer spending, inflation, and the global supply chain;

•domestic and global political and social conditions and the potential impacts of geopolitical turmoil or conflict;

•shifts in consumer behavior, and our ability to adapt, identify and respond to new and changing fashion trends and customer preferences, and to coordinate product development with buying and planning;

•changes in the general or specialty retail or apparel industries, including significant decreases in market demand and the overall level of spending for women’s private branded clothing and related accessories;

•our ability to secure and maintain customer acceptance of ~~styles and~~ in-store and online ~~concepts;~~concepts and styles;

•increased competition in the markets in which we operate, including for, among other things, premium mall space;

•our ability to remain competitive with customer shipping terms and costs;

•decreases in customer traffic at malls, shopping centers and our stores;

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•fluctuations in foreign currency exchange ~~rates;~~ rates and commodity prices;

•significant ~~changes~~increases in the costs of manufacturing, raw materials, transportation, importing, distribution, labor and advertising;

•decreases in the quality ~~and timeliness~~ of merchandise received from ~~suppliers;~~ suppliers and increases in delivery times for receiving such merchandise;

•our ability to appropriately manage our store fleet, including ~~achieving~~the closing of underperforming stores and opening of new stores, and our ability to achieve the expected results of any such store openings or store ~~closures;~~ closings;

•our ability to appropriately manage ~~our~~ inventory and allocation processes and leverage targeted promotions;

•our ability to maintain ~~our~~ cost saving discipline;

•our ability to operate our retail websites in a profitable manner;

•our ability to successfully identify and implement additional sales and distribution channels;

•our ability to successfully execute and achieve the expected results of our business, ~~and~~ brand strategies, brand awareness programs, and merchandising and

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marketing programs including, but not limited to, the Company’s ~~turnaround strategy,~~three-year strategic growth plan, retail fleet optimization plan, sales initiatives, ~~and~~ multi-channel strategies and ~~five operating priorities for fiscal 2021,~~four strategic pillars which are: 1) ~~continuing our ongoing~~customer led; 2) product obsessed; 3) digital ~~transformation; 2) further refining product through fit, quality, fabric~~first; and ~~innovation in each of our brands; 3) driving increased customer engagement through marketing;~~ 4) ~~maintaining our operating and cost discipline; and 5) further enhancing the productivity of our real estate portfolio;~~ operationally excellent;

•our ability to utilize our ~~distribution center~~NSSC, DC and other support facilities in an efficient and effective manner;

•our reliance on sourcing from foreign suppliers ~~including~~and significant adverse economic, labor, political or other shifts (including ~~the impact of~~adverse changes in tariffs, taxes or other import regulations, particularly with respect to China, or legislation prohibiting certain imports from China);

•U.S. and foreign governmental actions and policies and changes thereto;

•the continuing performance, implementation and integration of our management information systems;

•our ability to successfully update our information systems;

•the impact of any system failure, cyber security or other data security breaches, including any security breaches resulting in the theft, transfer, or unauthorized disclosure of customer, employee, or company information;

•our ability to comply with ~~any~~applicable domestic and foreign information security and privacy laws, regulations and technology platform rules or other obligations related to data privacy and security; ~~the~~

•our ability to attract, hire, train, motivate and retain qualified employees in an inclusive environment; ~~the successful recruitment of~~

•our ability to successfully recruit leadership ~~and~~or transition of members of our senior management team; ~~uncertainties regarding~~

•increased public focus and opinion on environmental, social and governance (“ESG”) initiatives and our ability to meet any announced ESG goals and initiatives;

•future unsolicited offers to buy the Company and actions of activist shareholders and others and our ability to respond effectively;

•our ability to secure and protect our intellectual property rights and to protect our reputation and brand images;

•unanticipated obligations or changes in estimates arising from new or existing litigation (including settlements thereto), income taxes and other regulatory proceedings;

•unanticipated adverse changes in legal, regulatory or tax laws; and

•our ability to comply with the terms of our Credit Agreement, ~~which includes~~including the restrictive provisions limiting our flexibility in operating our business and obtaining additional credit on commercially reasonable terms.

These factors should be considered in evaluating forward-looking statements contained herein. 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 Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk of our financial instruments as of October ~~30, 2021~~29, 2022 has not materially changed since January ~~30, 2021.~~29, 2022. 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 exposure to interest rate risk relates in part to our ~~credit agreement~~Credit Agreement with ~~our bank. On October 30, 2020, we entered into Amendment No. 1 (the "Amendment") to our credit agreement (as amended, the "Agreement"), as~~Wells Fargo Bank, which is further discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1, Note 129 to the accompanying unaudited condensed consolidated financial statements ~~and Part I, Item 2, MD&A,~~ included in this Form 10-Q. The interest rate applicable to Term SOFR Loans drawn under the ABL is equal to Term SOFR plus 1.60% (subject to a further decrease to Term SOFR plus 1.35% or an increase to Term SOFR plus 1.85% based upon average quarterly excess availability under the ABL). The Credit Agreement ~~which matures on October 30, 2025, has borrowing options which accrue~~also provides for a $15.0 million FILO loan. The interest ~~at our election, at either a base~~ rate ~~determined by reference~~applicable to the ~~federal funds rate,~~FILO is equal to Term SOFR plus 3.60% (subject to a further decrease to Term SOFR plus 3.35% or an increase to Term SOFR plus 3.85% based on average quarterly excess availability under the FILO). However, for any ABL or FILO with a SOFR interest rate ~~margin, or LIBOR, plus an~~period of six months, the interest rate ~~margin, as defined in~~applicable to the ~~Agreement.~~ABL and FILO is increased by 30 basis points. As of October ~~30, 2021, $99~~29, 2022, $69 million in borrowings were outstanding under the Credit Agreement and is reflected as long-term debt in the accompanying unaudited condensed consolidated balance sheet. ~~Due to the 75 basis points LIBOR floor under the Agreement, an~~An increase in market interest rates of 100 basis points would increase interest expense in the amount of approximately ~~$1.4~~$3.0 million over the remaining term of the loan.

The Company is currently evaluating the impact that the pending discontinuation of, or transition away from, LIBOR will have on the Agreement. We have been in discussions with Wells Fargo Bank, National Association regarding this and do not expect the move to have a significant impact on our unaudited condensed consolidated financial statements.

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 which ~~primarily~~ includes U.S. government agencies, corporate ~~bonds.~~bonds and commercial paper. The marketable securities portfolio as of October ~~30, 2021~~29, 2022 consisted of $3$13.8 million of securities with maturity dates within one year or less and no$9.2 million with maturity dates over one year. We consider all securities available-for-sale including those with maturity dates beyond 12 months, and therefore ~~classify~~classified these securities, as applicable, as short-term investments within current assets on the ~~condensed~~ consolidated balance sheets as they are available to support current operational liquidity needs. ~~As of October 30, 2021, 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.~~


ITEM 4.			CONTROLS AND PROCEDURES

Evaluation of 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, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

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 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). 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 Controls

There were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the date of the above referenced evaluation. Furthermore, there was no change in our internal ~~control~~controls over financial reporting or in other factors during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

Information regarding legal proceedings is incorporated by reference from Note 1310 to our unaudited condensed consolidated financial statements included in this Form 10-Q under the heading "Commitments and Contingencies."


ITEM 1A.			RISK FACTORS

In addition to the other information discussed in this report, the factors described in Part I, Item 1A. “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K should be considered as they could materially affect our business, financial condition or future results. There have been no material changes with respect to the risks described in our ~~2020~~2021 Annual Report on Form 10-K, except for those risks updated in our quarterly report on Form 10-Q for the quarter ended July ~~31, 2021,~~30, 2022, but these are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition or operating results.


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information concerning our purchases of common stock for the periods indicated (amounts in thousands, except share and per share amounts):

Period Total
Number of
Shares
Purchased (a) Average Price
Paid per Share Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans (b) Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under
the Publicly
Announced Plans
August 1, 2021 - August 28, 2021 130,806 $ 6.18 — $ 55,192
August 29, 2021 - October 2, 2021 19,113 4.59 — 55,192
October 3, 2021 - October 30, 2021 — — — 55,192
Total 149,919 5.98 —


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Publicly Announced Plans
July 31, 2022 - August 27, 2022	134,429	$	6.41	—	$	55,192
August 28, 2022 - October 1, 2022	6,172		5.55	—		55,192
October 2, 2022 - October 29, 2022	17,254		4.84	—		55,192
Total	157,855		6.20	—

(a) Total number of shares purchased consists of ~~149,919~~157,855 shares of restricted stock repurchased in connection with employee tax withholding obligations under employee compensation plans, which are not purchases under any publicly announced plan.

(b) In November 2015, we announced a $300 million share repurchase plan. There was approximately $55.2 million remaining under the program as of the end of the third quarter. 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. The Company has 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.

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ITEM 6.			EXHIBITS

(a)The following documents are filed as exhibits to this Form 10-Q:


			~~Exhibit 10.1~~						Second Amendment to Chico’s FAS, Inc. Officer Severance Plan and Summary Plan Description effective September 14, 2021 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, as filed with the Commission on September 20, 2021)

			~~Exhibit 10.2~~						Employment letter agreement between the Company and Patrick Guido, dated as of September 15, 2021 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, as filed with the Commission on September 17, 2021)

			~~Exhibit 10.3~~						Restrictive covenant agreement between the Company and Patrick Guido, dated as of September 15, 2021 (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, as filed with the Commission on September 17, 2021)

			~~Exhibit 10.4~~						~~Indemnification agreement between the Company and Patrick Guido, dated as of September 20, 2021~~

			~~Exhibit 10.5~~						~~Employment letter agreement between the Company and Wendy Hufford, dated as of August 20, 2021~~

			~~Exhibit 10.6~~						~~Restrictive covenant agreement between the Company and Wendy Hufford, dated as of September 13, 2021~~

			Exhibit 31.1						Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer

			Exhibit 31.2						Chico’s FAS, Inc. and Subsidiaries Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer

			Exhibit 32.1						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

			Exhibit 32.2						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

			Exhibit 101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended October ~~30, 2021,~~29, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income, ~~(Loss),~~ (ii) Condensed Consolidated Statements of Comprehensive Income, ~~(Loss),~~ (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

			Exhibit 104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended October ~~30, 2021,~~29, 2022, formatted in Inline XBRL (included within Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHICO'S FAS, INC.

Date:

~~December 1, 2021~~November 23, 2022

By:

/s/ Molly Langenstein

Molly Langenstein

Chief Executive Officer, President and Director

Date:

~~December 1, 2021~~November 23, 2022

By:

/s/ Patrick J. Guido

Patrick J. Guido

Executive Vice President, Chief Financial Officer

Date:

~~December 1, 2021~~November 23, 2022

By:

/s/ David M. Oliver

David M. Oliver

Senior Vice President - Finance, Controller and Chief Accounting Officer

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	October 30, 2021
	Gross Carrying Amount		Accumulated Impairment Charge		Net Carrying Amount

Goodwill:
Chico's reporting unit	$	36,403	$	(20,043)	$	16,360
WHBM reporting unit	60,371		(60,371)		—
	$	96,774	$	(80,414)	$	16,360

Other intangible assets:
WHBM trademark	$	34,000	$	(29,000)	$	5,000
Chico's franchise rights	4,930		(4,930)		—
	$	38,930	$	(33,930)	$	5,000

	January 30, 2021
	Gross Carrying Amount		Accumulated Impairment Charge		Net Carrying Amount

Goodwill:
Chico's reporting unit	$	36,403	$	(20,043)	$	16,360
WHBM reporting unit	60,371		(60,371)		—
	$	96,774	$	(80,414)	$	16,360

Other intangible assets:
WHBM trademark	$	34,000	$	(29,000)	$	5,000
Chico's franchise rights	4,930		(4,930)		—
	$	38,930	$	(33,930)	$	5,000

	October 31, 2020
	Gross Carrying Amount		Accumulated Impairment Charge		Net Carrying Amount

Goodwill:
Chico's reporting unit	$	36,403	$	(20,043)	$	16,360
WHBM reporting unit	60,371		(60,371)		—
	$	96,774	$	(80,414)	$	16,360

Other intangible assets:
WHBM trademark	$	34,000	$	(28,000)	$	6,000
Chico's franchise rights	4,930		(4,766)		164
	$	38,930	$	(32,766)	$	6,164