UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

Chico’s FAS, Inc.

11215 Metro Parkway, Fort Myers, Florida 33912

239-277-6200

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At May 23, 2005, there were 180,452,922 shares outstanding of Common Stock, $.01 par value per share.

CHICO’S FAS, Inc.

Index

2

CHICO’S FAS, Inc. and Subsidiaries

See Accompanying Notes.

3

CHICO’S FAS, Inc. and Subsidiaries

See Accompanying Notes.

4

CHICO’S FAS, Inc. and Subsidiaries

See Accompanying Notes.

5

CHICO’S FAS, Inc. and Subsidiaries

Note 1. Basis of Presentation

          The accompanying unaudited consolidated financial statements of Chico’s FAS, Inc. and its wholly-owned subsidiaries (collectively, 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, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the consolidated financial statements and notes thereto for the fiscal year ended January 29, 2005, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 8, 2005. The January 29, 2005 balance sheet amounts were derived from audited financial statements included in the Company’s Annual Report.

          The Company’s 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 weeks ended April 30, 2005 are not necessarily indicative of the results that may be expected for the entire year.

Note 2. Recent Accounting Pronouncements

          In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R (revised 2004), “Share-Based Payment”, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” The original effective date for adoption of SFAS No. 123R for the Company was July 31, 2005. However, in April, the SEC announced the adoption of a new rule that amends the effective dates for SFAS No. 123R. The SEC’s new rule allows companies to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. Therefore, the Company plans to adopt SFAS No. 123R effective for its 2006 fiscal year commencing on January 29, 2006.

Note 3. Common Stock Split

          On February 22, 2005, the Company completed a two-for-one stock split by distributing one additional share of the Company’s common stock to each stockholder of record as of February 4, 2005, for every share of common stock then owned. All prior period share and per share amounts presented in this report have been restated to give retroactive recognition to this two-for-one common stock split.

6

CHICO’S FAS, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2005
(Unaudited)
(in thousands, except share and per share amounts)

Note 4. Stock-Based Compensation

          The Company accounts for stock-based awards to employees and directors using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations, including for purposes of valuing its awards and recording the related compensation expense, if any. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation- Transition and Disclosure”, to all stock-based employee compensation.

Note 5. Net Income Per Share

          Basic Earnings Per Share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding. Restricted stock grants to employees and directors are not included in the computation of basic EPS until the securities vest. Diluted EPS reflects the dilutive effect of potential common shares from securities such as stock options and unvested restricted stock. The following is a reconciliation of the denominators of the basic and diluted EPS computations shown on the face of the accompanying consolidated statements of income:

7

CHICO’S FAS, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30, 2005
(Unaudited)
(in thousands, except share and per share amounts)

Note 5. Net Income Per Share (continued)

          For the three months ended April 30, 2005 and May 1, 2004, of the options then outstanding, options to purchase 20,000 and 55,800 shares of common stock, respectively, were excluded from the computation of diluted EPS on the basis that such options were antidilutive.

          During the three months ended April 30, 2005, options to purchase 1,275,000 shares of the Company’s common stock were granted pursuant to the Company’s stock option plans, options to purchase 1,224,866 were exercised and options to purchase 66,837 shares of common stock were canceled. During the three months ended May 1, 2004, options to purchase 1,113,800 shares of the Company’s common stock were granted pursuant to the Company’s stock option plans, options to purchase 3,116,990 were exercised and options to purchase 26,802 shares of common stock were canceled.

          Beginning in the first quarter of fiscal 2005, certain of the Company’s officers, its two non-officer inside directors, and each of its independent directors were awarded restricted stock, pursuant to restricted stock agreements. A restricted stock award is an award of common shares that is subject to certain restrictions during a specified period. The Company holds the shares during the vesting period, and the grantee cannot transfer the shares before the termination of that period. The grantee is, however, entitled to vote the common shares and to receive dividends and other distributions thereon. Unearned compensation related to the restricted stock awards is recorded as a component of stockholders’ equity and is amortized ratably over the vesting period of the award.

          As of April 30, 2005, there were 178,278 shares of restricted stock outstanding. The restricted stock awarded to officers vests entirely on the third anniversary of the date of grant. The restricted stock awarded to non-officer directors vests pro-rata over a three-year period. Total compensation expense related to these restricted stock grants of $4.7 million is being amortized over the vesting period, and amortization expense for the thirteen-weeks ended April 30, 2005 was $0.4 million.

8

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

General

          Chico’s FAS, Inc. (together with its subsidiaries, the “Company”) is a specialty retailer of private label, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items operating under the Chico’s, White House | Black Market (“WH|BM”) and Soma by Chico’s brand names.

          Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited consolidated financial statements and notes thereto and the Company’s 2004 Annual Report to Stockholders.

Overview

          The primary factors which historically have influenced the Company’s profitability and success have been its growth in number of stores, its growth in comparable store sales, and its increased operating margin arising out of improved gross margin and leverage of operating costs. In the last five years the Company has grown from 200 stores as of January 29, 2000 to 683 stores as of April 30, 2005, which includes the significant store growth resulting from the acquisition of WH|BM in fiscal 2003. The Company continues to expand its presence through the opening of new stores, the development of new opportunities such as Soma by Chico’s and through the extension of its merchandise line. The Company anticipates that its rate of growth (measured by overall growth in sales, growth in comparable store sales, and other factors) can be expected to decrease from the 40% plus rate of overall sales growth experienced in prior years, largely reflecting the Company’s significantly increased size, its 20% net square footage growth goal and the expectation that its same store sales increases will moderate. Nevertheless, even at a reduced growth rate, the Company expects to continue its ability to generate the necessary cash flow to fund its expansion and to take advantage of new opportunities. The Company has no long-term debt and foresees no current need to incur long-term debt to support its continued growth.

          Factors that will be critical to determining the Company’s future success include, among others, managing the overall growth strategy, including the ability to open and operate stores effectively, maximizing efficiencies in the merchandising, product development and sourcing processes, maintaining high standards for customer service and assistance, maintaining the newness, fit and comfort in its merchandise offerings, customer acceptance of new store concepts, and generating cash to fund the Company’s expansion needs. In order to monitor the Company’s success, the Company’s senior management monitors certain key performance indicators, including:

•

Comparable same store sales growth – For the thirteen-week period ended April 30, 2005, the Company’s comparable store sales growth (sales from stores open for at least twelve full months, including stores that have been expanded or relocated within the same general market) was 10.8%. This increase follows a similar comparable store sales growth in excess of 10% in the immediately preceding quarter, with 29 out of the Company’s last 32 quarterly periods achieving at least double digit increases in comparable store sales. The Company believes that comparable store sales growth is a critical success factor and a positive indication of the Company’s ability to manage its expansion and its ability to open and operate stores effectively.

9

	•	Positive operating cash flow – For the thirteen week period ended April 30, 2005 (the “current period”), cash flow from operations totaled $80 million compared with $64 million for the prior year’s thirteen week period ended May 1, 2004 (the “prior period”), representing an increase in cash flow growth of 25.9%. The Company believes that a key strength of its business is the ability to consistently generate cash. Strong cash flow generation is critical to the future success of the Company, not only to support the general operating needs of the Company, but also to fund capital expenditures related to new store openings, relocations, expansions and remodels, additional infrastructure costs associated with the distribution center, to continue funding implementation of state of the art information systems and to fund strategic acquisitions. See further discussion of the Company’s cash flows in the Liquidity and Capital Resources section.
	•	Loyalty Clubs – Management believes that a significant indicator of the Company’s success is the growth of the Chico’s loyalty program, the “Passport Club” and support for such loyalty program from its personalized customer service training programs and its marketing initiatives. In the current period, the Company added approximately 100,000 permanent Passport Club members and approximately 387,000 preliminary Passport Club members. The Company believes that the continued growth of its Passport Club indicates that the Company is still generating strong interest from new customers, many of whom tend to become long-term loyal customers, due in large part to the Company’s commitment to personalized customer service and constant newness of product.
		The Company introduced a new frequent shopper program at its WH|BM stores during October 2004 called “The Black Book”. The Black Book loyalty program is similar to the Passport Club in all key respects except that members become permanent upon spending $300, compared to $500 for the Passport Club. In the current period, the Company added approximately 76,000 permanent Black Book members and approximately 273,000 preliminary Black Book members.
	•	Quality of merchandise offerings – To monitor and maintain the acceptance of its merchandise offerings, the Company monitors sell-through levels, inventory turns, gross margins and markdown rates on a classification and style level. Although the Company does not disclose these statistics for competitive reasons, this analysis helps identify comfort, fit and newness issues at an early date and helps the Company plan future product development and buying.

          For the thirteen weeks ended April 30, 2005, the Company reported net sales, operating income and net income of $327 million, $73 million and $47 million, respectively, up 27.4%, 28.2% and 32.3%, from the comparable period in the prior fiscal year. The Company’s gross margin decreased to 61.7% for the current period from 62.2% in the prior period mostly as a result of increased markdowns and, to a lesser extent, by certain other factors described below.

10

Results of Operations – Thirteen Weeks Ended April 30, 2005 Compared to the Thirteen Weeks Ended May 1, 2004.

          Net Sales

          The following table shows net sales by Company-owned stores, net sales by catalog and Internet and net sales to franchisees in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          Net sales by Company-owned stores increased in the current period from the prior period, both in the aggregate and separately by brand, primarily due to new store openings, as well as the current trend of strong increases in the Company’s comparable store net sales (including stores within the comparable store base that have been expanded or relocated within the same general market). A summary of the factors impacting year-over-year sales increases is provided in the table below (dollar amounts in thousands):

          The comparable store sales increase of 10.8% was driven primarily by an increase in the number of transactions compared to the prior period which transaction volume increase was offset, in part, by a decrease of 3.6% in the Chico’s average unit retail price (which average unit retail price is a financial indicator, the percentage change of which is believed by management to represent a reasonable approximation of the percentage change in Company store net sales attributable to price changes), attributable primarily to an increased markdown rate and, to a lesser extent, from changes in product mix. WH|BM same store sales represent approximately 12% of the total same store sales base, with the WH|BM same store sales increase being somewhat ahead of the Chico’s same store sales increase. All of the net sales from Soma by Chico’s stores are included in new store sales for the current period; no such sales are included in comparable store sales.

          Net sales by catalog and Internet for the current period (which included Chico’s and a small offering of Soma by Chico’s merchandise) increased by $1.9 million, or 30.8%, compared to net sales by catalog and Internet for the prior period. It is believed that the increase was principally attributable to the increased circulation of catalog mailings and additional television spots in the current period versus the prior period.

11

          Cost of Goods Sold/Gross Profit

          The following table shows cost of goods sold and gross profit in dollars and the related gross profit percentages for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          The decrease in the gross profit percentage during the current period resulted primarily from a decrease in the merchandise margins of approximately 80 basis points at the Chico’s front-line stores and to a lesser extent, a decrease in the merchandise margins at the Company’s outlet stores, and increased product development costs. The decrease in the Chico’s front-line merchandise margins from last year’s unusually high merchandise margins, was attributable to a higher markdown rate, moderated in part by slightly improved initial merchandise markups. These decreases in gross profit percentage at the Chico’s stores were partially offset by an improvement of approximately 150 basis points in the merchandise margins at WH|BM front-line stores.

          General, Administrative and Store Operating Expenses

          The following table shows general, administrative and store operating expenses in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          The increase in general, administrative and store operating expenses was, for the most part, the result of increases in the Company’s store operating expenses, including associate compensation, occupancy and other costs associated with additional store openings and, to a lesser degree, an increase in marketing expenses and other general corporate infrastructure costs to support the Company’s rapid growth. General, administrative and store operating expenses as a percentage of net sales decreased 90 basis points over the prior period primarily due to decreases in Chico’s store operating and store support expenses as a percentage of total net sales over the prior period which in turn resulted primarily from leverage associated with the Company’s current period comparable store sales increase of 10.8% and, to a lesser degree, to the revision in the manner in which the Company accounts for construction allowances as described under “Depreciation and Amortization.” General, administrative and store operating expenses was also positively impacted by decreased marketing expenses as a percentage of total net sales.

12

          Depreciation and Amortization

          The following table shows depreciation and amortization in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):

          The increase in depreciation and amortization expense was for the most part due to capital expenditures related to new, remodeled and expanded stores. Depreciation and amortization expense, in dollars and as a percentage of total net sales, was also impacted by the Company’s revision to the manner in which it accounts for construction allowances from landlords of properties leased by the Company for its stores in the fourth quarter of fiscal 2004. Previously, these construction allowances were amortized as a reduction of depreciation expense, while the revision now has the amortization of these construction allowances reducing the Company’s rent expense (as previously described in “General, Administrative and Store Operating Expenses” under the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s 2004 Annual Report to Stockholders).

          Interest Income, net

          The following table shows interest income, net in dollars and as a percentage of total net sales for the thirteen weeks ended April 30, 2005 and May 1, 2004 (dollar amounts in thousands):