Chico’sFAS, Inc SWOT Analysis
Chico’sFAS, Inc SWOT Analysis
ChicoFAS (CHS) is a clothingretailer in the U.S that specializesin thewomenclothing.Thecompanyhas three mainbrandstheSoma, Chico’s andWhite House/Black market(WH/BM). Through thethree brands,thecompanysellsrefinedinformalto dressyattire, intimates,andcomplementarynon-clothing itemsvia online andcatalogprograms.In theUS,thewomenapparelindustryis verycompetitiveandCHS shakesoff thecompetitionby maintaina very effective personalserviceprogram.ChicoFAS has beenableto sustaina competitiveedgeover otherlargeretailstoresuchas Ann Taylor in thewomenapparelindustrythrough thisamazingpersonalserviceprogramthatentailsthoroughtrainingto employeessothattheyare in a positionto adviceclientson fits,colors,wardrobeneeds,outfitselection,anddifferentwaysto wearclothesandotheraccessories.At present,theCHS has about 1500 retailstoresin 48 States andin districtsof Puerto Rico, Virgin isle andColumbia. Nearlyallof thecompany’sstoresaresituatedin shoppingmalls,outdoordestinationshoppingareasandlifestyle shoppingcenters(ChicoFAS, 2014).
The company’s client base in composed of middle-upper class female above the age of 30. In the US, there are several teens’ retailers but the number of retail stores serving this demographic is limited. This demographic is to some extent underserved.
Currently, Chico FAS has no outstanding debt and $371.49 million in cash.
Over the last one decade returns on equity has improved and currently it stands at 16 % (Ryan, Powell & Dialynas, 2010).
Chico FAS has a total of $200 million share repurchase program in place with $137.7 million in the balance.
Chico FAS is exceedingly customer-centric and the company does not need to discount as much as other retail stores must do to maintain its customer base. The company has a very tight inventory and purchases merchandise based on the needs of customers (Kraft, 2013).
The company has managed to decrease inventory by as much as 5% in the last quarter of its financial year and grow returns.
Brand portfolio: The Company boasts of three brands, Soma, Chico’s and Black market/White house, and this allows the company to increase market share by serving different demographics.
Chico FAS business strategy: The Company has a consumer loyalty program, that is the WHITE House/Black Market Program and the Chico’s passport program. This loyalty program encourages customer to return to the retail store via a lifetime discount. There are also sizing techniques that are very appealing to the company demographic and that allow the company to lower inventory by offering a broad range of clothing without having to store a large number of sizes for each item (Ryan, Powell & Dialynas, 2010).
Design Control The company controls primarily all the features of the design process for the three brands including color, pattern, choice of fabric, prints, design specification and construction
CHS gross margin is currently at 57%, while the net margin is 6.54% in the last quarter of the previous financial year (Ryan, Powell & Dialynas, 2010).
Challenges related to the multi-store configuration: Chico FAS has three main brand designed with a different style and focus. The company has to be meticulous to maintain the essential elements of each brand and at the same time stay fresh and innovative to keep pace with changing client’s tastes and preferences. At the moment the Soma brand is struggling from this multi-store conundrum, Chico has been impotent in deciding the most apt demographic for the Soma brand (Young, Sparger, Duc and Chobanov, 2008).
The Soma brand does not have a loyalty program like that of the other two brands. The loyalty program for the brand started in 2007 collapsed after only one year and at the moment the Soma brand has no loyalty program.
Supplier Control: Currently about 60% of the company’s merchandise originate from China even though the company has no presence there. Consequently the company has very little power on the quality, price and timeliness. It would be an advantageous for CHS to establish an office in China to be in a position to survey the buildup of merchandise (Ryan, Powell & Dialynas, 2010).
CHS operations are only limited to within the bounder of the US with very little presence in foreign lands.
Brand Stagnation: The Company has been in operation for more than 25 years and it has been loath to abandon fits and patterns that were very popular in the early day of operation. The company needs to create innovative designs, fits, patterns and designs to keep pace with the need of clients and competitors. For example, if all of its pants are similar I all stores, a lady would not want to buy the same pant every year. Additionally, the CHS needs to modernize and refinish ancient stores to accompany the new clothing designs (Young, Sparger, Duc and Chobanov, 2008).
Pop-Up Stores: Chico FAS has seized the advantage of the improving economic condition since the 2008-09 economic slump by opening retail outlets in vacant storefronts with flexible leases to weigh the performance of their brands in several high profile destinations. These outlets will go a long way in helping the company to identify new markets in the country where their brands are in demand.
New Leader, Strategies and Lines: The new Chief executive officer at the company David Dyer has immense experience in retail apparel industry. Immediately after taking office in April 2010, he embarked on a bridal program to counter competition and increase market share. In this regard, the WH/BM started the bridal line to compete with other large retail stores in the same line such as Ann Taylor and J. Crew. This has allowed CHS to capture a new market segment in the women apparel industry (Ryan, Powell & Dialynas, 2010).
Enhanced outlet margin: CHS continually moves its old inventory from its prime stores to outlet stores as a relatively lower price. This enables the company to create a lower profit margin. Moreover, the company has embarked on a program to create items specifically meant for the outlet stores to cushion it from diminishing profit margin.
Fixed Asset: In 2010, the company purchases a total of 39 acres of property and 300, 0000 sq premises in proximity to the distribution center in Winder, GA. In the coming days, this will enable the company to support approximately $3 billion in sales.
New System: CHS has partnered with SAP to implement a new enterprise resource management planning system to control all sales channels to synchronize product development, accounting, finance and merchandise (Kraft, 2013).
Fewer Markdowns In the financial year 2009, the company implemented a stringent inventory management strategy, that has helped in lowering surplus inventory to minimize markdowns from retail prices. This strategy will be pivotal in the coming days as the company continues to increase the number of stores in the country.
Reinvigorated Advertising: CHS has begun commercial advertising for the three brands after many years of without any form of advert. If the company intensifies online marketing and advertising for the three brands, it has the potential of increasing sales as more consumers may be inclined to purchase online (Young, Sparger, Duc and Chobanov, 2008).
Competition:Based on thecompany’sanalystreport,CHS is facingintensecompetitionin thewomenapparelindustry.Forexample,theSoma brandsare designedforyoungerwomen.Womenare veryloathto alteringbrandstheyare comfortablewithandthismarketsegmentis under thecontrolof Victoria Secret. Soma brandslacka consumerloyaltyprogramthatAnn Taylor andVictoria secretspossess.In additionas youngwomenmatureandadoptgrown-uplingerie,thisbrandwillhavecompletelymissedout on an entiregenerationof clients.Anna Taylor, AscenaRetail. Coldwater Creek andare themaincompetitorandhavea similarmulti-store salesstrategyof outletsandhas alsoembarkedon massivee-commerce marketing(Ryan,Powell & Dialynas, 2010). IfCHS doesnot maintainnavigablewebsites forthethree brandstheymay losea hugegroupof consumersthat preferonline shoppingandwhomight chooseretailstoresthat are moreinternets friendly.
CHScan benefittremendouslyby turningtheir weaknessesinto strengths.Thecompanycan featurein theinternationalmarketby expandingits operationsto neighboring countriessuchas Canada andMexico. Over 605 of CHS merchandiseoriginatefrom China yet thecompanyhas noofficeoroperationsin thecountry.Itis importantthatCHS setsup an officein chinato be in a positionto monitorthe qualityof fabricandcontrolpricesandtimelines. Though,in 2011, thecompanywasableto purchasetheBoston properWebsite andCatalog division,itonlyaccountsfora mere5 % of thesales.CHS canusemoremarkingin thisline.AllCHS divisionneedsto intensifymarketingboth I theprintandelectronicmedia.CHS WH/BM workkitandslimming pants havebeenverysuccessfulandCHS needsto revivify its effortsof theseofferings,particularlytheworkkitthat givesAnn Taylor storesa runfortheir money.
Chico’sFAS, Inc.(2014). ChicoInc Technology.Retrieved on2 April from http://chicos.com
Kraft,A. (2013). Chico`s:A SWOT Analysis.Retreived from:http://beta.fool.com/leglamp/2013/02/04/chicosa-swot-analysis/23356/
Ryan,C., Powell, T and Dialynas, A. (2010).StrategicReport Chico FAS.Vector Strategy Group.
Young.E.,Sparger,K., Duc V.M,. Chobanov,N.(2008). Acquisitionof Chico’s MBA Capstone Project.Retrieved on 2 April from:http://facultystaff.ou.edu/S/Mark.P.Sharfman1/5902/5902_Acquisition_paper_Grade_=_95.pdf