Brean Reiterates Buy On Chico's FAS

In a report published Friday, Brean Capital analyst Liz Pierce maintained a Buy rating on

, with a price target of $22, following meetings with the management. Analyst Liz Pierce said that the meetings indicated that the company was "well positioned to drive operating margins higher." While Chico's may not be able to return to the peak operating margin of 21 percent that it achieved in FY04, on account of the current competitive environment, the company may be able to "hit the double-digit mark, with a mid-teen operating margin not off the table." "Tightly managing expenses, a more rationalized store footprint, omni and international growth should positively impact operating margin," Pierce added. Chico's has been collecting customer data, via its loyalty program, for more than two decades. "In fact, we believe the amount of information it possesses is unparalleled versus its peers and as such, a competitive advantage," the report stated. Chico's has plans to close around 140 stores over the forthcoming three years. This is expected to generate around $65 million in annualized savings. "That said, we do not anticipate these closings to have a material adverse impact on the top line as we expect a lot of those sales will be transferred to either another store or another channel," Pierce said. Chico's and WH|BM have "compelling global growth prospects" and Soma has "considerable organic growth potential" with the intimate apparel market estimated at around $10 billion, Pierce commented.