UPDATE: Nomura Initiates Coverage on Chico's FAS on Multiple Growth Drivers

In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on Chico's FAS CHS with a Buy rating and $19.00 price target. In the report, Nomura noted, “We believe that each of CHS's four concepts sits at various stages of growth, with WHBM and Soma at interesting inflection points in their maturity. Expansion into smaller markets, larger stores, and outlet growth should help drive HSD annual sq ft growth, the second-highest in our softlines coverage universe. We expect CHS to generate $150-200mn in annual free cash for the foreseeable future for an 8.3% FY14 FCF yield vs. our coverage universe average of 5.4%. We expect management to return $150-200mn annually through buybacks and quarterly dividends, which could drive $0.06-0.08+ in EPS annually. We project FY13/FY14 EPS of $1.03/$1.28 vs. the Street at $1.07/$1.27. Our target price of $19 is based on 14.9x our FY14 EPS estimate vs. the peer group average of 14x and the stock's 10-year average of 20x.” Chico's FAS closed on Friday at $15.66.