What Happened:
Shares of women’s apparel and accessories retailer Chico’s FAS (NYSE:CHS) jumped 63.1% in the pre-market session after the company announced it has agreed to be acquired by Sycamore Partners for $7.60 per share in cash. This share price implies a 65% premium over the company's closing stock price on September 27, 2023, the last trading day before the deal was announced. Sycamore Partners is a private equity firm specializing in retail, consumer, and distribution-related investments. Upon the close of the transaction, Chico's FAS will transition into a privately held company.
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What is the market telling us:
Chico's's shares are somewhat volatile and over the last year have had 28 moves greater than 5%. But moves this big are very rare even for Chico's and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was about one month ago, when the stock gained 7.42% on the news that the company reported second quarter profits ahead of expectations as adjusted earnings per share (EPS) exceeded Wall Street's estimates. On the other hand, the company missed Wall Street analysts' expectations for same-store sales and revenue. The major negative was that the company reduced its full year revenue and EPS guidance. Next quarter's revenue and EPS guidance are also below expectations. Overall, the results could have been better, but the stock is likely up reflecting low expectations going into the earnings report.
Chico's is up 53.6% since the beginning of the year. Investors who bought $1,000 worth of Chico's's shares 5 years ago would now be looking at an investment worth $864.48.
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