Julie Lorigan - Vice President, Investor Relations, Public Relations and Corporate Communications Shelley Broader - Chief Executive Officer Todd Vogensen - Chief Financial Officer Diane Ellis - Brand President

Kimberly Greenberger - Morgan Stanley Susan Anderson - B. Riley FBR Lorraine Hutchinson - Bank of America/Merrill Lynch Janet Kloppenburg - JJK Research Paul Lejuez - Citi Research Group Kate Fitzsimons - Royal Bank of Canada Paul Trussell - Deutsche Bank Julie Kim - Nomura Instinet Dana Telsey - Telsey Advisory Group

Good morning and welcome to the Chico’s FAS Second Quarter 2018 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Julie Lorigan, Chico’s FAS Vice President of Investor Relations, Public Relations and Corporate Communications. Ms. Lorigan, please go ahead.

Thanks, Anita and good morning everyone. Welcome to Chico’s FAS second quarter 2018 earnings conference call and webcast. Joining me today at our National Store Support Center in Fort Myers are Shelley Broader, our Chief Executive Officer; Todd Vogensen, our Chief Financial Officer; and Diane Ellis, our Chico’s Brand President who will be participating in today’s question-and-answer session. Our earnings release issued today can be found on our website at www.chicosfas.com under Investor Relations, Press Releases. Let me caution you that today’s comments will include forward-looking statements about our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, which speak only as of today’s date. You should not unduly rely on forward-looking statements. Important factors that could cause actual results or events to differ materially from those projected or implied by our forward-looking statements are included in our earnings release issued this morning, in our SEC filings and in the comments that are made on this call. We disclaim any obligation to update or revise any information discussed in this call except as maybe otherwise required by law. And with that, I will turn it over to Shelley.

Thank you, Julie and good morning everyone. We had a solid second quarter with results in line with our expectations. Customers are responding favorably to new merchandise initiatives and we are also seeing promising growth in our new channel and in our digital channel. Digital sales were up double-digits in the second quarter. All brands showed improvement in comparable sales in the quarter both sequentially and on a year-over-year basis. While traffic was challenging, we continue to see positive trends in units per transaction and conversion. We are carefully balancing our marketing efforts between both brand building and transaction driving initiatives to more effectively engage with our existing customers and to reach new and last customer. We are seeing improvement in our trend, particularly in customer reactivation. Our new partnerships, including ShopRunner, Amazon.com and QVC are progressing nicely. Sales are increasing and these channels of distribution are proving to be effective in driving increased customer awareness and consideration, which is a positive indicator for our omni-channel growth strategy. And combined with our ability to leverage shared inventory, we are confident that these channels will be meaningful contributors to our sales and earnings over the long-term. Now, turning to results by brand, at Chico’s, as you may recall, our research indicated that many of our customers are in the workforce, not surprisingly as we offered more work wear, we saw an increased demand, including Travelers, no-iron basic knits and denim in the second quarter. However, our fashion component in knits, primarily pattern and novelty was softer than anticipated. We have addressed this and have adjusted our assortment to include more modern print with elevated fabrics and we are reemphasizing clean work appropriate options this fall and moving forward. Our pants category did not perform to our expectations and we have course-corrected and have entered the fall season with more variety in length, leg shape and style. Also, the next generation of our popular So Slimming technology will be included in the fall assortment of pants and denim. Our customers have historically responded very positively to our So Slimming offering and this innovative technology is better than ever. We are so proud that in September, our Chico’s brand will celebrate its 35th anniversary. In recognition, this fall we will pay tribute to our heritage by offering both in-store and online, a special edition collection of unique artisanal pieces. We especially want to recognize and honor our loyal customers and our longstanding associates with this beautiful and distinct collection. Lastly, we are pleased to announce that Chico’s has formed collaboration with NYDJ, formerly Not Your Daughter’s Jeans. Beginning in mid October, we will offer an exclusive denim collection with washes and colors in traditional sizes 0 through 18. This product incorporates a new innovative technology and fit that will augment our current denim offering. Our research identified a significant overlap with our existing target demographic and those that love the NYDJ brand. So, we view this as a unique opportunity to excite our current customers and to introduce a host of new customers to our brand. Turning to White House Black Market, we saw a healthy improvement in comparable sales trends in the quarter driven by strength in polished work wear. We have a significant opportunity to continue driving sales growth in the popular categories of polished casual and special occasion dressing. While we had a nice customer response to our polished casual, we were under-penetrated and in dresses, the category overall performed well, but we were light on our improved operating in special occasion dresses. We will incorporate these learnings into next year’s planning cycle, particularly for spring and summer to better meet the expectations of our customers. Our focus as we turn to the fall is on the continued execution of our brand positioning, improving quality and building a good better best assortment. We have historically seen the back-to-school season coincide with our customers return to refined work wear as she rebuilds our closet. Our assortments are improving and we look forward to building on the positive momentum we experienced in the second quarter. To showcase our new merchandise assortment, we have an integrated marketing program in place that includes investments in circulation, social marketing and digital designed to drive strong customer traffic and sales. Moving to soma, we are approaching the 1-year anniversary of Mary van Praag as Soma’s Brand President and Mary and her team have made tremendous progress in repositioning the Soma brand. We saw improved momentum in the business in the second quarter driven by Cool Nights Sleep Separate, our core vanishing collections and our new In Bliss bra. Notably, the performance of In Bliss has been so strong it is second only to our Vanishing Back bra, which is our number one bestseller. Offering innovative solutions is at the core of everything we do at Soma and our In Bliss collection offers superior soft comfort and support. We introduced In Bliss in June and we went full scale in July and it is exceeding every expectation. We also recently launched Style Essentials, which replaces what we refer to as our loungewear assortment. Style Essentials offers effortless outfitting with easy care and easy wear flattering pants and tops with on-the-go lifestyle. We have created 5 key bottoms each with a specific benefit that provides a unique solution to customers. We believe this improved line has a great opportunity to drive increased customer demand and we look forward to updating you on this new collection in future calls. Overall, Soma’s merchandise is improving and with our exciting new initiatives we are on track for stronger top line growth in the back half of the year. Turning to updates on our other initiatives across the organization, in special sizes, petites continued to be strong and generated over $3 million in incremental sales for Chico’s in White House Black Market in the quarter. And at Chico’s, we have rolled out our extensive sizes to 150 stores. While early we are pleased with the results which are now trending above plan. Next, we continued to make considerable progress in further advancing our omni-channel capabilities. We are focused on providing our customers with added convenience and inspiration to enhance the overall experience. We have shifted the culture in our field and headquarters organization providing the tools, training and support necessary to deliver a seamless, most amazing personal experience wherever and however our customers shop. We believe operating at the intersection of digital and physical is the road to success and we are bridging those gaps to innovation. We are uniquely positioned to service our customer and to optimize our store fleet as a sales center, a return center and a distribution center. We continued to make investments in technology to future proof and digitize our services and drive stronger sales and customer satisfaction. We are starting to realize the benefits of our investment. For example, our new Locate tool, which was fully implemented in all Frontline stores last quarter, is enabling us to shift in-store orders directly to the customer. And in the second quarter, we generated a significant increase in customer demand and far exceeded our expectations. Sales from our initial rollout of Endless Aisle also exceeded our expectations. And following the success we have fast-tracked our implementation plan. By the end of September, all designated stores will be connected to our shared inventory management systems for purchase online and ship-from-store. Also in the second quarter, we saw great customer response to our shop-to-look functionality and our customers especially love outfitting. We tested this capability with over 400 outfits across mobile and desktop and have doubled the product availability for online outfitting by the end of September. In addition, we are in the early stages of testing more advanced personalization initiatives as we look to leverage our data analytics. We are identifying customers’ needs, segmenting similar behaviors and improving our customer journey. We are making great progress across all of our omni initiatives and we will keep you updated on our efforts on this important front. Before I turn it over to Todd, I will comment a little bit on our new sales channel. Following the successful premier in May Soma have their second appearance on QVC in early August and we were a top performer in the fashion segment. We achieved our goal in the first 5 minutes on air and generated an 80% plus sell-through on an increased buy. We have additional events planned for the second half of the year and continue to see increased customer awareness and traffic to our Soma website as a result of these events. We continue to be pleased with the performance of ShopRunner, with sales doubling over the last quarter. Gross average order value continued to be nearly 30% higher than our average customer order. In addition, 34% of total customers who have ordered through ShopRunner are new or reactivated. Lastly, our collaboration with Amazon.com is progressing nicely and we have achieved results in line to slightly ahead of our Amazon’s expectations. We had our first prime day, which was highly successful. In fact, our Chico’s Slug Tee ranked as one of the top fashion items sold on prime day. We are in the process of planning for additional events thoughtfully increasing our SKU count and making other investments to further drive the top line and introduced more new customers to the brand. In summary, we are pleased with our results for the second quarter. We are positioning our brands for success and we are future-proofing, digitizing and personalizing our omni experience. We are pleased with our top line momentum and know we will continue to focus on and invest in those areas to drive profitable sales and value creation over the long-term. We remain optimistic about the road ahead for our company and for our brand. I will now turn the call over to Todd for more details on our financial results.

Thanks, Shelley and good morning everyone. We reported second quarter results that were consistent with the outlook we have provided on our first quarter call. Those results reflect the negative impact of the 53rd week shift of approximately 1.5% in sales. Overall, we were pleased with the improvement in our sales trends and believe that our growth initiatives are beginning to gain traction. We achieved a 100 basis point improvement in merchandise margin in the second quarter. This improvement reflects savings from the supply chain and sourcing initiatives that we have discussed previously as well as effective inventory management. We ended the quarter with clean inventory, down 4.6% compared to last year. Overall, gross margin rate was flat to last year as our merchandise margin improvement was offset by deleverage on fixed expenses and cost associated with the implementation of our omni-channel initiatives, including ShopRunner, Locate and Endless Aisle. Moving to SG&A expenses, second quarter SG&A was in line with expectations, up $0.5 million or 0.3% compared to last year, reflecting planned investments in marketing and technology partially offset by continued expense control in both our stores and shared services. Our balance sheet remains strong and we ended the quarter with $239 million in cash and short-term investments and $61 million in debt. Of note, during the quarter, we announced a new $200 million senior secured asset-backed credit facility. This new facility is cost effective and provides us with greater borrowing flexibility, which enhances our already strong liquidity. Second quarter capital expenditures totaled $10 million mostly comprised of investment in existing stores and technology. For the year, we continue to anticipate capital expenditures of approximately $60 million to $70 million. In the second quarter we closed 11 stores and we are on track to close a total of approximately 40 stores to 50 stores this year while taking advantage of select short-term lease extensions and medium-term rent reductions where possible. We continued to actively pursue opportunities to enhance our portfolio and negotiate more favorable terms. Turning to our financial outlook for the third quarter and full year 2018, for full year 2018 we are reaffirming our outlook as previously provided in our first quarter press release. We expect net sales to be down in the mid single-digit range excluding the impact of the 53rd week and we anticipate comparable sales to be down in the low to mid single-digit range. We expect gross margin rate expansion of approximately 50 basis points which is within our previously guided range and we expect SG&A dollars to be approximately flat to fiscal 2017. As we look at the back half of the year given the momentum in our omni-channel initiatives, we expect stronger sales trends than we experienced in the first half. However, we also anticipate additional costs associated with the implementation of our omni-channel initiatives which should roughly offset the improved sales outlook in the third and fourth quarters. For the third quarter we expect net sales to be down a low single-digit percentage compared to last year which includes the benefit of lost sales from last year’s hurricanes, we also expect comparable sales to be down low single-digits compared to last year – also compared to last year. We expect third quarter gross margin rate improvement of approximately 50 basis points due to growth in merchandise margin from our supply chain and sourcing initiatives and partially offset by the impact of costs associated with the implementation of our omni-channel initiatives. We anticipate SG&A dollars to be up in the range of $8 million to $10 million due to continued advancements in technology to enhance the customer journey as well as investments in marketing. Now I will turn the call back over to Julie for Q&A.

Thank you, Todd. At this time we will be happy to take your questions. I will turn it back over to Anita to begin the process.

We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Kimberly Greenberger with Morgan Stanley. Please go ahead.

Great. Thank you so much. Good morning, I wanted to ask about some of the omni-channel initiatives that you have got going, in particular the Amazon initiatives and ShopRunner, I am wondering how quickly you think these initiatives might be able to scale and when might you expect these initiatives to be let’s say more meaningful as a percentage of total revenue, same question with the QVC partnership with Soma? Thanks so much.

Hi Kimberly, how are you?

Great. Thanks.

Thanks for asking the question. I will start a little bit about the idea of alternative channels and then I will turn it over to Todd. As we have said before we have been very careful in selecting our alternative channel partners and have sort of a specific role that each one of them play within our portfolio just starting with QVC and Soma. As we look at Soma and understand more about the brand and the incredible loyalty of the customers that we have at Soma, we understand that this brand awareness is a huge opportunity for us at Soma. So the opportunity and the partnership that we have QVC although tremendous and we anticipate will drive volume and is today its primary purpose is brand and brand awareness. And we are already seeing today some great success with new customers coming into the store being familiar with the brand having heard of the brand through QVC. We continued to monitor and test and as we said in the script today we have got additional events planned with QVC and Soma in the future. ShopRunner again was very exciting to us because of the lack of customer overlap although the ShopRunner customer is in our target demographic and especially strong at White House the overlap between that customer and the ShopRunner customer was low. So again not only are we seeing a great opportunity to reactivate customers who had once shopped with our brands, but also it’s a terrific source of new customers for us even today. And as we continued to build our relationship with that and understand even more that that partnership can do for us. Amazon was really a two-fold partnership, it was both brand awareness, the opportunity to have access to and market to that prime consumer, which is a significant number of customers that we wouldn’t have access to today and it was also tied to our fiscal plan. So, the fact that you can purchase on Amazon and return to us in-store and that just continues to be a great learning opportunity for us and we are carefully adding SKUs and adding variety to Amazon and it has a specific purpose. It is our basic base of the pyramid. We don’t have fashion items or even necessarily everyday fashion. On the Amazon site we are really driving that consistency and reorder and new introduction to consumers. So we are very happy with our new channels. We continued to explore additional ones like Cruise and Airport which we are continuing to grow and launch as well as our partnership with alternative brands like NYDJ.

Thanks so much.

I will just carry on with the specific ways you talk about sales growth, new customers in consideration is a big part of what we are doing. We had talked about that for this year specifically we wouldn’t break those out because we are really just starting and probably we will not get to a material sales number this year. But showing that this is a process where we are gaining traction, we are learning as we go, we want to make sure that we don’t get too far ahead of ourselves too quickly. So we are seeing good growth, it’s meeting our expectations and then some. And we will be something that we build into over time.

Thanks so much.

Alright. Thank you.

The next question comes from Susan Anderson with B. Riley FBR. Please go ahead.

Hi, good morning. Thanks for taking my question. It’s nice to see that improvement across all the brands this quarter and I was wondering Todd if you could maybe dig in a little bit more on the gross margin improvement for the back half if you could, maybe just update us on your thoughts or give more some color on what’s the drivers of the improvement. And then also just on the occupancy line if you could remind us what comp you need to leverage that and I guess I am assuming it was impacted a little bit more this quarter because of the negative impact from the calendar shift. And on the omni-channel costs for the second half, is that new versus the beginning of the year? Thanks.

Alright. Thank you, Susan. I will start with gross margin improvement. One of the things we have been very focused on is our supply chain and sourcing. We more so than ever are working with our vendors to make sure we are focused and where we are sourcing our goods taking advantage of the fact that we are a 3-brand company is that in a lot of cases we will have base fabrics that are very consistent that we can leverage with our vendors, we can also leverage overall shipping and overall freight costs and those types of things really help us to drive those sourcing savings we have targeted $30 million to $40 million in savings this year and we are right on track for that amount. And that is what really does help drive that gross margin. We have mentioned some of the omni-channel costs. It really is expected though what I would tell you is we are off to a strong start. So to the extent that we are seeing a strong start that is great news for the top line. There is also fulfillment costs that come with ship from store initiatives. So everything from packaging to all the other logistics that come with those initiatives, you have the cost and so that’s also something we are considering in gross margin. For occupancy in particular, we are still at the same stage. We do look to get leverage off of occupancy at that low single-digit comp rate and we are still continuing to see that. To your point we did have sales down because of the 53rd week that we are down almost 6%. That makes it difficult to get leverage when the occupancy is fixed and the calendar shift causes the sales to be a little bit lower just artificially. So same story as the past we are seeing good cost savings, good negotiation, good partnership with our landlords and that keeps that occupancy leverage in that low single-digit range.

Got it. And what’s the impact of the calendar shift in the third and fourth quarters?

It will be less meaningful. First quarter and second quarter are really the biggest quarters. We will have a small amount in Q4, but we should be through the biggest chunks of that calendar shift impact.

Great. Very helpful. Thanks so much. Good luck next quarter.

Thank you.

The next question comes from Lorraine Hutchinson with Bank of America/Merrill Lynch. Please go ahead.

Thank you. Good morning. Understanding that there are a lot of sourcing savings coming through, I guess I just wanted to tear a little bit more about the cadence of gross margin, because the 3Q GM guidance of 50 basis point implies a huge step up in the fourth quarter to hit 50 for the total year. So I was just wondering if you could help point to some of the opportunities that you see in the fourth quarter on the gross margin line?

Absolutely. So, there are a few things going on in there. First and foremost is really that sales trend change. So, we do expect to see continued sales improvement. If you look at first to second quarter, comp sales went from down 5.9% to down 3.2%, that’s a healthy improvement to see that across all brands certainly gives us confidence. So, there is an element of gross margin that is just plain leveraging the fixed costs that are in margin occupancy in particular. And so that certainly helps the rate. Also, we continue to expect in margin improvement. We are in good position from an inventory perspective. We have really solid purchase plans that align with our sales expectations and that should also help us from an overall promotional gap that gets us to a much more balanced range and where we expected to be for this year. So…

And Lorraine, another thing to keep in mind is that we have been very focused on this 3-year plan, the first year was identifying our issues, the second year was operationalizing the fixed of those, and the third year was really sales driving. So when you look at that gross margin expansion, you can also look at the tail end of a lot of that front of the house, back of the house work that we have done between the three brands rationalizing our vendor base, positioning fabric, finding new sources of manufacturing, and really streamlining our processes that are resulting in a more profitable outcome for us in the end.

Thank you.

Thank you.

The next question comes from Janet Kloppenburg with JJK Research. Please go ahead.

Hi, everybody. Todd, I had a question on the SG&A, it came in light to my expectations basically flat in the second quarter, but your guidance on the third quarter was much higher than I would have expected. I know that there is the marketing spend is higher, plan to be higher in the first and the third, but it does seem a bit higher than expected. And I was wondering if there was any shift from the second quarter to the third quarter. And just on the gross margin expectation for – I am sorry, not the gross margin, my question is on Chico’s, Shelley you said that the product is resonating very well here in August. Could you maybe give us an idea of where the improvements have come? Thanks.

Absolutely. I will start with SG&A and we do have Diana Ellis, our Brand President for Chico’s with us. So, we give Diana a chance to talk about merchandise. From an SG&A perspective, we had planned basically the way it has rolled out. Q1 and Q3 are biggest turnarounds from a sales perspective as we go through clearance in Q2 and Q4 and bounce back with customers really looking to refresh their wardrobe. So, it’s a natural time to get out there in front of her when she is looking for attention from us and also not getting crowded out by things like back-to-school. So, those are the natural times to really look to do more marketing, look to do more customer-facing marketing, so that is falling within the range of what we had expected and it balances out with our expectations across the year.

And there was no – Todd, there were no one-time benefits to the second quarter SG&A that brought it in like to my expectations?

Nothing significant, no, we always are looking to control our overall expenses in this quarter we certainly – no exception, we were investing behind the things we are confident in and then saw very strong savings across both store expenses and shared services.

Okay. Thank you.

And Janet thanks for your question on products, with regard to resonating – hi there. With regard to what’s resonating with our customers right now we are seeing very strong performance in our travelers business, which is one of our core franchises as well as our Zenergy activewear business, very strong woven top continue to be strong particularly in our non-iron category within woven tops. Opportunities that we see are in as Shelley mentioned earlier in our pant assortment as well as the top of the pyramid for our knit business, all of which we have addressed in the fall business going forward. We have increased our pant shapes. We have got ourselves back in a good position on our basic pant, broadened again that assortment of leg shapes and styles. And then with our knits, we have worked very hard to elevate our Princess at the top of the pyramid. They were probably leaning a little too matronly or mature and so we have made those shifts to make sure that that product is more elevated as well as improvements there in quality in fabrics. So we are really excited about how the customer is responding to our products and feel really good about the assortments that we have going into fall.

Thanks so much.

Thank you.

The next question comes from Paul Lejuez with Citi Research Group. Please go ahead.

Hi. Thanks guys. Can you just talk a little bit about the comp metrics at Soma from a traffic and ticket perspective, also curious about the profitability in that business compared to the rest of the chain, right now what’s your outlook is for the rest of year? Thanks.

Absolutely, so for Soma it’s really been a tale of two quarters in ramping going into the back half. We talked about in Q1 that if Soma was up against a tough bra launch from last year and looking towards a new bra launches they went into second quarter and that has absolutely been the case. Progression through the quarter got nothing but better as Soma had its new bra launch within Bliss and customer response has been really strong. June was very much soft launch without marketing behind it and then July more of that full launch. And as Shelly mentioned second best bra in the collection which is remarkable given the newness to the overall collection, so that is driving the overall comp and it gives us confidence going forward.

And some of the excitement that we have behind Soma is we have had success in the past with some really great individual bra launches that sort of carry today at Soma. What we are seeing with Soma today is continued growth in the franchise of Vanishing whether we are talking Vanishing Edge panty, Vanishing Back bra, introducing new customers to QVC and built through our most amazing personal service and the focus on fit and fit revolution in our stores, but it’s not just kind of a One Note Joe, we are seeing some incredible resurgence in our PJ business with our digital pajama bar where our customers can mix and match the collection digitally and the way that, that’s coming to life in-store seamlessly the same experience and fun that you are having online mixing and matching your pajamas in Soma is very much mirrored with the in-store experience. And now with the new launch of style essentials in lounge where we don’t have to rely so heavily on just the launch of one signal item. We have got that sort of record breaking and Bliss launch bringing people in, but there is much more for them to experience and buy both online and in-store at Soma.

Thanks guys. Good luck.

Alright. Thanks Paul.

Your next question comes from Brian Tunick with Royal Bank of Canada. Please go ahead.

Yes. Hi, this is Kate on for Brian. Thanks for taking our questions. Todd, you had talked about a stronger start here in August, I am just wondering if you are seeing that improvement across all three brands, should we think about Chico’s may be more leading the way. And then secondly just as we think about the fleet, is that relatively consistent or just how should we think about the hurricane impacts from last year? Thank you.

Sure. Thanks, Kate. First, I will get started, what I’d say is we would focus more on the July finish. We have gotten away from talking about quarter-to-date comps a while ago for a lot of reasons, but I think as you look across Q1 and Q2 going from Q1 to Q2, we did see broad-based improvement and that does give us a lot of confidence going into Q3 and our trends are what is included as we look forward to Q3. And our overall outlook in terms of the fleet in hurricanes yet it was relatively proportional the impact last year. It really obviously was very focused on the Southeast, particularly Florida and Texas for the hurricanes. And so when you look across our fleet, Chico’s and so much tend to be slightly more skewed in the Southeast, but it is really pretty broad-based and so that will be the overall impact can be relatively spread.

Okay, great. And then just one quick follow-up as you guys are ending the $100 million to $110 million cost saving program this year, are there any potential opportunities that you are looking out into next year, just to ongoing cleave expense out of the business?

I would say expense savings is just the core part of how we run the business. It’s a core part of our ethos that we are always looking to, we don’t want to get too far ahead of ourselves and call out particular programs, but everyone across the organization is looking for ways that we can be more efficient and that should be core.

Yes. And I think that’s the key. So, if you are talking about just reducing expenses off existing practices, I think we have done what we can do there and we are now have entered that phase really over the last 6 months of reinventing the processes, so that we can have a low cost operation that will continue to lever. So, what’s the most efficient and effective way for us to do business, while reducing cost forever. And as the business changes, as consumer needs change as the fact that we want to meet her anywhere at any time when we want to add the right emphasis and cost to deliver that side of the business, we have got to right-size and continue to reengineer the remainder of the business to keep our cost low. So, that’s sort of a cultural mentality that we have embraced over the last few years here and we will continue to move that forward.

Great guys. Best of luck.

Thank you.

The next question comes from Paul Trussell with Deutsche Bank. Please go ahead.

Good morning. Wanted to just encircling back to the comp metrics, I saw that average dollar sales were up this quarter for the first time in about 1.5 years, you can just touch on the driver there and your thoughts on that metric over the balance of the year? And then separately on stores, if you can speak to your negotiations or concessions you are receiving relative to maybe prior periods along with any color around recapture rates and your just overall field today about the size and performance of the fleet? Thank you.

Absolutely. Thanks for the question. So on the comp metrics you are right, average dollar sale was up this quarter, which we were very happy with. We are seeing strong performance on units per transaction. And actually what I would tell you is we are seeing strong performance on both conversion and units per transaction. So for our long-term, we have looked to those two metrics to be an indicator for us, here response to the product. And when she comes in, she is buying and she is buying units, that’s a sign for us that the product is resonating and that is something we will be pushing in addition to our promotional effectiveness looking to control AUR going forward. In terms of stores, overall in working with landlords we are continuing to see flexibility on term on length of leases and to the extent that we are able to work with our landlords on understanding that there is volatility in market, there is a willingness on most of our landlords parts to stay flexible on the term. And even more so what we are seeing now is as we have gotten further into some of our short-term extensions and we are seeing more sustained trends that give us confidence in particular sites, we are seeing a desire from landlords to maybe sign up for just a little bit longer term, but with good cost savings. That’s part of that ongoing partnership with our landlords that is very much paying off at this point.

And Paul, remember, we are still dedicated to our fleet. I mean, we are an omni-retailer and we believe that the winning brand have to have strong and unique and differentiated brands and they have to have both the physical manifestation of their brand and a great digital experience. And so as Todd and his real estate team has been successful in exiting the sites we don’t want to be in and continuing to lean out the portfolio, we also have a lot of flexibility in continuing to operate these as sales centers and unique way for us to deliver most amazing personal service to our customer and utilize our data in a unique physical way as well as using them as a return center and now with Locate and Endless Aisle as a distribution center. So, real estate played a very important strategic role within our brand and because of the flexibility that we have had with our leases, we can continue to experiment what is the right size and how much more profitable and how much of an integral part we can make that at still man-to-man service that you are getting with most amazing personal service within our boutiques.

That’s helpful color. Thank you and best of luck.

Thank you.

[Operator Instructions] The next question comes from Simeon Siegel with Nomura Instinet. Please go ahead.

Good morning. This is Julie Kim on for Simeon. Thank you for taking our question. Can you just give more color on the traffic trends you saw on the quarter and the customer reactivation you mentioned if that’s specific to a certain channel or brand? And separately what you are seeing in relation to rent dynamics, what kind of contentions you are getting and if there is any change in the fixed versus variable component to your rent structure? Thank you.

Sure. So from a traffic perspective and the reactivation perspective, we really have put a lot of effort behind, especially reaching out to customers who use to shop with us, who we maybe haven’t seen in a while letting them know the new things that are in our assortment and the brand positioning that is evolving and we are getting very strong response of that. And that is the cross-channel. So it is broad-based and something that gives us a lot of again confidence going forward. We also are seeing the benefit on that front from things like ShopRunner and Amazon, where we are able to increase consideration, increase awareness and use that to continue to drive traffic to our brands. And I think those two Shelley’s earlier comments will be areas that we continue to try to leverage and to put emphasis on to drive that traffic. In terms of rent dynamics, I would say our focus is not so much on getting variable rents though that certainly comes up in situations, but it’s really around providing more either opportunity and options on the length and tenure of our leases or on looking at the just plain rent structure in leases and again seeing good positive cooperation and partnership from our landlords.

Great, thank you.

Thank you.

The next question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.

Good morning and nice to see the improvement across brands. You mentioned the collaboration with Not Your Daughter’s Jeans or the NYDJ jeans, how do you see that going into the mix, how the price points relative to yours, do you see the opportunity for other collaborations and what does it mean in terms of margins? Thank you.

I will start out with that Dana, sorry and then I will turn it over to Diane. Again, we have a pretty strategic roadmap of partners that we select for specific purposes to help us either grow our top line, bringing new customers to the brand, brand awareness, margin enhancement, reactivation, new customer acquisition. In partnering with NYDJ they really hit so many of those categories for us. It’s a great demographic crossover with our Chico’s brand customer and many of our customers are familiar with that brand and many aren’t and the same goes with that NYDJ customer. So it’s the opportunity for a great new customer interaction and enhancement. It will be an exciting items for our current loyal Chico’s customer to see and very much like we are talking about with Soma earlier where we had great success in bringing in one particular franchise, selling a lot of that franchise and not necessarily lifting the rest of the boat. One of the focuses that the Chico’s brand has is in the pant category we have had some unbelievably great pant launches in Brigitte or in Juliet. But it hasn’t necessarily lifted the pant category or the store. So our focuses is finding the right partners like in NYDJ and if there are others that that hit all of the criteria we would consider bringing those in as well. We have been successful in doing that with the names bras for example in Soma online. And we believe it’s an enhancement to our existing brand that will help lift that entire category and add an additional item at a great top, a great jacket and to match that with the new customer. And I will turn it over to Diane for some other specifics.

Yes. Thanks Shelly. And again thanks Dana for the question. NYDJ for us on the initial launches in 50 stores and 50 boutiques and online as well, so we are excited about the opportunity to include some unique technologies that are new to us and exclusive to us at Chico’s. It also – the collaboration will also have the opportunity to combine what’s great about NYDJ in terms of their fit with the unique prints and color palettes that we have within Chico’s. And we think that the winning combination for our customer as well as new customers which again is one of the key benefits of this collaboration. So we are excited about it and we think price point wise it’s about 15% higher than our typical average price point for our denim. But we think again, the technologies and unique exclusive aspects of these warrants that incremental price point and we don’t see it as a trade-off with our existing inventory. We really do see it as incremental to our existing business both from a sales perspective and more importantly from a customer acquisition perspective.

Does this replace anything else in the store and are there other categories that you are looking to do these partnerships with? Thank you.

Thank you. At this point it again is incrementals that we see it as a layer of assortment that we didn’t have both from a technology perspective, a fit perspective and from unique design component. So we see it as incremental. But we are as Shelly said in the expiration stages of other partnerships where we achieved that same unique combination of what I would like to call one plus one equals three where the two brands together have the opportunity to not only drive incremental sales, but the opportunity to attract new customer acquisition to our brand and create further consideration for the Chico’s brand.

Thank you.

Thank you, Dana.

This concludes our question-and-answer session. I would now like to turn the conference back over to Shelley Broader for any closing remarks.

Thank you. So in summary, we are very excited about the opportunities ahead. We are focused on those initiatives that will build on the momentum we are beginning to see. These include strengthening our merchandising assortment, growing our channels of business, expanding our partnerships and further advancing our omni-channel capabilities. We are investing and acting quickly to enhance the customer experience and drive improved performance of our business. So thank you for joining and have a nice day.

This conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.