Chico's shares rise on possible PE buyout report

Stock Market Predictions

(Global Markets) - Shares of Chico's FAS Inc (CHS.N) rose as much as 7 percent on Friday after a report in an online publication about possible private equity interest in the women's clothing retailer.

A dealReporter.com story suggested that Chico's may be an attractive target for private equity firms, Interactive Brokers Group options analyst Caitlin Duffy wrote in a report on Friday.

Global Markets, however, could not access the report.

Tiburon Research Group analyst Rob Wilson said Chico's, which has seen its sales slow down, might be looking to sell itself before more bad news comes out.

Shares of Fort Myers, Florida-based Chico's were trading at $11.12 in Friday afternoon on the New York Stock Exchange. They had hit a high of $11.23 earlier in the day.

Chico's did not respond to an e-mail and calls seeking comment.

Retailers like Chico's have been forced to increase markdowns to attract customers in a heavily competitive environment, eating into their profits.

Three years ago, the company had set a goal to earn $1 a share for fiscal 2012. However, last month it said that the target would not be met.

For fiscal 2013, it expects to earn $1.50 a share.

"I think (Chico's) made a mistake putting up some very aggressive earnings target out there ... They're certainly not on the trajectory on which they'll be able to achieve their target," analyst Wilson, who thinks $14 a share would be a good price for the company, said.

Interactive Brokers Group's Duffy said call options on the specialty retailer were attracting buyers. She said investors traded more than three times as many calls on Friday compared with Thursday.

In November, the retailer had warned that its margins will remain under pressure as it offers higher discounts to draw shoppers in the holiday season.

(Reporting by Arpita Mukherjee and Ranjita Ganesan in Bangalore; Editing by Viraj Nair)