Chico's becomes the latest retailer to sell on Amazon

Key Points
  • Chico's will begin selling merchandise on Amazon in mid-May.
  • The company says it could add items from its other brands, White House Black Market and Soma, "as the new business channel gains traction."
Pedestrians pass in front of a Chico's store in New York
Scott Mlyn | CNBC

Chico's FAS, the parent company of Chico's, White House Black Market and Soma, announced Monday it plans to sell Chico's merchandise on Amazon.

Chico's shares had jumped more than 4 percent in the premarket, but then retreated and were down 1 percent in the regular trading session.

The company said shoppers in mid-May will find a "select assortment" of clothing and accessories, including its athleisure line, no-iron shirts and jewelry, on Amazon. Chico's said it could begin selling items from White House Black Market and Soma via Amazon, "as the new business channel gains traction."

Chico's said it will keep control of marketing, pricing and promotions for its products in this new partnership.

"Chico's FAS will be one of the few vertically-integrated specialty retailers with Prime eligibility on," Chico's FAS CEO and President Shelley Broader said in a statement.

Amazon has been looking to add established clothing brands to its site, which could propel the e-commerce giant to become the No. 1 apparel retailer in the U.S. this year. It's been working with Nike, Calvin Klein and Carter's, to name a few, to help dismantle a sea of third-party sellers flooding the site with used or marked-down inventory.

Still, many brands worry that once they agree to sell on Amazon they will be pressured to slash prices, which would hurt profit margins.

According to Jefferies analyst Randal Konik, Chico's has been cutting back on promotions and is keeping a tighter control on inventories. "[Merchandise] rebalancing is beginning to yield results at core Chico's, and we see the other divisions following suit," he said in a note to clients.

In the fourth quarter, same-store sales for Chico's FAS fell about 5 percent, which was better than what analysts were anticipating. Inventories decreased more than 6 percent during the period, while selling, general and administrative expenses also dropped from a year earlier.

Regarding its partnership with Amazon, Chico's said the deal is "not expected to be material" to 2018 results "given its early nature."

Chico's shares are up about 15 percent so far this year.