Stock Picks: CHS Up, ADSK Down

Clothing retailer Chico’s FAS (CHS) was up more than 14% in early trading this morning after the company reported better-than-expected sales and earnings for the third quarter.

Chico’s earnings of 13 cents per share, compared to one cent per share in the same quarter last year, beat analysts’ expectations of seven cents per share. Revenue of $446.9 million was also better than anticipated, with comparable same-store sales up 12.8% over the previous year. The company’s gross margins increased by an impressive 400 basis points.

The company’s results are surprising, says Margaret Whitfield, an analyst with Sterne, Agee & Leach, but she cautions that Chico’s performance isn’t a sign that all consumers are returning to stores. “They focus on the more affluent consumer, whose spirits may be buoyed by improving trends in the stock market,” she says. New management has also improved the product offerings and lured both lapsed and new customers into stores.

Chico’s hasn’t traditionally been a gift destination, making the fourth quarter difficult – but improving trends in jewelry sales could change that this year, Whitfield says.

The bottom line: Improved product has lured customers back into the company’s stores, and it could be poised for a better-than-usual fourth quarter.

Design software company Autodesk (ADSK) was down more than 10% in morning trading on disappointing guidance, despite yesterday’s report of better-than-expected earnings for the fiscal third quarter.

Autodesk’s non-GAAP earnings of 27 cents a share, down from 56 cents in the same quarter a year ago, beat estimates. Revenue was $417 million, down 31% from the year-ago quarter.

Revenue and earnings were better than expected, but the company also said that non-GAAP operating margin for the first quarter of fiscal 2011 would likely be flat to slightly down year-over-year. That announcement “caught all by surprise and weakens the bull case considerably” for the company, Heather Bellini, an analyst with ISI Group, wrote in a report this morning.

The company’s customers, particularly in architecture and engineering, have reduced headcount, and it will be difficult to achieve revenue growth until those firms start hiring again, Bellini wrote. Autodesk CEO Carl Bass struck a similar note in a statement: “While there are several data points in our business that are encouraging…the continued job losses in our core markets represent ongoing challenges to a swift recovery in our business,” he said.

The bottom line: This quarter was better than expected, but the company’s outlook for the future is spooking investors.