FRAN
$10.30
Francesca's
($.38)
(3.56%)
Earnings Details
1st Quarter April 2017
Tuesday, June 06, 2017 7:30:20 AM
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Summary

Francesca's Misses

Francesca's (FRAN) reported 1st Quarter April 2017 earnings of $0.12 per share on revenue of $107.7 million. The consensus earnings estimate was $0.14 per share on revenue of $113.2 million. The Earnings Whisper number was $0.15 per share. Revenue grew 1.5% on a year-over-year basis.

The company said it expects second quarter earnings of $0.13 to $0.18 per share on revenue of $120.0 million to $124.0 million. The current consensus earnings estimate is $0.28 per share on revenue of $126.7 million for the quarter ending July 31, 2017. The company also said it now expects fiscal year earnings of $1.07 to $1.17 per share on revenue of $518.0 million to $537.0 million. The company's previous guidance was earnings of $1.11 to $1.21 per share on revenue of $527.0 million to $543.0 million and the current consensus earnings estimate is $1.16 per share on revenue of $531.5 million for the year ending January 31, 2018.

Francescas Holdings Corp operates a chain of retail boutiques selling apparel, jewelry, accessories and gifts.

Results
Reported Earnings
$0.12
Earnings Whisper
$0.15
Consensus Estimate
$0.14
Reported Revenue
$107.7 Mil
Revenue Estimate
$113.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

francesca’s(R) Reports First Quarter Fiscal Year 2017 Financial Results

Net sales increase 1% to $107.7 million

-- Comparable sales decreased 5%

-- Diluted earnings per share were $0.12

Francesca’s Holdings Corporation (FRAN) today reported financial results for the first quarter ended April 29, 2017.

Steve Lawrence, President and CEO, stated, "We were disappointed in our comparable sales performance, which was impacted by lower than expected boutique traffic and conversion rate. February and March sales were soft, primarily as a result of the later Easter, driving weaker than anticipated sales in full-price product. In spite of lower sales, our first quarter diluted EPS came in at the low end of our guidance due to better than expected merchandise margins and cost management. Since the beginning of April, sales trends have improved with the onset of warmer weather and the Easter shift."

Mr. Lawrence continued, "One of our focuses continues to be on strong inventory controls and we were pleased that we reduced average inventory per boutique by 15% and entered the second quarter with an improved mix of fresh merchandise. While our first quarter performance was not up to our expectations, we believe that an improving sales trend, coupled with current trend-right assortment, will position us to get back on track in the second quarter. We have begun to rollout our new POS which will give us much more robust omni-channel capabilities. Several other initiatives are starting to roll out later this year, such as our new loyalty program. We believe that these initiatives will help fuel sales in the second half of the year."

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">FIRST QUARTER RESULTS</span>

Net sales increased 1% to $107.7 million from $106.1 million in the comparable prior year quarter. This increase was due to the addition of 42 net new boutiques since the end of the first quarter last year. Comparable sales decreased 5% compared to an increase of 2% in the same period last year. The decrease in comparable sales was due to a decrease in boutique traffic and conversion rates. The Company opened 12 new boutiques and closed four boutiques during the quarter, bringing the total count to 679 at the end of the quarter.

Gross profit, as a percent of net sales, decreased to 45.2% from 46.3% in the prior year quarter. This unfavorable variance was principally due to deleveraging of occupancy costs as merchandise margin was up slightly compared to last year.

Selling, general and administrative expenses increased 10% to $41.3 million from $37.7 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll to support the larger boutique base as well as increases in marketing and software costs.

Income from operations was $7.4 million, or 6.9% of net sales, compared to $11.5 million, or 10.8% of net sales, in the prior year quarter.

Our effective tax rate was 40.3% compared to 37.6% in the same prior year period. The increase in the Company’s effective tax rate was due to true up of prior year state taxes.

Net income for the first quarter was $4.3 million, or $0.12 diluted earnings per share, compared to $7.1 million, or $0.18 diluted earnings per share, in the comparable prior year period.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">BALANCE SHEET SUMMARY</span>

Total cash and cash equivalents at the end of the quarter were $48.1 million compared to $35.4 million at the end of the comparable prior year quarter. During the first quarter, the Company repurchased 609,000 shares of its common stock at a cost of $9.3 million.

The Company ended the quarter with $31.4 million of inventory on hand compared to $34.8 million at the end of the comparable prior year period. Average ending inventory per boutique decreased by 15% versus the comparable prior year period principally due to improved inventory management.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">SECOND QUARTER AND REVISED FISCAL YEAR 2017 GUIDANCE</span>

For the second quarter ending July 29, 2017, net sales are expected to be in the range of $120 million to $124 million; assuming a 3% decrease to a 1% increase in comparable sales compared to flat in the prior year. The Company plans to open approximately 18 new boutiques and close approximately six existing boutiques during the second quarter. Diluted earnings per share are expected to be in the range of $0.13 to $0.18.

For the fiscal year ending February 3, 2018, net sales are expected to be in the range of $518 million to $537 million; assuming a 2% decrease to a 2% increase in comparable sales compared to the prior year increase of 2%. The Company expects to open approximately 60 to 65 boutiques and close approximately 10 to 15 boutiques in fiscal year 2017, compared to 64 new boutiques opened and nine boutiques closed in fiscal year 2016. Diluted earnings per share are expected to be in the range of $1.07 to $1.17 compared to the prior year of $1.09 and prior guidance of $1.11 to $1.21. The number of average diluted shares for the full year assumed in guidance is 36.8 million shares. The effective tax rate is estimated to be 38%.

Capital expenditures for fiscal year 2017 are expected to be in the range of $28 million to $33 million.

Conference Call Information

A conference call to discuss the first quarter results is scheduled for June 6, 2017, at 8:30 a.m. ET. A live webcast of the conference call will be available in the investor relations section of the Company’s website, www.francescas.com. A replay of the call will be available after the conclusion of the call and remain available until June 13, 2017. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 8256628. A replay of the web cast will also be available shortly after the conclusion of the call and will remain on the website for ninety days.

Forward-Looking Statements

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements reflect our current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected. These risks and uncertainties include, but are not limited to, the following: the risk that we cannot anticipate, identify and respond quickly to changing fashion trends and customer preferences or changes in consumer environment, including changing expectations of service and experience in boutiques and online, and evolve our business model; our ability to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise through our ecommerce business; our ability to successfully open and operate new boutiques each year; and our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth. For additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in our Annual Report on Form 10-K for the year ended January 28, 2017 filed with the Securities and Exchange Commission ("SEC") on March 22, 2017 and any risk factors contained in subsequent quarterly and annual reports we file with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement.

About Francesca’s Holdings Corporation

francesca’s(R) is a growing specialty retailer which operates a nationwide-chain of boutiques providing customers a unique, fun and personalized shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca’s(R) operates approximately 679 boutiques in 48 states and the District of Columbia and also serves its customers through francescas.com. For additional information on francesca’s(R), please visit www.francescas.com.

Francesca’s Holdings Corporation

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts, Percentages and Basis Points)

Thirteen Weeks Ended
April 29, 2017
April 30, 2016
Variance
In USD
As a
In USD
As a
In USD
%
Basis
% of Net
% of Net
Points
Sales
Sales
Net sales
$
107,689
100.0 %
$
106,113
100.0 %
$
1,576
1
%
-
Cost of goods sold and occupancy costs
59,006
54.8
%
56,983
53.7
%
2,023
4
%
110
Gross profit
48,683
45.2
%
49,130
46.3
%
(447
)
(1
)%
(110
)
Selling, general and administrative expenses
41,281
38.3
%
37,666
35.5
%
3,615
10
%
280
Income from operations
7,402
6.9
%
11,464
10.8
%
(4,062 )
(35
)%
(390
)
Interest expense
(113
)
(0.1
)%
(109
)
(0.1
)%
(4
)
4
%
-
Other expense
(25
)
0.0
%
-
0.0
%
(25
)
n/a
-
Income before income tax expense
7,264
6.7
%
11,355
10.7
%
(4,091 )
(36
)%
(400
)
Income tax expense
2,931
2.7
%
4,274
4.0
%
(1,343 )
(31
)%
(130
)
Net income
$
4,333
4.0
%
$
7,081
6.7
%
$
(2,748 )
(39
)%
(270
)
__________________________
Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.
Diluted earnings per share
$
0.12
$
0.18
Weighted average diluted share count
37,149
40,400
Comparable sales change
(5)%
2%

Francesca’s Holdings Corporation

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

April 29, 2017
January 28, 2017
April 30, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
48,101
$
53,202
$
35,421
Accounts receivable
8,145
5,605
13,316
Inventories
31,365
23,958
34,799
Deferred income taxes
-
8,487
6,557
Prepaid expenses and other current assets
9,479
8,823
6,649
Total current assets
97,090
100,075
96,742
Property and equipment, net
81,577
80,484
79,056
Deferred income taxes
15,859
6,978
4,333
Other assets, net
2,896
2,056
1,155
TOTAL ASSETS
$
197,422
$
189,593
$
181,286
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
21,305
$
9,205
$
11,174
Accrued liabilities
25,085
25,761
14,858
Total current liabilities
46,390
34,966
26,032
Landlord incentives and deferred rent
38,261
38,092
37,531
Total liabilities
84,651
73,058
63,563
Commitments and contingencies
Stockholders’ equity:
Common stock - $0.01 par value, 80.0 million shares authorized; 46.3 million, 46.1 million and 46.2 million shares issued at April 29, 2017, January 28, 2017 and April 30, 2016, respectively.
463
461
462
Additional paid-in capital
110,267
109,008
108,737
Retained earnings
147,817
143,557
108,637
Treasury stock, at cost - 9.2 million, 8.5 million and 5.7 million shares at April 29, 2017, January 28, 2017 and April 30, 2016, respectively.
(145,776 )
(136,491 )
(100,113 )
Total stockholders’ equity
112,771
116,535
117,723
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
197,422
$
189,593
$
181,286

Francesca’s Holdings Corporation

Consolidated Statements of Cash Flows

(In thousands)

Thirteen Weeks Ended
April 29, 2017
April 30, 2016
Cash Flows Provided by Operating Activities:
Net income
$
4,333
$
7,081
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
5,101
4,649
Stock-based compensation expense
1,254
1,052
Excess tax benefit from stock-based compensation
-
(22
)
Loss on sale of assets
110
88
Deferred income taxes
(347
)
(838
)
Changes in operating assets and liabilities:
Accounts receivable
(2,540 )
(3,714
)
Inventories
(7,407 )
(3,258
)
Prepaid expenses and other assets
(1,638 )
214
Accounts payable
10,341
(2,862
)
Accrued liabilities
(676
)
(1,470
)
Landlord incentives and deferred rent
169
979
Net cash provided by operating activities
8,700
1,899
Cash Flows Used in Investing Activities:
Purchases of property and equipment
(4,634 )
(5,121
)
Other
-
4
Net cash used in investing activities
(4,634 )
(5,117
)
Cash Flows Used in Financing Activities:
Repurchases of common stock
(9,054 )
(17,785 )
Taxes paid related to net settlement of equity awards
(113
)
-
Proceeds from the exercise of stock options
-
178
Excess tax benefit from stock-based compensation
-
22
Net cash used in financing activities
(9,167 )
(17,585 )
Net decrease in cash and cash equivalents
(5,101 )
(20,803 )
Cash and cash equivalents, beginning of year
53,202
56,224
Cash and cash equivalents, end of period
$
48,101
$
35,421
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes
$
73
$
6,653
Interest paid
$
49
$
47

Francesca’s Holdings Corporation

Supplemental Information

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Quarterly Sales by Merchandise Category</span>

Thirteen Weeks Ended
April 29, 2017
April 30, 2016
Variance
In USD
As a %
In USD
As a %
In Dollars
%
of Sales
of Sales
(in thousands, except percentages)
Apparel
$
60,012
55.7
%
$
56,351
53.1
%
$ 3,661
6
%
Jewelry
23,771
22.1
%
24,062
22.7
%
(291
)
(1
)%
Accessories
13,981
13.0
%
14,587
13.7
%
(606
)
(4
)%
Gifts
11,115
10.3
%
11,327
10.7
%
(212
)
(2
)%
Merchandise sales
108,879
101.1
%
106,327
100.2
%
2,552
2
%
Others
(1,190
)
(1.1
)%
(214
)
(0.2
)%
(976
)
(456
)%
Net sales
$
107,689
100.0
%
$
106,113
100.0
%
$ 1,576
1
%
_____________________
In the first quarter of fiscal 2017, swimwear was reclassified out of accessories to apparel. To facilitate comparability, prior year amounts were reclassified.
Includes gift card breakage income, shipping and change in return reserve.

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Quarterly Comparable Sales</span>

FY 2017
FY 2016
FY 2015
Q1
(5
)%
2
%
(2
)%
Q2
0
%
(4
)%
Q3
7
%
4
%
Q4
0
%
11
%
Fiscal year
2
%
3
%

<span style="text-decoration: underline;" data-mce-style="text-decoration: underline;">Boutique Count</span>

Thirteen Weeks Ended
Fiscal Year Ended
Thirteen Weeks Ended
April 29, 2017
January 28, 2017
April 30, 2016
Number of boutiques open at the beginning of period 671
616
616
Boutiques opened
12
64
22
Boutiques closed
(4
) (9
) (1
)
Number of boutiques open at the end of period
679
671
637
CONTACT:
ICR, Inc.
Jean Fontana
646-277-1214
Company
Kelly Dilts 832-494-2236
Kate Venturina 832-494-2233
IR@francescas.com

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