FRAN
$6.17
Francesca's
($.12)
(1.91%)
Earnings Details
3rd Quarter October 2017
Tuesday, December 5, 2017 7:31:48 AM
Tweet Share Watch
Summary

Francesca's Guides In-line

Francesca's (FRAN) reported 3rd Quarter October 2017 earnings of $0.01 per share on revenue of $105.8 million. The consensus earnings estimate was $0.03 per share on revenue of $106.8 million. Revenue fell 11.4% compared to the same quarter a year ago.

The company said it expects fourth quarter earnings of $0.35 to $0.40 per share on revenue of $145.0 million to $150.0 million. The current consensus earnings estimate is $0.40 per share on revenue of $148.9 million for the quarter ending January 31, 2018.

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

Results
Reported Earnings
$0.01
Earnings Whisper
-
Consensus Estimate
$0.03
Reported Revenue
$105.8 Mil
Revenue Estimate
$106.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

Net sales, comparable sales and diluted earnings per share were within guidance range

-- Net sales decreased 11% to $105.8 million and comparable sales decreased 18%

-- Diluted earnings per share were $0.01

-- Company revises full year guidance

Francesca’s Holdings Corporation (FRAN) today reported financial results for the third quarter ended October 28, 2017.

Steve Lawrence, President and CEO, stated, "While our third quarter was a challenging period, we took decisive steps to improve our positioning as we head into the holiday season and beyond. As we previously discussed, our sales results were impacted by merchandise missteps that impacted our business throughout the third quarter. Additionally, comparable sales results were impacted by an estimated 425 basis points from hurricanes Harvey and Irma. We have taken aggressive action to get us back on track by refocusing on our core consumer and delivering on our mission of surprising and delighting every guest, every time with a unique, trend-right assortment at a great value. We have seen business get progressively better as the new receipts have landed and November comparable sales have sequentially improved from our third quarter performance. That being said, we still have a lot of work ahead of us.

"Looking ahead, we remain focused on the initiatives that will be critical for our success in the long term. We have spent the better part of 2017 putting in place building blocks for our future with the infrastructure investments we have made. Growing our ecommerce business remains our number one long term focus and many of the things we have put in place this year will help us drive our online business now and in the future. We are also taking steps to rationalize our store fleet with a focus on openings in A and B malls and closings in C and D malls. We believe this strategy is aligned with our goal to be in the most relevant locations. Overall, we remain focused on taking steps to reinvigorate our merchandise assortments and making investments in our business that will drive sustainable profitable growth for the long term."

THIRD QUARTER RESULTS

Net sales decreased 11% to $105.8 million from $119.5 million in the comparable prior year quarter. This decrease was due to an 18% decrease in comparable sales compared to a 7% increase in the comparable prior year period. Comparable sales decreased primarily due to a decline in boutique traffic and conversion rates as the back-to-school assortment did not resonate with guests. Additionally, Hurricanes Harvey and Irma negatively impacted comparable sales by approximately 425 basis points, mostly as a result of the supply chain disruption the Company experienced at its corporate offices located in Houston, Texas. These decreases were partially offset by the addition of 45 net new boutiques since the end of the third quarter last year and $1.5 million of additional gift card breakage income recognized during the quarter as a result of a change in the estimated period over which redemption of gift cards is considered remote. The Company opened 23 new boutiques and closed one boutique during the quarter, bringing the total count to 714 at the end of the quarter.

Gross profit, as a percent of net sales, decreased to 39.6% from 48.2% in the prior year quarter. This was due to a decrease in merchandise margin and deleveraging of occupancy costs. The decrease in merchandise margin was due to increased markdowns in order to sell-through our back-to-school assortment.

Selling, general and administrative expenses decreased 1% to $41.4 million from $41.9 million in the prior year quarter. This decrease was primarily due to a decrease in short- and long-term performance-based incentive expenses partially offset by increases in boutique and corporate payroll, software, professional fees and marketing expenses.

Income from operations was $0.5 million, or 0.4% of net sales, compared to $15.8 million, or 13.2% of net sales, in the prior year quarter.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the third quarter were $19.0 million compared to $24.7 million at the end of the comparable prior year quarter. During the third quarter, the Company repurchased 0.5 million shares of its common stock at a total cost of $3.5 million.

The Company ended the quarter with $38.8 million of inventory on hand compared to $42.8 million at the end of the comparable prior year period. Average ending inventory per boutique decreased by 15% compared to the comparable prior year period as the Company continues to diligently control inventory through enhanced inventory management processes that began in the second quarter of 2016.

FOURTH QUARTER AND REVISED FISCAL YEAR 2017 GUIDANCE

For the fourth quarter ending February 3, 2018, net sales are expected to be in the range of $145 million to $150 million; assuming a decrease of 9% to 12% in comparable sales compared to flat comparable sales in the prior year. The Company plans to open nine new boutiques during the fourth quarter. Diluted earnings per share for the fourth quarter are expected to be in the range of $0.35 to $0.40 compared to $0.39 in the prior year.

For the fiscal year ending February 3, 2018, net sales are now expected to be in the range of $478 million to $483 million; assuming a decrease of 9% to 10% in comparable sales compared to the prior year increase of 2%. The Company expects to open 60 boutiques and close eight boutiques in fiscal year 2017, compared to 64 new boutiques opened and nine boutiques closed in fiscal year 2016. Diluted earnings per share are now expected to be in the range of $0.67 to $0.72 compared to the prior year of $1.09. The number of average diluted shares for the full year assumed in guidance is 36.3 million shares. The effective tax rate is estimated to be 38.7%.

Capital expenditures for fiscal year 2017 are expected to be in the range of $30 million to $33 million.

Conference Call Information

A conference call to discuss the third quarter results is scheduled for December 5, 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 December 12, 2017. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 6325605. A replay of the webcast 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; our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth and our ability to successfully integrate our new Chief Merchant. 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 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 714 boutiques in 47 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.

CONTACT:
ICR, Inc.
Company
Jean Fontana
Kelly Dilts 832-494-2236
646-277-1214
Kate Venturina 832-494-2233
IR@francescas.com
Francesca’s Holdings Corporation
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Percentages and Basis Points)
Thirteen Weeks Ended
October 28, 2017
October 29, 2016
Variance
In USD
As a %
In USD
As a %
In USD
%
Basis Points
of Net Sales
of Net Sales
Net sales
$
105,791
100.0
%
$
119,470
100.0
%
$
(13,679 )
(11
)%
-
Cost of goods sold and occupancy costs
63,931
60.4
%
61,843
51.8
%
2,088
3
%
860
Gross profit
41,860
39.6
%
57,627
48.2
%
(15,767 )
(27
)%
(860
)
Selling, general and administrative expenses
41,405
39.1
%
41,872
35.0
%
(467
)
(1
)%
410
Income from operations
455
0.4
%
15,755
13.2
%
(15,300 )
(97
)%
(1,280 )
Interest expense
(109
)
(0.1
)%
(131
)
(0.1
)%
(22
)
(17
)%
-
Other income
88
0.1
%
79
0.1
%
9
11
%
-
Income before income tax expense
434
0.4
%
15,703
13.1
%
(15,269 )
(97
)%
(1,270 )
Income tax expense
195
0.2
%
6,009
5.0
%
(5,814
)
(97
)%
(480
)
Net income
$
239
0.2
%
$
9,694
8.1
%
$
(9,455
)
(98
)%
(790
)
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
$
0.01
$
0.26
Weighted average diluted share count
35,959
37,675
Comparable sales
(18)%
7%
Thirty-Nine Weeks Ended
October 28, 2017
October 29, 2016
Variance
In USD
As a %
In USD
As a %
In USD
%
Basis Points
of Net Sales
of Net Sales
Net sales
$
333,187
100.0
%
$
340,843
100.0
%
$
(7,656
)
(2
)%
-
Cost of goods sold and occupancy costs
187,249
56.2
%
180,149
52.9
%
7,100
4
%
330
Gross profit
145,938
43.8
%
160,694
47.1
%
(14,756 )
(9
)%
(330
)
Selling, general and administrative expenses
126,338
37.9
%
116,353
34.1
%
9,985
9
%
380
Income from operations
19,600
5.9
%
44,341
13.0
%
(24,741 )
(56
)%
(710
)
Interest expense
(332
)
(0.1
)%
(353
)
(0.1
)%
(21
)
(6
)%
-
Other income
278
0.1
%
118
0.0
%
160
136
%
10
Income before income tax expense
19,546
5.9
%
44,106
12.9
%
(24,560 )
(56
)%
(700
)
Income tax expense
7,711
2.3
%
16,740
4.9
%
(9,029
)
(54
)%
(260
)
Net income
$
11,835
3.6
%
$
27,366
8.0
%
$
(15,531 )
(57
)%
(440
)
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
$
0.32
$
0.70
Weighted average diluted share count
36,525
38,945
Comparable sales
(9)%
3%
Francesca’s Holdings Corporation
Consolidated Balance Sheets
(In thousands, except share and per share amount)
October 28, 2017
January 28, 2017
October 29, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
19,020
$
53,202
$
24,725
Accounts receivable
18,150
5,605
8,218
Inventories
38,824
23,958
42,774
Deferred income taxes
-
8,487
5,709
Prepaid expenses and other current assets
10,179
8,823
7,745
Total current assets
86,173
100,075
89,171
Property and equipment, net
85,710
80,484
82,992
Deferred income taxes
15,577
6,978
4,425
Other assets, net
3,794
2,056
1,370
TOTAL ASSETS
$
191,254
$
189,593
$
177,958
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
28,239
$
9,205
$
16,550
Accrued liabilities
12,848
25,761
16,629
Total current liabilities
41,087
34,966
33,179
Landlord incentives and deferred rent
38,327
38,092
38,821
Total liabilities
79,414
73,058
72,000
Commitments and contingencies
Stockholders’ equity:
Common stock - $0.01 par value, 80.0 million shares authorized; 46.4 million, 46.1 million and 46.1 million shares issued at October 28, 2017, January 28, 2017 and October 29, 2016, respectively.
464
461
461
Additional paid-in capital
111,065
109,008
107,908
Retained earnings
155,319
143,557
128,922
Treasury stock, at cost - 10.2 million, 8.5 million and 8.3 million shares at October 28, 2017, January 28, 2017 and October 29, 2016, respectively.
(155,008 )
(136,491 )
(131,333 )
Total stockholders’ equity
111,840
116,535
105,958
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
191,254
$
189,593
$
177,958
Francesca’s Holdings Corporation
Consolidated Statements of Cash Flows
(In thousands)
Thirty-Nine Weeks Ended
October 28, 2017
October 29, 2016
Cash Flows Provided by Operating Activities:
Net income
$
11,835
$
27,366
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
15,749
14,415
Stock-based compensation expense
2,082
18
Excess tax benefit from stock-based compensation
-
(2
)
Loss on disposal of assets
565
265
Deferred income taxes
(65
)
(81
)
Impairment charges
100
66
Changes in operating assets and liabilities:
Accounts receivable
(12,272
)
1,364
Inventories
(14,866
)
(11,233
)
Prepaid expenses and other assets
(3,529
)
(1,294
)
Accounts payable
16,987
2,015
Accrued liabilities
(12,913
)
301
Landlord incentives and deferred rent
235
2,269
Net cash provided by operating activities
3,908
35,469
Cash Flows Used in Investing Activities:
Purchases of property and equipment
(19,121
)
(18,666
)
Other
-
8
Net cash used in investing activities
(19,121
)
(18,658
)
Cash Flows Used in Financing Activities:
Repurchases of common stock
(18,827
)
(48,715
)
Taxes paid related to net share settlement of equity awards
(142
)
-
Proceeds from the exercise of stock options
-
403
Excess tax benefit from stock-based compensation
-
2
Net cash used in financing activities
(18,969
)
(48,310
)
Net decrease in cash and cash equivalents
(34,182
)
(31,499
)
Cash and cash equivalents, beginning of year
53,202
56,224
Cash and cash equivalents, end of period
$
19,020
$
24,725
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes
$
23,806
$
13,014
Interest paid
$
144
$
143
Francesca’s Holdings Corporation
Supplemental Information
Quarterly Sales by Merchandise Category
Thirteen Weeks Ended
October 28, 2017
October 29, 2016
Variance
In Dollars
As a % of
In Dollars
As a % of
In Dollars
%
Net Sales
Net Sales
(in thousands, except percentages)
Apparel
$
54,663
51.7
%
$
64,013
53.6
%
$
(9,350
)
(15
)%
Jewelry
22,826
21.6
%
26,143
21.9
%
(3,317
)
(13
)%
Accessories
15,360
14.5
%
17,346
14.5
%
(1,986
)
(11
)%
Gifts
10,922
10.3
%
11,638
9.7
%
(716
)
(6
)%
Merchandise sales
103,771
98.1
%
119,140
99.7
%
(15,369 )
(13
)%
Other
2,020
1.9
%
330
0.3
%
1,690
512
%
$
105,791
100.0
%
$
119,470
100.0
%
$
(13,679 )
(11
)%
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.
Quarterly Comparable Sales
FY 2017
FY 2016
FY 2015
Q1
(5)%
2%
(2)%
Q2
(3)%
0%
(4)%
Q3
(18)%
7%
4%
Q4
0%
11%
Fiscal year
2%
3%
Boutique Count
Thirty-Nine Weeks Ended
Fiscal Year Ended
Thirty-Nine Weeks Ended
October 28, 2017
January 28, 2017
October 29, 2016
Number of boutiques open at the beginning of period 671
616
616
Boutiques opened
51
64
59
Boutiques closed
(8
)
(9
)
(6
)
Number of boutiques open at the end of period
714
671
669

https://resource.globenewswire.com/Resource/Download/5752c2b5-3a2a-43fd-84d2-e06fdbf98d5c?size=1

<img src="http://www.globenewswire.com/newsroom/ti?ndecode=MTUwIzcwNDM1NTA=" alt="" width="1" height="1"/>