FRAN
$5.64
Francesca's
($.01)
(.18%)
Earnings Details
4th Quarter January 2018
Tuesday, March 27, 2018 7:30:00 AM
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Summary

Francesca's Beats

Francesca's (FRAN) reported 4th Quarter January 2018 earnings of $0.20 per share on revenue of $138.5 million. The consensus earnings estimate was $0.19 per share on revenue of $137.8 million. The Earnings Whisper number was $0.19 per share. Revenue fell 5.4% compared to the same quarter a year ago.

The company said it expects a first quarter loss of $0.13 to $0.10 per share on revenue of $100.0 million to $103.0 million and fiscal year earnings of $0.53 to $0.63 per share on revenue of $485.0 million to $499.0 million. The current consensus estimate is for earnings of $0.15 per share on revenue of $111.3 million for the quarter ending May 5, 2018 and $0.62 per share on revenue of $488.7 million for the year ending February 2, 2019.

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

Results
Reported Earnings
$0.20
Earnings Whisper
$0.19
Consensus Estimate
$0.19
Reported Revenue
$138.5 Mil
Revenue Estimate
$137.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

francesca’s® Reports Fourth Quarter and Fiscal Year 2017 Financial Results and Provides Fiscal Year 2018 Guidance

  • Fourth quarter net sales decreased 5% to $138.5 million and comparable sales decreased 15%
  • Fourth quarter diluted earnings per share were $0.10, including a $0.09 impact of the new tax legislation
  • Fourth quarter adjusted diluted earnings per share were $0.20(1)

HOUSTON, March 27, 2018 (GLOBE NEWSWIRE) -- Francesca’s Holdings Corporation (Nasdaq:FRAN) today reported financial results for the fourth quarter and fiscal year ended February 3, 2018.  

Steve Lawrence, President and CEO, stated, “While 2017 was a challenging year for francesca’s, it was also a year where we put in place a number of strategic investments that we believe will serve as building blocks for our future. We have also strengthened our focus on the merchandising principles that drove our past success. In 2018, we believe that we will return to ‘surprising and delighting’ our guests with our improved merchandising assortment and boutique experience.  We expect that as our initiatives begin to take hold and we start to fully leverage the investments we made last year, we will see sequential quarter to quarter comparable sales improvement through the year.’’

FOURTH QUARTER RESULTS

Net sales decreased 5% to $138.5 million from $146.3 million in the comparable prior year quarter.  This decrease was due to a 15% decrease in comparable sales compared to flat in the comparable prior year quarter.  The decrease in comparable sales was primarily due to a decline in boutique conversion rate and traffic, as our merchandise did not resonate with our guests. This decrease was partially offset by the sales from 50 net new boutiques since the prior year quarter and $5 million in sales for the 53rd week of fiscal year 2017. The Company opened nine new boutiques and closed two boutiques during the quarter, bringing the total boutique count to 721 at the end of the quarter.     

Gross profit, as a percent of net sales, decreased to 43.9% from 46.4% in the prior year quarter.  This unfavorable variance was principally due to 280 basis points deleveraging of occupancy costs, partially offset by 30 basis points increase in merchandise margin.   

Selling, general and administrative expenses increased 14% to $50.5 million from $44.3 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll to support the larger boutique base and ecommerce operations, as well as increases in professional fees, software costs and marketing due to the continued investments in marketing, technology and infrastructure.  These increases were partially offset by lower performance-based incentive expenses.

Income from operations was $10.4 million, or 7.5% of net sales, compared to $23.6 million, or 16.1% of net sales, in the prior year quarter. 

The effective tax rate for the fourth quarter was 63.9% compared to 37.7% in the comparable prior year quarter. Income tax expense included a non-cash charge of $3.3 million, or $0.09 per diluted share, as a result of the remeasurement of the Company’s net deferred tax assets using the lower federal corporate income tax rate under the Tax Cuts and Jobs Act.

Net income for the fourth quarter was $3.7 million, or $0.10 diluted earnings per share, and, excluding the remeasurement of net deferred tax assets, adjusted net income was $7.1 million, or $0.20(1) adjusted diluted earnings per share.  This compares to prior year quarter net income of $14.6 million, or $0.39 diluted earnings per share.

(1) Diluted earnings per share components may not equal the sum due to rounding.

FULL YEAR RESULTS

Net sales decreased 3% to $471.7 million from $487.2 million in the prior year.  This decrease was due an 11% decrease in comparable sales compared to a 2% increase in the prior year. This decrease was partially offset by the sales from 50 net new boutiques since the prior year-end and $5 million in sales for the 53rd week of fiscal year 2017. 

During fiscal year 2017, the Company opened 60 new boutiques and closed 10 boutiques compared to 64 new boutiques opened and nine boutiques closed during fiscal year 2016.

Net income for fiscal year 2017 totaled $15.6 million, or $0.43 diluted earnings per share, compared to $42.0 million, or $1.09 diluted earnings per share, in the prior year. 

Excluding the $3.3 million, or $0.09 per diluted share, charge related to the remeasurement of the Company’s net deferred tax assets, adjusted net income for fiscal year 2017 totaled $18.9 million, or adjusted diluted earnings per share of $0.52. This compares to prior year adjusted net income of $40.8 million, or adjusted diluted earnings per share of $1.06, which excludes the $2.0 million, or $0.03 per diluted share, net benefit in connection with the resignation of the Company’s former Chairman, President and CEO.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the quarter were $31.3 million compared to $53.2 million at the end of the comparable prior year quarter and no debt.  During the fourth quarter, the Company repurchased 248,000 shares of its common stock at a cost of $1.5 million, bringing the Company’s total year-to-date repurchases to 1,861,000 shares at a cost of $20.0 million.

The Company ended the quarter with $26.8 million of inventory on hand compared to $24.0 million at the end of the comparable prior year period. Average ending inventory per boutique increased 4% versus the prior year period.  Prior year inventory levels were at an historic low as the Company marked inventory out-of-stock in order to implement the in-season clearance strategy. 

FIRST QUARTER AND FISCAL YEAR 2018 GUIDANCE

For the first quarter ending May 5, 2018, net sales are expected to be in the range of $100 million to $103 million, assuming a 13% to 15% decrease in comparable sales compared to the prior year decrease of 5%. The Company plans to open 20 to 25 new boutiques and close approximately 5 existing boutiques during the first quarter. Loss per share is expected to be in the range of ($0.10) to ($0.13).

For the fiscal year ending February 2, 2019, net sales are expected to be in the range of $485 million to $499 million; assuming a low-single digit decrease in comparable sales compared to the prior year decrease of 11%. The Company expects to open approximately 35 boutiques and close approximately 20 boutiques in fiscal year 2018, compared to 60 new boutiques opened and 10 boutiques closed in fiscal year 2017. Diluted earnings per share are expected to be in the range of $0.53 to $0.63 compared to prior year of $0.43.  This also compares to prior year adjusted diluted earnings per share of $0.52 which excludes the $3.3 million, or $0.09 per diluted share, charge related to the remeasurement of the Company’s deferred tax assets.  The number of average diluted shares for the full year assumed in guidance is 35.5 million shares. The effective tax rate is estimated to be 26% for 2018.

Capital expenditures for fiscal year 2018 are expected to be approximately $30 million.

Conference Call Information

A conference call to discuss the fourth quarter and fiscal year 2017 results is scheduled for March 27, 2018, 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 April 3, 2018. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 8258995. 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 website; our ability to successfully open, refresh and operate new boutiques each year; our ability to efficiently source, distribute additional merchandise quantities necessary to support our growth; and new tax legislation developments or guidance that may influence our effective tax rate. 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, as well as “Risk Factors” in our Annual Report on Form 10-K for the year ended February 3, 2018 that we will file with the SEC, 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.

SEC Regulation G – Non-GAAP Information

This press release includes non-GAAP adjusted net income and adjusted diluted earnings per share, each a non-GAAP financial measure. The Company believes these non-GAAP financial measures not only provides our management with comparable financial data for internal financial analysis but also provides meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the business and facilitate a meaningful evaluation of our quarterly and fiscal year 2017 net income and diluted earnings per share on a comparable basis with our quarterly and fiscal year 2016 results. These non-GAAP measures should be considered a supplement to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

About Francesca's Holdings Corporation

francesca's® 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® operates approximately 721 boutiques in 47 states and the District of Columbia and also serves its customers through francescas.com. For additional information on francesca's®, 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)

 
 Fourteen Weeks Ended
February 3, 2018
 Thirteen Weeks Ended
January 28, 2017
 Variance
 In USD As a %
of Net
Sales(1)
 In USD As a %
of Net
Sales(1)
 In USD % Basis
Points
Net sales$  138,491   100.0 % $  146,345   100.0 % $  (7,854) (5)%   -   
Cost of goods sold and occupancy costs   77,666   56.1 %    78,412   53.6 %    (746) (1)% 250  
Gross profit   60,825   43.9 %    67,933   46.4 %    (7,108) (10)%  (250)
Selling, general and administrative expenses   50,463   36.4 %    44,349   30.3 %    6,114   14 % 610  
Income from operations   10,362   7.5 %    23,584   16.1 %    (13,222) (56)%  (860)
Interest expense   (120) (0.1)%    (111) (0.1)%    (9) (8)%   -   
Other income   68   0.0 %    29   0.0 %    39   134 %  
Income before income tax expense   10,310   7.4 %    23,502   16.1 %    (13,192) (56)%  (870)
Income tax expense   6,584   4.8 %    8,867   6.1 %    (2,283) (26)% (130 )
Net income$  3,726  2.7 % $  14,635   10.0 % $  (10,909) (75)%  (730)
(1)  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$  0.10     $  0.39          
Weighted average diluted share count   35,642        37,383          
              
Comparable sales change (15)%
  0%
      
              
 Fiscal Year Ended      
 February 3, 2018 January 28, 2017 Variance
 In USD As a %
of Net
Sales(1)
 In USD As a %
of Net
Sales(1)
 In USD % Basis
Points
Net sales$  471,678   100.0 % $  487,188   100.0 % $  (15,510) (3)%   -   
Cost of goods sold and occupancy costs   264,915   56.2 %    258,561   53.1 %    6,354   2 %   310  
Gross profit   206,763   43.8 %    228,627   46.9 %    (21,864) (10)%  (310)
Selling, general and administrative expenses   176,801  37.5 %    160,702   33.0 %    16,099   10 % 450  
Income from operations   29,962   6.4 %    67,925   13.9 %    (37,963) (56)%  (750)
Interest expense   (452) (0.1)%    (464) (0.1)%    12   3%   -   
Other income   346   0.1 %    147   0.0 %    199   135%  10 
Income before income tax expense   29,856   6.3 %    67,608   13.9 %    (37,752) (56)%  (760)
Income tax expense   14,295   3.0 %    25,607   5.3 %    (11,312) (44)%  (230)
Net income$  15,561   3.3 % $  42,001   8.6 % $  (26,440) (63)%  (530)
(1)  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$  0.43     $  1.09          
Weighted average diluted share count   36,300        38,551          
              
Comparable sales change (11)%
  2%
      
 


Francesca’s Holdings Corporation
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

       
  February 3,  January 28, 
  2018  2017 
ASSETS        
Current assets:        
Cash and cash equivalents $31,331  $53,202 
Accounts receivable  16,642   5,605 
Inventories  26,816   23,958 
Deferred income taxes  -   8,487 
Prepaid expenses and other current assets  9,714   8,823 
Total current assets  84,503   100,075 
Property and equipment, net  87,702   80,484 
Deferred income taxes  9,413   6,978 
Other assets, net  3,622   2,056 
TOTAL ASSETS $185,240  $189,593 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $17,801  $9,205 
Accrued liabilities  14,654   25,761 
Total current liabilities  32,455   34,966 
Landlord incentives and deferred rent  38,337   38,092 
Total liabilities  70,792   73,058 
Commitments and contingencies        
Stockholders’ equity:        
Common stock-$.01 par value, 80.0 million shares authorized, 46.3 million
and 46.1 million shares issued as of February 3, 2018 and January 28, 2017,
respectively.
  463   461 
Additional paid-in capital  111,439   109,008 
Retained earnings  159,045   143,557 
Treasury stock, at cost – 10.3 million and 8.5 million shares held at February
3, 2018 and January 28, 2017, respectively.
  (156,499)  (136,491)
Total stockholders’ equity  114,448   116,535 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $185,240  $189,593 
 


Francesca’s Holdings Corporation
Consolidated Statements of Cash Flows
(In thousands)

 
  Fiscal Year Ended 
  February 3,  January 28,  January 30,  
  2018  2017  2016  
Cash Flows Provided by Operating Activities:             
Net income $15,561  $42,001  $38,152  
Adjustments to reconcile net income to net cash provided
by operating activities:
             
Depreciation and amortization  21,202   19,337   16,816  
Stock-based compensation expense  2,430   1,016   2,932  
Excess tax benefit from stock-based compensation  -   (34)  (236) 
Impairment charges  258   141   790  
Loss on disposal of assets  733   407   487  
Amortization of debt issuance costs  250   245   245  
Deferred income taxes  6,099   (5,411)  (3,226) 
Changes in assets and liabilities:             
Accounts receivable  (10,764)  3,975   2,935  
Inventories  (2,858)  7,583   (7,740) 
Prepaid expenses and other assets  (3,177)  (3,160)  (524) 
Accounts payable  6,013   (4,936)  4,137  
Accrued liabilities  (11,167)  9,467   4,424  
Landlord incentives and deferred rent  245   1,540   3,675  
Net cash provided by operating activities  24,825   72,171   62,867  
              
Cash Flows Used in Investing Activities:             
Purchase of property and equipment  (26,778)  (21,852)  (24,276) 
Other  -   8   12  
Net cash used in investing activities  (26,778)  (21,844)  (24,264) 
              
Cash Flows Used in Financing Activities:             
Repurchases of common stock  (19,860)  (53,853)  (22,185) 
Proceeds from the exercise of stock options  96   512   499  
Excess tax benefit from stock-based compensation  -   34   236  
Taxes paid related to net settlement of equity awards  (154)  (42)  -  
Net cash used in financing activities  (19,918)  (53,349)  (21,450) 
              
Net increase in cash and cash equivalents  (21,871)  (3,022)  17,153  
Cash and cash equivalents, beginning of year  53,202   56,224   39,071  
Cash and cash equivalents, end of year $31,331  $53,202  $56,224  
              
Supplemental Disclosures of Cash Flow Information:             
Cash paid for income taxes $24,163  $19,324  $23,958  
Interest paid $192  $192  $190  
              


Francesca’s Holdings Corporation
Supplemental Information

Quarterly Sales by Merchandise Category

 
 Fourteen Weeks Ended
February 3, 2018
 Thirteen Weeks Ended
January 28, 2017
 Variance
 In USD As a %
of Sales
  In USD As a %
of Sales
 In Dollars %
 (in thousands, except percentages)
Apparel(1)54,977 39.7%  59,930 41.0%  (4,953)(8)%
Jewelry32,481 23.5%  34,069 23.3%  (1,588)(5)%
Accessories(1)24,928 18.0%  25,612 17.5%  (684)(3)%
Gifts24,412 17.6%  25,834 17.7%  (1,422)(6)%
Merchandise sales136,798 98.8%  145,445 99.4%  (8,647)(6)%
Others(2)1,693 1.2%  900 0.6%  793 88 %
Net sales138,491 100.0%  146,345 100.0%  (7,854)(5)%
              

(1)       In fiscal year 2017, swimwear and leggings were reclassified out of accessories to apparel. To facilitate comparability, prior year amounts were reclassified.
(2)       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(15)% 0% 11%
 Fiscal year(11)% 2% 3%
          

Boutique Count

 Fiscal Year Ended
 February 3, 2018 January 28, 2017 January 30, 2016 
Number of boutiques open at the beginning of period671 616 539 
Boutiques opened60 64 83 
Boutiques closed(10)(9)(6)
Number of boutiques open at the end of period721 671 616 
  

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Source: Francesca's Holdings Corporation