Francesca’s Holdings Corporation (NASDAQ: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.”
FIRST QUARTER RESULTS
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.
BALANCE SHEET SUMMARY
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.
SECOND QUARTER AND REVISED FISCAL YEAR 2017
GUIDANCE
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® 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 679 boutiques in
48 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.
Francesca’s Holdings
CorporationConsolidated 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 % of Net Sales(1) |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
% |
|
BasisPoints |
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 |
) |
__________________________ |
(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 |
$ |
0.12 |
|
|
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
37,149 |
|
|
|
|
|
40,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
(5)% |
|
|
|
2% |
|
|
|
|
|
|
|
Francesca’s Holdings
CorporationConsolidated 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
CorporationConsolidated 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
CorporationSupplemental Information
Quarterly Sales by Merchandise Category
|
Thirteen Weeks Ended |
|
|
|
|
|
|
April 29, 2017 |
|
April 30, 2016 |
|
Variance |
|
In USD |
|
As a % of Sales |
|
|
In USD |
|
As a % of Sales |
|
In Dollars |
|
% |
|
(in thousands, except
percentages) |
Apparel (1) |
$ |
60,012 |
|
|
55.7 |
% |
|
|
$ |
56,351 |
|
|
53.1 |
% |
|
|
$ |
3,661 |
|
|
6 |
% |
Jewelry |
|
23,771 |
|
|
22.1 |
% |
|
|
|
24,062 |
|
|
22.7 |
% |
|
|
|
(291 |
) |
|
(1 |
)% |
Accessories (1) |
|
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(2) |
|
(1,190 |
) |
|
(1.1 |
)% |
|
|
|
(214 |
) |
|
(0.2 |
)% |
|
|
|
(976 |
) |
|
(456 |
)% |
Net sales |
$ |
107,689 |
|
|
100.0 |
% |
|
|
$ |
106,113 |
|
|
100.0 |
% |
|
|
$ |
1,576 |
|
|
1 |
% |
_____________________ |
(1) In the first quarter of fiscal 2017, swimwear was
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 |
|
|
0 |
% |
|
(4 |
)% |
Q3 |
|
|
7 |
% |
|
4 |
% |
Q4 |
|
|
0 |
% |
|
11 |
% |
Fiscal
year |
|
|
2 |
% |
|
3 |
% |
|
|
|
|
|
|
|
|
Boutique Count
|
Thirteen Weeks EndedApril 29,
2017 |
|
Fiscal Year EndedJanuary 28,
2017 |
|
Thirteen Weeks EndedApril 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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