- Net sales increased 11% to $79.6 million
- Comparable sales decreased 3%
- Diluted earnings per share decreased 17% to $0.20
Francesca's Holdings Corporation (Nasdaq:FRAN) today reported net
income of $8.7 million or $0.20 per diluted share for the third
quarter of 2013, compared to net income of $10.8 million or $0.24
per diluted share for the third quarter of 2012.
Neill P. Davis, francesca's® Chief Executive Officer stated, "We
delivered third quarter results in line with our guidance range on
top of strong prior year quarter increases. Throughout the third
quarter our merchandise performance reflected strength in new and
emergent categories; however, these were offset by the absence of
strong trends in our apparel tops and jewelry offerings. In
addition, we experienced strong consumer responses to the
francesca's brand as reflected in our direct-to-consumer business,
which produced healthy gains, growing 87% during the quarter and
represents 2.3% of our year-to-date net sales."
Commenting on the fourth quarter, Mr. Davis noted that,
"Boutique transactions during November were below expectation,
particularly during the final week. In light of a weaker start to
the holiday selling season and the broader retail industry trends
reflecting slower traffic in the early start to the holiday, we are
adjusting our fourth quarter sales outlook. We are focused on
managing through the tough retail environment, and committed to
operating our distinctive business with a long-term vision. Our
planning for the Spring 2014 season is well underway and I believe
the fashion themes represented in our offerings will resonate with
our customers, particularly in categories lacking newness in prior
seasons."
THIRD QUARTER SUMMARY
Net sales for the thirteen weeks increased 11% to $79.6 million
driven by 87 new boutique openings since the prior year quarter.
Performance was strongest in accessories, outpacing increases in
apparel and jewelry, and a decline in gifts.
Comparable sales, including direct-to-consumer sales, decreased
3%, as compared to a 17% increase in the prior year quarter.
Comparable transactions decreased 3%, with a flat average
transaction size. Direct-to-consumer sales increased 87% versus the
prior year quarter driven by increases in site traffic, conversion
rates, and average transaction values.
Ten new boutiques were opened during the third quarter bringing
new openings for the year to date to 86. We expect an additional
five boutique openings in the fourth quarter bringing the full year
to 91.
Gross profit, as a percentage of net sales, decreased to 50.7%
compared to 52.6% in the prior year quarter. This decrease was due
to 160 basis points of deleveraging of fixed occupancy costs and 30
basis points of lower merchandise margins. Decrease in margin was
due to elevated markdowns compared to the prior year quarter.
Selling, general and administrative expenses increased 28% to
$25.8 million from $20.1 million in the prior year quarter. As a
percentage of net sales, selling, general and administrative
expense increased 440 basis points to 32.4% compared to 28.0% in
the prior year quarter. This increase was primarily due to higher
payroll expenses associated with expansion of the field leadership
structure for the long-term and those needed to support the
additional number of boutiques in operation during the third
quarter. Selling, general and administrative expenses for the third
quarter 2012 include a pre-tax charge of $342,000 related to the
relocation of our headquarters and distribution facilities.
Excluding this charge, adjusted selling, general and administrative
expenses for the third quarter 2012 were $19.8 million, or 27.5% of
net sales.
Income from operations for the quarter decreased 18% to $14.6
million or 18.3% of net sales compared to $17.7 million or 24.6% of
net sales in the prior year quarter. Excluding the aforementioned
relocation charge, adjusted income from operations for the third
quarter 2012 was $18.1 million, or 25.1% of net sales.
BALANCE SHEET SUMMARY
During the quarter, the Company repurchased 1.9 million shares
of the Company's common stock for $36.9 million at an average price
per share of $19.00.
Total cash and cash equivalents at quarter end were $31.8
million compared to $12.9 million at the prior year quarter end,
and $29.9 million at the end of fiscal 2012. The Company had $25
million of outstanding debt under its revolving credit facility at
the end of the quarter.
Total inventories rose to $30.6 million, an increase of 30%,
compared to $23.5 million at the end of the third quarter of 2012
as a result of the increase in the number of boutiques in operation
as compared to the prior year quarter and the positioning of
inventories for fourth quarter sales. Average inventory per
boutique increased 5% compared to the same period in 2012.
FOURTH FISCAL QUARTER AND FULL FISCAL YEAR 2013
GUIDANCE
For the fourth quarter ending February 1, 2014, net sales are
expected to be between $90.0 million and $95.0 million assuming a
-8% to -3% change in comparable sales including our
direct-to-consumer business. This compares to the prior year
comparable sales increase of 10%. The Company plans to open five
new boutiques during the fourth quarter as compared to one boutique
opened during the prior year quarter. We have an opportunity to
take possession of four additional boutiques during January 2014.
These boutiques were previously planned to be opened during the
first quarter of 2014. The acceleration of these openings should
allow us to capitalize on additional revenue opportunities as well
as the ability to keep the number of openings during fiscal 2014 at
the full planned number by back filling the four accelerated
openings during fiscal 2014. The retail calendar shift reduced
fourth quarter 2012 sales by $0.2 million. Earnings per diluted
share are expected to be in the range of $0.25 to $0.29.
For the full year ending February 1, 2014, net sales are
expected to be in the range of $338.2 million to $343.2 million
assuming a -3% to -1% decrease in comparable sales including our
direct-to-consumer business. This compares to the prior year
comparable sales increase of 16%. The Company plans to open 91
boutiques in the fiscal 2013, as compared to 77 in fiscal 2012.
Adjusted diluted earnings per share are expected to be in the range
of $1.03 to $1.07 which excludes $0.6 million or $0.01 per diluted
share net of tax charge related to a secondary equity offering
during the first quarter. This is compared to the 52-week prior
year adjusted diluted earnings per share of $1.04 which excludes
$0.5 million net of tax charge related to a secondary equity
offering, $0.2 million net of tax charge related to stock option
acceleration, $0.2 million net of tax charge related to the
relocation of our headquarters and distribution facilities, which
had a combined increase of $0.02 of diluted earnings per share, and
an approximate decrease of $0.03 of diluted earnings per share
impact from the 53rd week. The effective tax rate is estimated to
be 39.3% for the fourth quarter and the full year. Expected capital
expenditures have increased to a range of $25.0 to $26.0 million
primarily due to investment in our direct-to-consumer platform and
additional boutique openings during the fourth quarter.
Conference Call Information
A conference call to discuss third quarter 2013 results is
scheduled for December 5, 2013, at 8:30 a.m. EST. A live web cast
of the conference call will be available in the investor relations
section of the Company's website, www.francescas.com. In addition,
a replay of the call will be available after the call and remain
available until January 5, 2014. To access the telephone replay,
listeners should dial (877) 870-5176. The access code for the
replay is 6209165. A replay of the web cast will also be available
shortly after the call and will remain on the website for ninety
days.
SEC Regulation G — Non-GAAP Information
This press release includes non-GAAP adjusted selling, general
and administrative expenses, adjusted income from operations, and
adjusted diluted earnings per share, each a non-GAAP financial
measure. We have reconciled these non-GAAP financial measures with
the most directly comparable GAAP financial measures in the text
above. We believe that these non-GAAP financial measures not only
provide our management with comparable financial data for internal
financial analysis but also provide meaningful supplemental
information to investors. Specifically, these non-GAAP financial
measures allow investors to better understand the performance of
our business and facilitate a meaningful evaluation of our
quarterly and fiscal year 2013 diluted earnings per share and
actual results on a comparable basis with our quarterly and fiscal
year 2012 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.
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. Such
forward-looking statements reflect the Company's 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; our ability to
attract a sufficient number of customers to our boutiques or sell
sufficient quantities of our merchandise through our
direct-to-consumer 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. 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 filed with the Securities and Exchange Commission on
March 22, 2013. We undertake no obligation to publicly update or
revise any forward-looking statement. Financial schedules are
attached to this release.
About Francesca's Holdings Corporation
francesca's® is a growing specialty retailer with retail
locations designed and merchandised to feel like independently
owned, upscale boutiques providing customers a fun and
differentiated shopping experience. The merchandise assortment is a
diverse and balanced mix of apparel, jewelry, accessories and
gifts. Today francesca's® operates 447 boutiques in 45 states and
also serves its customers through francescas.com. For additional
information on francesca's®, please visit www.francescas.com.
|
Francesca's Holdings
Corporation |
Unaudited Consolidated
Statements of Operations |
|
|
Thirteen Weeks
Ended |
|
November 2,
2013 |
October 27,
2012 |
Variance |
|
In USD |
As a % of Net
Sales(1) |
In USD |
As a % of Net
Sales(1) |
In USD |
% |
Basis Points(1) |
|
(In thousands except per share data and
percentages) |
Net sales |
$ 79,632 |
100.0% |
$ 71,986 |
100.0% |
$ 7,646 |
11% |
0 |
Cost of goods sold and occupancy costs |
39,275 |
49.3% |
34,115 |
47.4% |
5,160 |
15% |
190 |
Gross profit |
40,357 |
50.7% |
37,871 |
52.6% |
2,486 |
7% |
(190) |
Selling, general and administrative
expenses |
25,766 |
32.4% |
20,144 |
28.0% |
5,622 |
28% |
440 |
Income from operations |
14,591 |
18.3% |
17,727 |
24.6% |
(3,136) |
(18)% |
(630) |
Interest expense |
(129) |
(0.2)% |
(114) |
(0.2)% |
(15) |
13% |
0 |
Other income (expense) |
(77) |
(0.1)% |
105 |
0.1% |
(182) |
(174)% |
(20) |
Income before income tax expense |
14,385 |
18.1% |
17,718 |
24.6% |
(3,333) |
(19)% |
(650) |
Income tax expense |
5,714 |
7.2% |
6,921 |
9.6% |
(1,207) |
(17)% |
(240) |
Net income |
$ 8,671 |
10.9% |
$ 10,797 |
15.0% |
$ (2,126) |
(20)% |
(410) |
(1) Percentage totals or
basis points variances in the above table may not equal the sum or
difference of the components due to rounding. |
Diluted earnings (loss) per common share |
$ 0.20 |
|
$ 0.24 |
|
|
|
|
Weighted average diluted shares
outstanding: |
43,993 |
|
44,911 |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales increase |
(3)% |
|
17% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty Nine Weeks
Ended |
|
November 2,
2013 |
October 27,
2012 |
Variance |
|
In USD |
As a % of Net
Sales(1) |
In USD |
As a % of Net
Sales(1) |
In USD |
% |
Basis Points(1) |
|
(In thousands except per share data and
percentages) |
Net sales |
$ 248,185 |
100.0% |
$ 209,673 |
100.0% |
$ 38,512 |
18% |
0 |
Cost of goods sold and occupancy costs |
118,700 |
47.8% |
97,443 |
46.5% |
21,257 |
22% |
140 |
Gross profit |
129,485 |
52.2% |
112,230 |
53.5% |
17,255 |
15% |
(140) |
Selling, general and administrative
expenses |
72,800 |
29.3% |
58,960 |
28.1% |
13,840 |
23% |
120 |
Income from operations |
56,685 |
22.8% |
53,270 |
25.4% |
3,415 |
6% |
(260) |
Interest expense |
(362) |
(0.1)% |
(546) |
(0.3)% |
184 |
(34)% |
10 |
Other income |
127 |
0.1% |
257 |
0.1% |
(130) |
(50)% |
(10) |
Income before income tax expense |
56,450 |
22.7% |
52,981 |
25.3% |
3,469 |
7% |
(250) |
Income tax expense |
22,223 |
9.0% |
20,790 |
9.9% |
1,433 |
7% |
(100) |
Net income |
$ 34,227 |
13.8% |
$ 32,191 |
15.4% |
$ 2,036 |
6% |
(160) |
(1) Percentage totals or
basis points variances in the above table may not equal the sum or
difference of the components due to rounding. |
Diluted earnings (loss) per common share |
$ 0.77 |
|
$ 0.72 |
|
|
|
|
Weighted average diluted shares
outstanding: |
44,600 |
|
44,791 |
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales increase |
(1)% |
|
18% |
|
|
|
|
|
Francesca's Holdings
Corporation |
Unaudited Consolidated
Balance Sheets |
(In
thousands) |
|
|
November 2, |
February 2, |
October 27, |
|
2013 |
2013 |
2012 |
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 31,842 |
$ 29,877 |
$ 12,906 |
Accounts receivable |
9,850 |
2,504 |
5,634 |
Inventories |
30,638 |
19,049 |
23,523 |
Deferred income taxes |
3,688 |
3,506 |
2,872 |
Prepaid expenses and other current
assets |
6,222 |
4,749 |
4,622 |
Total current assets |
82,240 |
59,685 |
49,557 |
Property and equipment, net |
57,359 |
49,559 |
43,021 |
Deferred income taxes |
4,046 |
2,357 |
1,923 |
Other assets, net |
2,555 |
1,573 |
2,372 |
|
|
|
|
Total assets |
$ 146,200 |
$ 113,174 |
$ 96,873 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 8,570 |
$ 8,358 |
$ 12,369 |
Accrued liabilities |
10,365 |
10,667 |
6,649 |
Total current liabilities |
18,935 |
19,025 |
19,018 |
Deferred and accrued rents |
27,554 |
22,092 |
21,895 |
Long-term debt |
25,000 |
— |
— |
|
|
|
|
Total liabilities |
71,489 |
41,117 |
40,913 |
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
Common stock – $.01 par value, 80.0
million shares authorized; 44.2 million, 43.9 million and 43.9
million shares issued; 42.3 million, 43.9 million and 43.9
million shares outstanding at November 2, 2013, February 2, 2013
and October 27, 2012, respectively. |
442 |
439 |
438 |
Additional paid-in capital |
90,511 |
85,161 |
83,935 |
Retained earnings (accumulated
deficit) |
20,684 |
(13,543) |
(28,413) |
Treasury stock, at cost – 1.9 million
shares at November 2, 2013 |
(36,926) |
— |
— |
Total stockholders' equity |
74,711 |
72,057 |
55,960 |
|
|
|
|
Total liabilities and stockholders'
equity |
$ 146,200 |
$ 113,174 |
$ 96,873 |
|
Francesca's Holdings
Corporation |
Unaudited Consolidated
Statements of Cash flows |
(In
thousands) |
|
|
Thirty Nine Weeks
Ended |
|
November 2, |
October 27, |
|
2013 |
2012 |
|
|
|
Cash Flows From Operating Activities: |
|
|
Net income |
$ 34,227 |
$ 32,191 |
Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
Depreciation expense |
7,421 |
5,458 |
Stock-based compensation expense |
2,955 |
2,684 |
Excess tax benefit from stock-based
compensation |
(3,522) |
(2,193) |
Loss on sale of assets |
343 |
89 |
Amortization of debt issuance costs |
216 |
220 |
Deferred income taxes |
(1,871) |
(1,491) |
Changes in assets and liabilities: |
|
|
Accounts receivable |
(3,824) |
(3,199) |
Inventories |
(11,589) |
(9,061) |
Prepaid expenses and other assets |
(2,295) |
(2,068) |
Accounts payable |
212 |
3,463 |
Accrued liabilities |
(302) |
(1,051) |
Deferred and accrued rents |
5,462 |
7,005 |
Net cash provided by operating
activities |
27,433 |
32,047 |
|
|
|
Cash Flows Used in Investing Activities: |
|
|
Purchase of property and equipment |
(15,646) |
(15,370) |
Proceeds from sale of assets |
82 |
— |
Net cash used in investing activities |
(15,564) |
(15,370) |
|
|
|
Cash Flows Used in Financing Activities: |
|
|
Proceeds from borrowings under the
revolving credit facility |
25,000 |
— |
Repayments of borrowings under the
revolving credit facility |
— |
(22,000) |
Payments of debt issuance costs |
(376) |
— |
Repurchases of common stock |
(36,926) |
— |
Proceeds from the exercise of stock
options |
1,156 |
1,990 |
Taxes paid related to net settlement of
equity awards |
(2,280) |
— |
Excess tax benefit from stock-based
compensation |
3,522 |
2,193 |
Net cash used in financing activities |
(9,904) |
(17,817) |
|
|
|
Net increase (decrease) in cash and cash
equivalents |
1,965 |
(1,140) |
Cash and cash equivalents, beginning of
year |
29,877 |
14,046 |
Cash and cash equivalents, end of
period |
$ 31,842 |
$ 12,906 |
|
|
|
Supplemental Disclosures of Cash Flow
Information: |
|
|
Cash paid for income taxes |
$ 28,352 |
$ 26,182 |
Interest paid |
$ 125 |
$ 405 |
|
Francesca's Holdings
Corporation |
Supplemental
Information |
|
Sales by Merchandise
Category |
|
|
Thirteen Weeks
Ended |
Variance |
|
November 2,
2013 |
October 27,
2012 |
In Dollars |
% |
|
(In thousands except percentages) |
Apparel |
$ 41,604 |
$ 38,013 |
$ 3,591 |
9% |
Jewelry |
17,335 |
15,844 |
1,491 |
9% |
Accessories |
13,771 |
10,854 |
2,917 |
27% |
Gifts |
6,540 |
7,139 |
(599) |
-8% |
Merchandise sales |
79,250 |
71,850 |
7,400 |
10% |
Other(1) |
382 |
136 |
246 |
181% |
Net sales |
$ 79,632 |
$ 71,986 |
$ 7,646 |
11% |
________
(1) Includes gift card breakage income, shipping and change in
return reserve.
|
Quarterly Comparable
Transactions Results |
|
|
Transactions(1) |
Average Transaction
Value(2) |
|
|
|
Q1 2013 |
-3% |
5% |
Q2 2013 |
-4% |
3% |
Q3 2013 |
-3% |
0% |
__________
(1) The number of comparable transactions (including
merchandise and gift card purchases, returns and gift card
redemptions) processed through our point-of sale system for which a
receipt was issued.
(2) Average transaction value is calculated by dividing total
comparable sales by the number of comparable transactions during
the period.
|
Quarterly Comparable
Sales Results |
|
|
FY 2011(1) |
FY 2012(1) |
FY 2013(2) |
2 Year Stack |
Q1 |
16% |
16% |
2% |
18% |
Q2 |
6% |
21% |
-1% |
20% |
Q3 |
7% |
17% |
-3% |
14% |
|
|
|
|
|
Q4 |
15% |
10% |
-- |
-- |
|
|
|
|
|
FY |
11% |
16% |
-- |
-- |
________
(1) Beginning in the first quarter of fiscal year 2013,
comparable sales results include our direct-to-consumer
sales. To facilitate comparability with the prior year period,
prior year comparable sales growth was recalculated and now
includes direct-to-consumer sales growth.
(2) Due to the retail calendar shift, comparable sales results
for each of the thirteen weeks ended May 4, 2013, August 3, 2013
and November 2, 2013 were compared with the comparable sales for
each of the thirteen weeks ended May 5, 2013, August 4, 2013 and
November 3, 2013, respectively.
CONTACT: ICR, Inc.
Jean Fontana
646-277-1214
Company
Randi Sonenshein
Vice President, Finance and Investor Relations
832-494-2250
Randi.Sonenshein@francescas.com
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