- Fourth quarter net sales increased 6% to $92.1 million
- Fourth quarter comparable sales decreased 6%
- Fourth quarter adjusted diluted earnings per share were
$0.27
Francesca's Holdings Corporation (Nasdaq:FRAN) today announced
fourth quarter and full year 2013 financial results. These results
cover the 13 and 52 week periods ended February 1, 2014 along with
comparisons to the 14 and 53 week periods ended February 2,
2013.
Neill P. Davis, francesca's® Chief Executive Officer and
President stated, "Sales results for the fourth quarter were below
our revised guidance driven by the impact of 370 full and partial
daily boutique closings during January due to extreme weather
conditions. Performance in regions less affected by extreme weather
performed within our updated fourth quarter guidance. Looking at
our full year performance, compared to the comparable 52-weeks in
the prior year, sales increased 16% driven by new boutique openings
and continued strong growth in our direct-to-consumer business. Our
business model was evident in the challenging environment of 2013
as we delivered full year operating margins in excess of 20% while
growing our market presence, supporting our growth with
infrastructure investments, and managing through the transition in
our merchandise offerings."
Commenting on the first quarter and full year 2014 outlook, Mr.
Davis noted that, "The headwinds our business experienced as we
progressed through January have continued into the first quarter,
impacting our ability to clear through seasonal fall and winter
products and resulting in the delay of spring season full-price
selling. Although initial customer reaction to our spring apparel
fashion is strong, clarity and timing of Spring 2014 customer
buying trends remain uncertain. Our outlook for the quarter is
based on current trends and an expectation of continued soft
traffic through the balance of the first quarter. Underpinning our
full year outlook of double-digit growth rates in sales and diluted
earnings per share is our expectation of an improving trend in the
second half of the fiscal year based on new boutique openings and
related sales productivity, improving comparable sales results
aided by easier second half comparisons, and leveraging of prior
year infrastructure investments."
FOURTH QUARTER RESULTS
Net sales for the thirteen weeks ending February 1, 2014 were
$92.1 million. Net sales for the fourteen weeks ending February 2,
2013 were $86.7 million, including approximately $3.9 million
related to the fourteenth week in last year's fourth quarter. The
increase in fourth quarter sales was driven by 91 new boutique
openings since the prior year quarter.
Comparable sales, which includes direct-to-consumer sales,
decreased 6%, as compared to a 10% increase in the prior year
quarter. The decrease in comparable sales was driven by a decrease
in transactions partially offset by an increase in
direct-to-consumer sales of 92% versus the prior year quarter.
Five new boutiques were opened during the fourth quarter
bringing new openings for the year to 91 and ending total boutique
count to 451 at quarter end.
Gross profit, as a percentage of net sales, decreased to 50.6%
compared to 53.4% in the prior year quarter. This decrease was due
to 180 basis points of deleveraging of fixed occupancy costs and
100 basis points of lower merchandise margin. The decrease in
merchandise margins was due to elevated markdowns and promotions
compared to the prior year quarter.
Adjusted selling, general and administrative expenses, which
excludes $1.3 million in charges related to severance and
litigation, increased 28% to $27.7 million from $21.6 million of
selling, general and administrative expenses in the prior year
quarter. This increase was primarily due to higher payroll expenses
and infrastructure investments to support the larger boutique base
and direct-to-consumer sales growth. The prior year quarter did not
include any adjusted items.
Adjusted income from operations, which excludes $1.3 million in
charges related to severance and litigation, was $18.9 million or
20.5% of net sales compared to income from operations of $24.7
million or 28.5% of net sales in the prior year quarter.
Net income was $10.6 million or $0.25 diluted earnings per share
for the fourth quarter of 2013, compared to net income of $14.9
million or $0.33 diluted earnings per share for the fourth quarter
of 2012, with 2012's 53rd week contributing approximately $0.03
diluted earnings per share. Adjusted net income for the fourth
quarter of 2013 was $11.4 million, or $0.27 adjusted diluted
earnings per share, which excludes severance and litigation
expenses of $1.3 million pretax ($0.8 million net of tax), or $0.02
diluted earnings per share.
FULL YEAR RESULTS
Net sales increased 15% to $340.3 million. Prior year net
sales included approximately $3.9 million associated with the 53rd
week. Comparable sales, which includes direct-to-consumer sales,
decreased 2%, as compared to a 16% increase in the prior year.
For fiscal 2013, ending total boutique locations increased by
91, or 25%, to 451 from 360 in the prior year.
Net income was $44.8 million or $1.02 diluted earnings per share
compared to $47.1 million or $1.05 diluted earnings per share in
2012, including 2012's 53rd week which contributed approximately
$0.03 diluted earnings per share.
Adjusted net income for fiscal year 2013 was $46.2 million or
$1.05 adjusted diluted earnings per share, which excludes $0.6
million pretax charges ($0.6 million net of tax), or $0.01 diluted
earnings per share, related to a secondary equity offering and $1.3
million pretax charges, $0.8 million net of tax, or $0.02 diluted
earnings per share, related to severance and
litigation. Adjusted net income for fiscal year 2012
was $47.9 million, or $1.06 adjusted diluted earnings per share,
which excludes $0.5 million pretax charges ($0.5 million net of
tax), or $0.01 diluted earnings per share, related to a secondary
equity offering, $0.3 million pretax charges ($0.2 million net of
tax) related to stock option acceleration expenses and $0.3 million
pretax charges ($0.2 million net of tax), which had a combined
increase of $0.02 diluted earnings per share, related to the
relocation of our headquarters and distribution facilities.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at year end were $37.5 million
compared to $29.9 million at prior year end. The Company had
$25.0 million of outstanding debt under its revolving credit
facility at year end.
Total inventories rose to $24.6 million, an increase of 29%,
compared to $19.0 million at the end of 2012 as a result of the
increase in the number of boutiques in operation as compared to the
prior year and carryover clearance inventory from the fourth
quarter. Ending inventory per boutique increased 3% compared to the
same period in 2012.
During the fourth quarter, the Company repurchased approximately
1.0 million shares of the Company's common stock at a cost of
approximately $17.9 million or an average of $18.84 per share. For
the fiscal year 2013, the Company repurchased approximately 2.9
million shares at a cost of approximately $54.8 million or an
average price of $18.95 per share.
FIRST FISCAL QUARTER AND FULL FISCAL YEAR 2014
GUIDANCE
For the first quarter ending May 3, 2014, net sales are expected
to be between $85 million and $90 million assuming a high to low
single digit decrease in comparable sales, which includes our
direct-to-consumer business. This compares to the prior year
comparable sales increase of 2%. The Company plans to open
approximately 60 new boutiques during the first quarter as compared
to 56 boutiques opened during the prior year quarter. Diluted
earnings per share are expected to be in the range of $0.20 to
$0.24.
For the full year ending January 31, 2015, net sales are
expected to be in the range of $391 million to $409 million
assuming a low single digit decrease to a low single digit increase
in comparable sales, including our direct-to-consumer business.
This compares to the prior year comparable sales decrease of
2%. The Company plans to open approximately 85 boutiques in
the fiscal year 2014, as compared to 91 in fiscal
2013. Diluted earnings per share are expected to be in the
range of $1.16 to $1.31. This is compared to the prior year
adjusted diluted earnings per share of $1.05, which excludes $0.6
million, or $0.01 diluted earnings per share, net of tax charge
related to a secondary equity offering during the first quarter and
$0.8 million, or $0.02 diluted earnings per share, net of tax
charge related to severance and litigation charges during the
fourth quarter. The number of average diluted shares for the full
year assumed in guidance is expected to be 42.5 million which
excludes the impact of potential additional share repurchases
during the year. The effective tax rate is estimated to be
38.6% for both the first quarter and full year. Capital
expenditures are expected to be in a range of $25.0 million to
$27.0 million which will be primarily spent on boutique openings
and remodels, as well as investments in our merchandising and
direct-to-consumer information technology systems.
Conference Call Information
A conference call to discuss fourth quarter 2013 results is
scheduled for March 26, 2014, 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 April 2, 2014. To access the telephone replay,
listeners should dial (877) 870-5176. The access code for the
replay is 5875269. 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,
adjusted net income 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, as amended. 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 for the year ended February 2, 2013 filed with the
Securities and Exchange Commission on March 22, 2013 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. 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 496 boutiques in 45 states and
the District of Columbia also serves its customers through
francescas.com. For additional information on francesca's®, please
visit www.francescas.com.
Francesca's Holdings
Corporation |
Consolidated Statements
of Operations |
|
|
Thirteen Weeks
Ended |
Fourteen Weeks
Ended |
|
|
February
1, 2014 |
February
2, 2013 |
Variance |
|
In USD |
As a % of Net
Sales(1) |
In USD |
As a % of Net
Sales(1) |
In USD |
% |
Basis Points |
|
(In thousands except per share data and
percentages) |
Net sales |
$92,140 |
100.0% |
$86,700 |
100.0% |
$5,440 |
6% |
-- |
Cost of goods sold and occupancy costs |
45,560 |
49.4% |
40,430 |
46.6% |
5,130 |
13% |
280 |
Gross profit |
46,580 |
50.6% |
46,270 |
53.4% |
310 |
1% |
(280) |
Selling, general and administrative
expenses |
28,995 |
31.5% |
21,600 |
24.9% |
7,395 |
34% |
660 |
Income from operations |
17,585 |
19.1% |
24,670 |
28.5% |
(7,085) |
(29)% |
(940) |
Interest expense |
(226) |
(0.2)% |
(125) |
(0.1)% |
(101) |
81% |
(10) |
Other income |
81 |
0.1% |
(27) |
0.0% |
108 |
(400)% |
10 |
Income before income tax expense |
17,440 |
18.9% |
24,518 |
28.3% |
(7,078) |
(29)% |
(940) |
Income tax expense |
6,828 |
7.4% |
9,648 |
11.1% |
(2,820) |
(29)% |
(370) |
Net income |
$10,612 |
11.5% |
$14,870 |
17.2% |
$(4,258) |
(29)% |
(560) |
(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 common share |
$0.25 |
|
$0.33 |
|
|
|
|
Weighted average diluted shares
outstanding: |
42,687 |
|
44,858 |
|
|
|
|
|
|
|
|
|
|
Comparable sales change |
(6)% |
10% |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
Ended |
|
|
February
1, 2014 |
February
2, 2013 |
Variance |
|
In USD |
As a % of Net
Sales(1) |
In USD |
As a % of Net
Sales(1) |
In USD |
% |
Basis Points |
|
(In thousands except per share data and
percentages) |
Net sales |
$340,325 |
100.0% |
$296,373 |
100.0% |
$43,952 |
15% |
-- |
Cost of goods sold and occupancy costs |
164,260 |
48.3% |
137,873 |
46.5% |
26,387 |
19% |
170 |
Gross profit |
176,065 |
51.7% |
158,500 |
53.5% |
17,565 |
11% |
(170) |
Selling, general and administrative
expenses |
101,795 |
29.9% |
80,560 |
27.2% |
21,235 |
26% |
270 |
Income from operations |
74,270 |
21.8% |
77,940 |
26.3% |
(3,670) |
(5)% |
(450) |
Interest expense |
(588) |
(0.2)% |
(672) |
(0.2)% |
84 |
(13)% |
10 |
Other income |
208 |
0.1% |
230 |
0.1% |
(22) |
(10)% |
-- |
Income before income tax expense |
73,890 |
21.7% |
77,498 |
26.1% |
(3,608) |
(5)% |
(440) |
Income tax expense |
29,051 |
8.5% |
30,437 |
10.3% |
(1,386) |
(5)% |
(170) |
Net income |
$44,839 |
13.2% |
$47,061 |
15.9% |
$ (2,222) |
(5)% |
(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 common share |
$1.02 |
|
$1.05 |
|
|
|
|
Weighted average diluted shares
outstanding: |
44,123 |
|
44,807 |
|
|
|
|
|
|
|
|
|
|
Comparable sales change |
(2)% |
16% |
|
|
|
|
|
|
|
|
|
|
|
Francesca's Holdings
Corporation |
Consolidated Balance
Sheets |
(In thousands, except
share data) |
|
|
February 1,
2014 |
February 2,
2013 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 37,498 |
$ 29,877 |
Accounts receivable |
8,984 |
2,504 |
Inventories |
24,614 |
19,049 |
Deferred income taxes |
4,565 |
3,506 |
Prepaid expenses and other current
assets |
6,764 |
4,749 |
Total current assets |
82,425 |
59,685 |
Property and equipment, net |
64,131 |
49,559 |
Deferred income taxes |
2,335 |
2,357 |
Other assets, net |
1,654 |
1,573 |
|
|
|
TOTAL ASSETS |
$150,545 |
$113,174 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 10,207 |
$ 8,358 |
Accrued liabilities |
9,823 |
10,667 |
Total current liabilities |
20,030 |
19,025 |
Deferred and accrued rents |
27,448 |
22,092 |
Long-term debt |
25,000 |
-- |
Total liabilities |
72,478 |
41,117 |
Commitments and contingencies |
|
|
Shareholders' equity (deficit): |
|
|
Common stock--$.01 par value,
80.0 million shares authorized, 45.2 million and 43.9 million
shares issued; 42.3 million and 43.9 million shares outstanding at
February 1, 2014 and February 2, 2013, respectively. |
452 |
439 |
Additional paid-in capital |
101,192 |
85,161 |
Accumulated deficit |
31,296 |
(13,543) |
Treasury stock, at cost – 2.9 million
shares at February 1, 2014 |
(54,873) |
-- |
Total shareholders' equity |
78,067 |
72,057 |
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY |
$150,545 |
$113,174 |
|
|
|
Francesca's Holdings
Corporation |
Consolidated Statements
of Cash flows |
(In
thousands) |
|
|
For the Fiscal
Year Ended |
|
February 1,
2014 |
February 2,
2013 |
January 28,
2012 |
Cash Flows Provided by Operating
Activities: |
|
|
|
Net income |
$ 44,839 |
$ 47,061 |
$22,501 |
Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
10,054 |
7,151 |
4,936 |
Stock-based compensation expense |
3,781 |
3,599 |
4,671 |
Excess tax benefit from stock-based
compensation |
(5,846) |
(2,296) |
(449) |
Loss on sale of assets |
343 |
188 |
23 |
Loss on early extinguishment of debt |
-- |
-- |
1,591 |
Amortization of debt issuance costs |
278 |
299 |
537 |
Deferred income taxes |
(1,014) |
(2,559) |
721 |
Changes in assets and liabilities: |
|
|
|
Accounts receivables |
(634) |
(70) |
1,750 |
Inventories |
(5,565) |
(4,587) |
(2,593) |
Prepaid expenses and other assets |
(2,021) |
(1,512) |
(445) |
Accounts payable |
1,415 |
(547) |
2,629 |
Accrued liabilities |
(844) |
3,069 |
3,932 |
Deferred and accrued rents |
5,356 |
7,203 |
6,667 |
Net cash provided by operating
activities |
50,142 |
56,999 |
46,471 |
Cash Flows Used in Investing Activities: |
|
|
|
Purchase of property and equipment |
(24,633) |
(23,663) |
(16,894) |
Other |
98 |
-- |
36 |
Net cash used in investing activities |
(24,535) |
(23,663) |
(16,858) |
Cash Flows Used in Financing Activities: |
|
|
|
Proceeds from issuance of stock in
initial public offering, net of costs |
-- |
-- |
44,245 |
Proceeds from borrowings under the
revolving credit facility |
25,000 |
-- |
41,000 |
Repayment of borrowings under the
revolving credit facility |
-- |
(22,000) |
(19,000) |
Repayment of borrowings under the senior
secured credit facility |
-- |
-- |
(93,813) |
Repurchases of common stock |
(54,873) |
-- |
-- |
Payment of debt issuance costs |
(376) |
-- |
(1,468) |
Proceeds from the exercise of stock
options |
8,697 |
2,199 |
504 |
Taxes paid related to net settlement of
equity awards |
(2,280) |
-- |
-- |
Excess tax benefit from stock-based
compensation |
5,846 |
2,296 |
449 |
Net cash used in financing activities |
(17,986) |
(17,505) |
(28,083) |
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
7,621 |
15,831 |
1,530 |
Cash and cash equivalents, beginning of
year |
29,877 |
14,046 |
12,516 |
Cash and cash equivalents, end of
year |
$ 37,498 |
$ 29,877 |
$14,046 |
Supplemental Disclosures of Cash Flow
Information: |
|
|
|
Cash paid for income taxes |
$ 32,401 |
$ 32,405 |
$ 8,971 |
Interest paid |
293 |
448 |
5,569 |
|
|
|
|
Francesca's Holdings
Corporation |
Supplemental
Information |
|
Sales by Merchandise
Category |
|
|
|
|
|
Thirteen Weeks Ended |
Fourteen Weeks Ended |
Variance |
|
February 1,
2014 |
February 2,
2013 |
In Dollars |
% |
Clothing |
$36,881 |
$34,764 |
$2,117 |
6% |
Jewelry |
21,422 |
22,114 |
(692) |
(3)% |
Accessories |
17,369 |
14,284 |
3,085 |
22% |
Gift & Home |
16,232 |
15,460 |
772 |
5% |
Merchandise sales |
91,904 |
86,622 |
5,282 |
6% |
Others(1) |
236 |
78 |
158 |
203% |
Net sales |
$92,140 |
$86,700 |
$5,440 |
6% |
|
|
|
|
|
(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% |
|
|
Q4 2013 |
(4)% |
(2)% |
|
|
FY 2013 |
(4)% |
1% |
|
|
(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 and Fiscal Year
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% |
(6)% |
4% |
FY |
11% |
16% |
(2)% |
14% |
|
|
|
|
|
|
|
|
|
|
(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) Fiscal year 2012 was a
53-week year. In calculating comparable sales change for
fiscal year 2013, comparable sales for the period February 3, 2013
through February 1, 2014 were compared against comparable sales for
the period February 5, 2012 through February 2, 2013. In
calculating comparable sales change for the quarterly periods in
fiscal year 2013, comparable sales results for each of the thirteen
weeks ended May 4, 2013, August 3, 2013, November 2, 2013 and
February 1, 2014 were compared with the comparable sales for each
of the thirteen weeks ended May 5, 2012, August 4, 2012, November
3, 2012 and February 2, 2014, 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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