Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 9, 2015

FRANCESCA’S HOLDINGS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

	Delaware
001-35239	(State or Other Jurisdiction of Incorporation)	20-8874704
(Commission File Number)		(I.R.S. Employer Identification No.)

8760 Clay Road, Houston, Texas		77080
(Address of Principal Executive Offices)		(Zip Code)

(713) 864-1358

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On September 9, 2015, Francesca’s Holdings Corporation (the “Company”) issued a press release announcing its consolidated financial results for the fiscal second quarter ended August 1, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits.

99.1

Press Release issued by Francesca’s Holdings Corporation on September 9, 2015.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FRANCESCA’S HOLDINGS CORPORATION

Date: September 9, 2015	By:	/s/ Kal Malik
		Kal Malik
		Chief Administrative Officer

EXHIBIT INDEX

Exhibit No.		Description

99.1		Press Release issued by Francesca’s Holdings Corporation on September 9, 2015.

Exhibit 99.1

francesca’s® Reports Second Quarter Fiscal Year 2015 Financial Results

Net sales increased 9% to $106.0 million

Comparable sales decreased 4%

Diluted earnings per share was $0.22

Opened 69 boutiques year-to-date

HOUSTON, TEXAS — September 9, 2015 — Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported financial results for the second quarter ended August 1, 2015.

Michael W. Barnes, Chairman, President, and CEO stated, “We are pleased to announce this morning that we met our expectations for second quarter sales and earnings, which, reflect in-line results across merchandise categories, strong new boutique performance and healthy gross margin expansion. Inventory per boutique at the end of the quarter was down four percent to last year’s second quarter. We are very pleased with the results for the back-to-school period through Labor Day. Our customers continue to respond favorably to our fall merchandise assortment and we are seeing significant improvement in our apparel and accessories offerings.”

Mr. Barnes continued, “Looking ahead, our focus remains on driving profitable sales as we continue to enhance our merchandise offerings and maintain appropriate inventory levels with a disciplined approach to our promotional strategy. Based on our recent performance and expectations for the remainder of the year, we are maintaining the top end of our prior sales outlook and tightening our earnings per share guidance for fiscal 2015. As we continue to develop and execute our strategic plan, including building out our leadership team for the future, I am excited about the long-term prospects of francesca’s. I want to thank all of our team members for their continued hard work and dedication.”

SECOND QUARTER RESULTS

Net sales increased 9% to $106.0 million from $97.3 million in the comparable prior year period. This increase was driven by 82 new boutiques opened since the comparable prior year quarter. We opened 19 boutiques during the quarter bringing the total boutique count to 608 at the end of the second quarter.

Comparable sales decreased 4% due to lower comparable transactions. DTC sales were flat at $3.6 million in each of the thirteen weeks ended August 1, 2015 and August 2, 2014.

Gross profit, as a percentage of net sales, increased to 47.4% from 46.6% in the prior year quarter. This increase is driven by 260 basis points improvement in merchandise margin partially offset by 170 basis points deleveraging of occupancy costs. The merchandise margin improvement is attributable to the decreased amount of charges related to the disposal of slow-moving merchandise as well as lower promotions compared to last year.

Selling, general and administrative expenses (“SG&A”) increased 23% to $35.1 million from $28.7 million in the prior year quarter. The increase in SG&A expenses is primarily due to higher boutique and corporate payroll expenses to support the larger boutique base.

Income from operations was $15.2 million, or 14.3% of net sales, compared to $16.7 million, or 17.1% of net sales, in the prior year quarter.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the quarter were $48.8 million compared to $24.9 million at the end of the comparable prior year quarter.

We ended the quarter with $33.6 million of inventory on hand compared to $30.2 million at the comparable prior year period. Average ending inventory per boutique decreased by 4% versus the comparable prior year period.

THIRD QUARTER AND FISCAL YEAR 2015 GUIDANCE

For the third quarter ending October 31, 2015, net sales are expected to be in the range of $98.0 million to $101.0 million; assuming a low single digit decrease to flat comparable sales compared to the prior year comparable sales decrease of 6%. The Company plans to open 11 new boutiques during the third quarter. Diluted earnings per share are expected to be in the range of $0.12 to $0.15.

For the full year ending January 30, 2016, we now expect net sales to be in the range of $416.0 million to $424.0 million; assuming a low single digit decrease in comparable sales compared to a prior year comparable sales decrease of 5%. The Company expects to open 83 boutiques in fiscal year 2015 compared to 88 new boutiques opened in fiscal year 2014. Diluted earnings per share are expected to be in the range of $0.83 to $0.88. The number of average diluted shares for the full year assumed in guidance is expected to be 42.4 million shares. The effective tax rate is estimated to be 38.1%.

Our expected capital expenditures for fiscal year 2015 have decreased to approximately $25.0 million to $27.0 million from approximately $30.0 million to $32.0 million previously disclosed due to the postponement of infrastructure investments in our DTC website which we now expect to commence development in fiscal year 2016. Additionally, current year spending for new boutiques that will open in fiscal year 2016 is planned to decrease as we now expect to open fewer boutiques in fiscal year 2016 compared to an average of 85 boutiques we have opened in the last three fiscal years.

Conference Call Information

A conference call to discuss the second quarter fiscal year 2015 results is scheduled for September 9, 2015, at 8:30 a.m. ET. A live web cast of the conference call will be available in the investor relations section of our website, www.francescas.com. 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. A replay of the call will be available after the conclusion of the call and remain available until September 16, 2015. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 8391867.

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; 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; our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth; and our ability to attract and integrate a new Chief Merchandising Officer. 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 31, 2015 filed with the Securities and Exchange Commission on March 27, 2015 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 with retail locations designed and merchandised to feel like unique, 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 612 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	Mark Vendetti
646-277-1214	832-494-2315
	Mark.Vendetti@francescas.com / IR@francescas.com

Francesca’s Holdings Corporation

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts and Percentages)

	Thirteen Weeks Ended
	August 1, 2015						August 2, 2014						Variance
	In USD			As a % of Net Sales⁽¹⁾			In USD			As a % of Net Sales⁽¹⁾			In USD			%			Basis Points
Net sales	$	106,033			100.0	%	$	97,319			100.0	%	$	8,714			9	%		-
Cost of goods sold and occupancy costs		55,725			52.6	%		52,004			53.4	%		3,721			7	%		(90	)
Gross profit		50,308			47.4	%		45,315			46.6	%		4,993			11	%		90
Selling, general and administrative expenses		35,133			33.1	%		28,653			29.4	%		6,480			23	%		370
Income from operations		15,175			14.3	%		16,662			17.1	%		(1,487	)		(9	)%		(280	)
Interest expense		(112	)		(0.1	)%		(169	)		(0.2	)%		57			(34	)%		10
Other (expense) income		(54	)		(0.1	)%		56			0.1	%		(110	)		(196	)%		(20	)
Income before income tax expense		15,009			14.2	%		16,549			17.0	%		(1,540	)		(9	)%		(280	)
Income tax expense		5,705			5.4	%		6,242			6.4	%		(537	)		(9	)%		(100	)
Net income	$	9,304			8.8	%	$	10,307			10.6	%	$	(1,003	)		(10	)%		(180	)
(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	$	0.22					$	0.24
Weighted average diluted share count		42,433						42,367

Comparable sales change		(4)%						(7)%

	Twenty Six Weeks Ended
	August 1, 2015						August 2, 2014						Variance
	In USD			As a % of Net Sales⁽¹⁾			In USD			As a % of Net Sales⁽¹⁾			In USD			%			Basis Points
Net sales	$	201,044			100.0	%	$	182,743			100.0	%	$	18,301			10	%		-
Cost of goods sold and occupancy costs		105,843			52.6	%		95,596			52.3	%		10,247			11	%		30
Gross profit		95,201			47.4	%		87,147			47.7	%		8,054			9	%		(30	)
Selling, general and administrative expenses		68,136			33.9	%		56,465			30.9	%		11,671			21	%		300
Income from operations		27,065			13.5	%		30,682			16.8	%		(3,617	)		(12	)%		(330	)
Interest expense		(222	)		(0.1	)%		(390	)		(0.2	)%		168			(43	)%		10
Other (expense) income		(120	)		(0.1	)%		159			0.1	%		(279	)		(175	)%		(20	)
Income before income tax expense		26,723			13.3	%		30,451			16.7	%		(3,728	)		(12	)%		(340	)
Income tax expense		10,178			5.1	%		11,584			6.3	%		(1,406	)		(12	)%		(130	)
Net income	$	16,545			8.2	%	$	18,867			10.3	%	$	(2,322	)		(12	)%		(210	)
(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	$	0.39					$	0.45
Weighted average diluted share count		42,425						42,364

Comparable sales change		(3)%						(7)%

Francesca’s Holdings Corporation

Consolidated Balance Sheets

(In thousands, except share amounts)

	August 1, 2015			January 31, 2015			August 2, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	48,840		$	39,071		$	24,861
Accounts receivable		9,061			12,279			9,905
Inventories		33,642			23,801			30,191
Deferred income taxes		5,537			4,858			4,726
Prepaid expenses and other current assets		5,915			5,890			6,965
Total current assets		102,995			85,899			76,648
Property and equipment, net		80,176			74,095			71,217
Deferred income taxes		5,426			3,642			4,562
Other assets, net		1,677			1,909			1,538
TOTAL ASSETS	$	190,274		$	165,545		$	153,965

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,301		$	11,550		$	11,380
Accrued liabilities		13,465			11,904			9,088
Total current liabilities		26,766			23,454			20,468
Landlord incentives and deferred rent		37,404			32,877			33,097
Long-term debt		-			-			5,000
Total liabilities		64,170			56,331			58,565

Commitments and contingencies

Stockholders’ equity:
Common stock - $0.01 par value, 80.0 million shares authorized; 45.5 million shares issued at each August 1, 2015, January 31, 2015 and August 2, 2014.		455			455			455
Additional paid-in capital		105,843			105,498			104,925
Retained earnings		79,949			63,404			50,163
Treasury stock, at cost - 3.2 million shares at each August 1, 2015, January 31, 2015 and August 2, 2014.		(60,143	)		(60,143	)		(60,143	)
Total stockholders’ equity		126,104			109,214			95,400
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	190,274		$	165,545		$	153,965

Francesca’s Holdings Corporation

Consolidated Statements of Cash Flows

(In thousands)

	Twenty Six Weeks Ended
	August 1, 2015			August 2, 2014
Cash Flows From Operating Activities:
Net income	$	16,545		$	18,867
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,000			6,366
Stock-based compensation expense		1,591			1,629
Excess tax benefit from stock-based compensation		(61	)		(775	)
Loss on sale of assets		282			121
Deferred income taxes		(3,940	)		(2,388	)
Changes in operating assets and liabilities:
Accounts receivable		3,279			(146	)
Inventories		(9,841	)		(5,577	)
Prepaid expenses and other assets		86			(208	)
Accounts payable		2,466			1,480
Accrued liabilities		1,561			(735	)
Landlord incentives and deferred rent		4,527			5,649
Net cash provided by operating activities		24,495			24,283

Cash Flows From Investing Activities:
Purchases of property and equipment		(14,959	)		(13,759	)
Proceeds from sale of assets		3			2
Net cash used in investing activities		(14,956	)		(13,757	)

Cash Flows From Financing Activities:
Proceeds from the exercise of stock options		169			1,332
Excess tax benefit from stock-based compensation		61			775
Repayments of borrowings under the revolving credit facility		-			(20,000	)
Repurchases of common stock		-			(5,270	)
Net cash provided by (used in) financing activities		230			(23,163	)

Net increase (decrease) in cash and cash equivalents		9,769			(12,637	)
Cash and cash equivalents, beginning of year		39,071			37,498
Cash and cash equivalents, end of period	$	48,840		$	24,861

Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	$	8,335		$	9,413
Interest paid	$	94		$	288

Francesca’s Holdings Corporation

Supplemental Information

Quarterly Sales by Merchandise Category

	Thirteen Weeks Ended				Change
	August 1, 2015		August 2, 2014		Dollar		%
	(in thousands, except percentages)
Apparel	$	56,441	$	52,128	$	4,313		8	%
Jewelry		23,442		20,594		2,848		14	%
Accessories		14,537		14,526		11		0	%
Gifts		11,069		9,865		1,204		12	%
Merchandise sales		105,489		97,113		8,376		9	%
Others⁽¹⁾		544		206		338		164	%
	$	106,033	$	97,319	$	8,714		9	%

⁽¹⁾

Includes gift card breakage income, shipping and change in return reserve.

Quarterly Comparable Transactions Results for Fiscal Year 2015

	Transactions⁽¹⁾			Average Transaction Value⁽²⁾
Q1		(5	)%		3	%
Q2		(3	)%		(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 Comparable Sales