- 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
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.
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 |
August2,2014 |
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
|
FY 2013 |
FY 2014 |
FY 2015 |
Q1 |
2 % |
(7)% |
(2)% |
Q2 |
(1)% |
(7)% |
(4)% |
Q3 |
(3)% |
(6)% |
|
Q4 |
(6)% |
1 % |
|
Fiscal year |
(2)% |
(5)% |
|
CONTACT: ICR, Inc.
Jean Fontana
646-277-1214
Company
Mark Vendetti
832-494-2315
Mark.Vendetti@francescas.com / IR@francescas.com
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