- Net sales increased 19% to $103.7 million
- Comparable sales increased 4%
- Diluted earnings per share was $0.16
- Opened 80 boutiques year-to-date
Francesca's Holdings Corporation (NASDAQ:FRAN) today reported
financial results for the third quarter ended October 31, 2015.
Michael W. Barnes, Chairman, President, and CEO stated, "We are
very pleased to have exceeded our third quarter sales and earnings
expectations. The momentum in our business that began in August
continued throughout the third quarter. We saw strength across all
of our departments and throughout many categories, with apparel and
accessories businesses leading the way. The sales productivity of
new boutiques were the highest since 2012, which we believe is a
result of the improved merchandise offering and elevated boutique
level execution. In anticipation of an earlier start of the holiday
season, we accelerated inventory receipts into the third quarter
compared to last year. However, we are planning inventory levels at
the end of the fourth quarter to be more consistent with historical
levels in line with our expectations."
Mr. Barnes noted that, "Based on recent results and our strong
merchandising position across our apparel, jewelry and gift
businesses, we have increased sales and comparable sales guidance
for the fiscal year. We have increased the lower end of our EPS
guidance for the fiscal year which now includes approximately $0.04
per diluted share for team member bonuses that were not included in
our prior guidance. Overall, we continue to focus our execution on
building the senior management team and executing our long term
strategy toward achieving our future goals. Now that both our new
Chief Merchandising Officer and our SVP of Digital and Marketing
have joined the leadership team, I look forward to their
contributions as we implement and execute our long term strategies
which I call the "Vision 2020" plan. Thus far during fiscal 2015,
we have driven meaningful improvement in our financial performance
and I continue to believe in the significant long term growth
opportunities ahead. I'd like to thank all our team members for
their hard work and continued dedication to francesca's®."
THIRD QUARTER RESULTS
Net sales increased 19% to $103.7 million from $87.1 million in
the comparable prior year period. This increase was driven by the
4% increase in comparable sales as well as the opening of 81 new
boutiques since the comparable prior year quarter. We opened 11
boutiques during the quarter bringing our total boutique count to
619 at the end of the third quarter.
The increase in comparable sales was primarily driven by an
increase in average transaction value compared to prior year. Each
of our merchandise category posted double digit sales increase
during the quarter, with strongest growth in apparel and
accessories. DTC sales increased 12% to $3.8 million during the
quarter compared to $3.4 million in the same period last year.
Gross profit, as a percentage of net sales, decreased to 46.6%
compared to 47.3% in the prior year quarter. This decrease is
driven by 30 basis points of lower merchandise margin due to
charges related to the disposal of slow-moving merchandise and 30
basis points of increased depreciation charges associated with
remodeling and updating existing boutiques equipment, furniture and
fixtures as well as increasing boutique build-out costs.
Selling, general and administrative expenses ("SG&A")
increased 25% to $37.3 million compared to $29.8 million in the
prior year quarter. The increase in SG&A expenses is primarily
due to higher boutique and corporate payroll to support the larger
boutique base as well as increased performance-based incentive
bonus expenses.
Income from operations was $11.0 million, or 10.7% of net sales,
compared to $11.4 million, or 13.1% of net sales, in the prior year
quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were
$42.0 million compared to $22.8 million at the end of the
comparable prior year quarter.
We ended the quarter with $43.9 million of inventory compared to
$35.4 million at end of the comparable prior year
period. Average ending inventory per boutique increased 8%
compared to prior year period due to accelerated inventory receipts
in preparation for the holiday season.
During the third quarter, the Company repurchased 666,000 shares
of its common stock at a cost of $8.5 million or an average of
$12.83 per share.
FOURTH QUARTER AND FISCAL YEAR 2015
GUIDANCE
For the fourth quarter ending January 30, 2016, net sales are
expected to be in the range of $127.0 million to $130.0 million;
assuming a mid-single digit increase in comparable sales compared
to the prior year comparable sales increase of 1%. The Company
expects to finish the year with 616 boutiques as a result of
opening 3 new boutiques and closing 6 boutiques in the fourth
quarter. Diluted earnings per share are expected to be in the range
of $0.31 to $0.33.
For the full year ending January 30, 2016, we expect net sales
to be in the range of $432.0 million and $435.0 million; assuming a
flat to slightly positive 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 $0.86 to $0.88. The number of average
diluted shares for the full year assumed in guidance is expected to
be 42.1 million shares. The effective tax rate is estimated to be
38.1%. We expect capital expenditures of $25.0 million to
$26.0 million for fiscal year 2015.
Conference Call Information
A conference call to discuss the third quarter fiscal year 2015
results is scheduled for December 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 shortly after the conclusion
of the call and remain until December 16, 2015. To access the
telephone replay, listeners should dial 1-877-870-5176. The
access code for the replay is 5941907.
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 Financial 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 which operates a
nationwide-chain of boutiques providing customers a unique, fun and
differentiated shopping experience. The merchandise assortment is a
diverse and balanced mix of apparel, jewelry, accessories and
gifts. Today francesca's® operates 621 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 |
|
|
October 31,
2015 |
November 1,
2014 |
Variance |
|
In USD |
As a % of Net
Sales(1) |
In USD |
As a % of Net
Sales(1) |
In USD |
% |
Basis Points |
Net sales |
$ 103,728 |
100.0 % |
$87,110 |
100.0 % |
$ 16,618 |
19 % |
-- |
Cost of goods sold and occupancy costs |
55,362 |
53.4 % |
45,925 |
52.7 % |
9,437 |
21 % |
70 |
Gross profit |
48,366 |
46.6 % |
41,185 |
47.3 % |
7,181 |
17 % |
(70) |
Selling, general and administrative
expenses |
37,286 |
35.9 % |
29,810 |
34.2 % |
7,476 |
25 % |
170 |
Income from operations |
11,080 |
10.7 % |
11,375 |
13.1 % |
(295) |
(3)% |
(240) |
Interest expense |
(122) |
(0.1)% |
(117) |
(0.1)% |
(5) |
4% |
-- |
Other (expense) income |
29 |
0.0 % |
42 |
0.0 % |
(13) |
(31)% |
-- |
Income before income tax expense |
10,987 |
10.6 % |
11,300 |
13.0 % |
(313) |
(5)% |
(240) |
Income tax expense |
4,036 |
3.9 % |
4,030 |
4.6 % |
6 |
0 % |
(70) |
Net income |
$ 6,951 |
6.7 % |
$ 7,270 |
8.3 % |
$ (319) |
(4)% |
(160) |
(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 |
$ 0.16 |
|
$ 0.17 |
|
|
|
|
Weighted average diluted share count |
42,246 |
|
42,389 |
|
|
|
|
|
|
|
|
|
|
Comparable sales change |
4% |
(6)% |
|
|
|
|
|
|
|
|
|
|
|
|
Thirty Nine Weeks
Ended |
|
|
October 31,
2015 |
November 1,
2014 |
Variance |
|
In USD |
As a % of Net
Sales |
In USD |
As a % of Net
Sales |
In USD |
% |
Basis Points |
Net sales |
$ 304,772 |
100.0 % |
$269,853 |
100.0 % |
$ 34,919 |
13 % |
-- |
Cost of goods sold and occupancy costs |
161,205 |
52.9 % |
141,521 |
52.4 % |
19,684 |
14 % |
50 |
Gross profit |
143,567 |
47.1 % |
128,332 |
47.6 % |
15,235 |
12 % |
(50) |
Selling, general and administrative
expenses |
105,422 |
34.6 % |
86,275 |
32.0 % |
19,147 |
22 % |
260 |
Income from operations |
38,145 |
12.5 % |
42,057 |
15.6 % |
(3,912) |
(9)% |
(310) |
Interest expense |
(344) |
(0.1)% |
(507) |
(0.2)% |
163 |
(32)% |
10 |
Other income |
(91) |
0.0 % |
201 |
0.1 % |
(292) |
(145)% |
(10) |
Income before income tax expense |
37,710 |
12.4 % |
41,751 |
15.5 % |
(4,041) |
(10)% |
(310) |
Income tax expense |
14,214 |
4.7 % |
15,614 |
5.8 % |
(1,400) |
(9)% |
(110) |
Net income |
$ 23,496 |
7.7 % |
$ 26,137 |
9.7 % |
$ (2,641) |
(10)% |
(200) |
(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 |
$ 0.55 |
|
$ 0.62 |
|
|
|
|
Weighted average diluted share count |
42,365 |
|
42,373 |
|
|
|
|
|
|
|
|
|
|
Comparable sales change |
(1)% |
(7)% |
|
|
|
|
|
|
|
|
|
Francesca's Holdings Corporation
Consolidated Balance Sheets (In thousands,
except share amounts)
|
October 31,
2015 |
January 31,
2015 |
November 1,
2014 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 42,015 |
$ 39,071 |
$ 22,830 |
Accounts receivable |
8,683 |
12,279 |
9,214 |
Inventories |
43,885 |
23,801 |
35,428 |
Deferred income taxes |
5,737 |
4,858 |
4,797 |
Prepaid expenses and other
current assets |
6,023 |
5,890 |
5,699 |
Total current assets |
106,343 |
85,899 |
77,968 |
Property and equipment, net |
79,017 |
74,095 |
70,646 |
Deferred income taxes |
6,659 |
3,642 |
6,573 |
Other assets, net |
1,656 |
1,909 |
2,776 |
TOTAL ASSETS |
$ 193,675 |
$ 165,545 |
$ 157,963 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ 15,933 |
$ 11,550 |
$ 13,074 |
Accrued liabilities |
14,817 |
11,904 |
8,610 |
Total current liabilities |
30,750 |
23,454 |
21,684 |
Landlord incentives and deferred rent |
37,540 |
32,877 |
33,299 |
Total liabilities |
68,290 |
56,331 |
54,983 |
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
Common stock -- $.01 par value,
80.0 million shares authorized; 45.5 million shares
issued at each October 31, 2015, January 31, 2015 and November 1,
2014, respectively. |
455 |
455 |
455 |
Additional paid-in capital |
106,722 |
105,498 |
105,235 |
Retained earnings |
86,900 |
63,404 |
57,433 |
Treasury stock, at cost – 3.8
million, 3.2 million and 3.2 million shares held at October 31,
2015, January 31, 2015 and November 1, 2014, respectively. |
(68,692) |
(60,143) |
(60,143) |
Total stockholders' equity |
125,385 |
109,214 |
102,980 |
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ 193,675 |
$ 165,545 |
$ 157,963 |
Francesca's Holdings Corporation
Consolidated Statements of Cash Flows (In
thousands)
|
Thirty Nine Weeks Ended |
|
October 31,
2015 |
November 1,
2014 |
Cash Flows Provided By Operating
Activities: |
|
|
Net income |
$ 23,496 |
$ 26,137 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and
amortization |
12,361 |
9,848 |
Stock-based compensation
expense |
2,416 |
2,488 |
Excess tax benefit from
stock-based compensation |
(81) |
(226) |
Loss on sale of assets |
360 |
191 |
Deferred income taxes |
(5,374) |
(4,470) |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
3,677 |
(4) |
Inventories |
(20,084) |
(10,814) |
Prepaid expenses and other
assets |
(66) |
(240) |
Accounts payable |
6,086 |
3,268 |
Accrued liabilities |
2,913 |
(1,213) |
Landlord incentive and deferred
rent |
4,663 |
5,851 |
Net cash provided by operating
activities |
30,367 |
30,816 |
|
|
|
Cash Flows Used in Investing Activities: |
|
|
Purchase of property and
equipment |
(19,850) |
(16,785) |
Proceeds from sale of
assets |
12 |
13 |
Net cash used in investing activities |
(19,838) |
(16,772) |
|
|
|
Cash Flows Used in Financing Activities: |
|
|
Repurchases of common
stock |
(7,872) |
(5,270) |
Proceeds from the exercise of
stock options |
206 |
1,332 |
Excess tax benefit from
stock-based compensation |
81 |
226 |
Repayments of borrowings under
the revolving credit facility |
-- |
(25,000) |
Net cash used in financing activities |
(7,585) |
(28,712) |
|
|
|
Net increase (decrease) in cash and cash
equivalents |
2,944 |
(14,668) |
Cash and cash equivalents, beginning of
year |
39,071 |
37,498 |
Cash and cash equivalents, end of
period |
$ 42,015 |
$ 22,830 |
|
|
|
Supplemental Disclosures of Cash Flow
Information: |
|
|
Cash paid for income taxes |
$ 14,909 |
$ 17,716 |
Interest paid |
$ 142 |
$ 340 |
Francesca's Holdings Corporation
Supplemental Information Quarterly Sales
by Merchandise Category
|
Thirteen Weeks Ended |
Change |
|
October 31,
2015 |
November 1,2014 |
Dollar |
% |
|
(in thousands, except
percentages) |
Apparel |
$ 54,326 |
$ 44,274 |
$ 10,052 |
23 % |
Jewelry |
21,265 |
18,638 |
2,627 |
14 % |
Accessories |
17,078 |
14,220 |
2,858 |
20 % |
Gifts |
10,847 |
9,606 |
1,241 |
13 % |
Merchandise sales |
103,516 |
86,738 |
16,778 |
19 % |
Others(1) |
212 |
372 |
(160) |
(43)% |
|
$ 103,728 |
$ 87,110 |
$ 16,618 |
19% |
(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)% |
|
Q3 |
(1)% |
5% |
|
(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)% |
4% |
Q4 |
(6)% |
1 % |
|
Fiscal year |
(2)% |
(5)% |
|
CONTACT: ICR, Inc.
Jean Fontana
646-277-1214
Company
Kate Venturina
832-494-2233
kate.venturina@francescas.com / IR@francescas.com
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