Francesca’s Holdings Corporation (NASDAQ:FRAN) today reported
financial results for the first quarter ended April 30, 2016.
Richard Kunes, Interim Chairman, President, and CEO stated, “We
delivered diluted earnings per share of $0.18, which was within our
guidance range, despite lower than expected sales results
particularly around Easter.”
Commenting on the second quarter and full year 2016 outlook, Mr.
Kunes noted that, “We continue to see weakness in the overall
retail environment particularly in apparel with declines in traffic
and heightened promotions. Our second quarter and updated full year
guidance reflects this recent trend and our assumption that the
environment will not further deteriorate in the back half of the
year. We remain committed to our Vision 2020 plan as our
executive team continues to focus on enhancing brand awareness,
delivering a compelling merchandise offering and developing our
ecommerce strategy, while continuing to provide a unique and
exceptional guest experience in our boutiques. We will
maintain our focus on conversion, inventory management and expense
control while always maintaining our goal of achieving long-term,
profitable, sustainable growth.”
FIRST QUARTER RESULTS
Net sales increased 12% to $106.1 million from $95.0 million in
the comparable prior year period. This increase was due to a
2% increase in comparable sales driven by an increase in the number
of transactions both at the boutiques and on-line as well as the
opening of 48 net new boutiques since the comparable prior year
period. We opened 22 new boutiques and closed one
underperforming boutique during the quarter bringing our total
boutique count to 637 as of April 30, 2016. Ecommerce
comparable sales increased 38% to $5.2 million driven by increased
website traffic and conversion rates.
Gross profit, as a percentage of net sales, decreased to 46.3%
from 47.3% in the prior year quarter. This decrease is
attributable to 60 basis points decrease in merchandise margin and
30 basis points deleveraging of occupancy costs. The decrease
in merchandise margin was due to increased clearance activity and
sales mix changes during the quarter compared to the same period
last year.
Selling, general and administrative expenses (“SG&A”)
increased 14% to $37.7 million from $33.0 million in the prior year
quarter. The increase in SG&A expenses is primarily due to
increased corporate and boutique payroll expense to support the
larger boutique base and strategic initiatives. Additionally,
stock-based compensation expense increased compared to last year in
connection with the performance-based restricted stock awarded to
executives and certain key employees in March 2016 aligning
incentive compensation with the Vision 2020 plan.
Professional fees were also higher in support of various strategic
and operational initiatives.
Income from operations was $11.5 million, or 10.8% of net sales,
compared to $11.9 million, or 12.5% of net sales, in the prior year
quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were
$35.4 million compared to $46.1 million at the end of the
comparable prior year quarter.
We ended the quarter with $34.8 million of inventory on hand
compared to $31.4 million at the comparable prior year
period. Average ending inventory per boutique increased by 2%
versus the comparable prior year period.
During the first quarter, we repurchased approximately 925,000
shares of our common stock at a cost of $16.8 million.
Subsequent to the end of the quarter through May 31, 2016, we
repurchased an additional 728,000 shares of our common stock at a
cost of $9.5 million.
SECOND QUARTER AND FISCAL YEAR 2016
GUIDANCE
For the second quarter ending July 30, 2016, net sales are
expected to be in the range of $106 million to $110 million;
assuming a mid-single digit decrease in comparable sales compared
to the prior year decrease of 4%. The Company plans to open 15 to
20 new boutiques and close one to five boutiques during the second
quarter. Diluted earnings per share are expected to be in the range
of $0.16 to $0.19, which includes a $0.04 per share impact as the
result of the reversal of previously accrued stock-based
compensation expense related to the forfeiture of unvested awards
granted to our previous Chairman, President and Chief Executive
Officer who resigned on May 15, 2016.
For the full year ending January 28, 2017, we now expect net
sales to be in the range of $460 million to $480 million; assuming
a flat to a low-single digit decrease in comparable sales compared
to a prior year comparable sales increase of 3%. The Company
expects to open 50 to 60 boutiques and close five to ten
underperforming boutiques in fiscal year 2016 compared to 83 new
boutiques opened and six boutiques closed in fiscal year
2015. Diluted earnings per share are now expected to be in
the range of $0.86 to $0.96, which includes a $0.04 per share
impact as the result of the reversal of previously accrued
stock-based compensation expense related to the forfeiture of
unvested awards granted to our previous Chairman, President and
Chief Executive Officer who resigned on May 15, 2016. The
number of average diluted shares for the full year assumed in
guidance is expected to be 39.6 million shares and reflects share
repurchases through May 31, 2016. The effective tax rate is
estimated to be 37.8%.
Capital expenditures for fiscal year 2016 are expected to be in
the range of $28 million to $31 million.
Conference Call Information
A conference call to discuss the first quarter fiscal year 2016
results is scheduled for June 9, 2016, at 8:30 a.m. ET. A live
webcast of the conference call will be available in the investor
relations section of our website, www.francescas.com. A replay of
the call will be available after the conclusion of the call and
remain available until June 16, 2016. To access the telephone
replay, listeners should dial 1-877-870-5176. The access code for
the replay is 4229996. A replay of the web cast will also be
available shortly after the conclusion of the call and will remain
on the website for ninety days.
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 ecommerce
business; our ability to successfully open and operate new
boutiques each year; and our ability to efficiently source;
distribute additional merchandise quantities necessary to support
our growth; and our ability to attract and integrate a new
President and Chief Executive 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 30, 2016
filed with the Securities and Exchange Commission (“SEC”) on March
25, 2016 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
personalized shopping experience. The merchandise assortment
is a diverse and balanced mix of apparel, jewelry, accessories and
gifts and home. Today francesca's® operates 646 boutiques in
48 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
CorporationConsolidated Statements of
Operations(In Thousands, Except Per Share Amounts
and Percentages)
|
Thirteen Weeks Ended |
|
|
|
|
|
|
|
|
April 30, 2016 |
|
May 2, 2015 |
|
|
Variance |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
% |
|
Basis Points |
Net sales |
$ |
106,113 |
|
|
|
100.0 |
% |
|
$ |
95,011 |
|
|
|
100.0 |
% |
|
$ |
11,102 |
|
|
|
12 |
% |
|
|
- |
|
Cost of goods sold and
occupancy costs |
|
56,983 |
|
|
|
53.7 |
% |
|
|
50,118 |
|
|
|
52.7 |
% |
|
|
6,865 |
|
|
|
14 |
% |
|
|
100 |
|
Gross profit |
|
49,130 |
|
|
|
46.3 |
% |
|
|
44,893 |
|
|
|
47.3 |
% |
|
|
4,237 |
|
|
|
9 |
% |
|
|
(100 |
) |
Selling, general and
administrative expenses |
|
37,666 |
|
|
|
35.5 |
% |
|
|
33,003 |
|
|
|
34.7 |
% |
|
|
4,663 |
|
|
|
14 |
% |
|
|
80 |
|
Income from
operations |
|
11,464 |
|
|
|
10.8 |
% |
|
|
11,890 |
|
|
|
12.5 |
% |
|
|
(426 |
) |
|
|
(4 |
)% |
|
|
(170 |
) |
Interest expense |
|
(109 |
) |
|
|
(0.1 |
)% |
|
|
(110 |
) |
|
|
(0.1 |
)% |
|
|
1 |
|
|
|
1 |
% |
|
|
- |
|
Other income |
|
- |
|
|
|
0.0 |
% |
|
|
(66 |
) |
|
|
(0.1 |
)% |
|
|
66 |
|
|
|
100 |
% |
|
|
10 |
|
Income before income
tax expense |
|
11,355 |
|
|
|
10.7 |
% |
|
|
11,714 |
|
|
|
12.3 |
% |
|
|
(359 |
) |
|
|
(3 |
)% |
|
|
(160 |
) |
Income tax expense |
|
4,274 |
|
|
|
4.0 |
% |
|
|
4,473 |
|
|
|
4.7 |
% |
|
|
(199 |
) |
|
|
(4 |
)% |
|
|
(70 |
) |
Net income |
$ |
7,081 |
|
|
|
6.7 |
% |
|
$ |
7,241 |
|
|
|
7.6 |
% |
|
$ |
(160 |
) |
|
|
(2 |
)% |
|
|
(90 |
) |
(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 |
$ |
0.18 |
|
|
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
40,400 |
|
|
|
|
|
42,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
|
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francesca’s Holdings
CorporationConsolidated Balance
Sheets(In thousands, except share
amounts)
|
|
April 30, 2016 |
|
|
January 30, 2016 |
|
|
May 2, 2015 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
35,421 |
|
|
$ |
56,224 |
|
|
$ |
46,119 |
|
Accounts
receivable |
|
|
13,316 |
|
|
|
9,580 |
|
|
|
11,858 |
|
Inventories |
|
|
34,799 |
|
|
|
31,541 |
|
|
|
31,395 |
|
Deferred
income taxes |
|
|
6,557 |
|
|
|
6,411 |
|
|
|
5,288 |
|
Prepaid
expenses and other current assets |
|
|
6,649 |
|
|
|
7,013 |
|
|
|
5,547 |
|
Total current
assets |
|
|
96,742 |
|
|
|
110,769 |
|
|
|
100,207 |
|
Property and equipment,
net |
|
|
79,056 |
|
|
|
77,894 |
|
|
|
77,114 |
|
Deferred income
taxes |
|
|
4,333 |
|
|
|
3,847 |
|
|
|
3,623 |
|
Other assets, net |
|
|
1,155 |
|
|
|
1,067 |
|
|
|
1,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
181,286 |
|
|
$ |
193,577 |
|
|
$ |
182,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
11,174 |
|
|
$ |
14,305 |
|
|
$ |
16,280 |
|
Accrued
liabilities |
|
|
14,858 |
|
|
|
16,328 |
|
|
|
13,699 |
|
Total current
liabilities |
|
|
26,032 |
|
|
|
30,633 |
|
|
|
29,979 |
|
Landlord incentives and
deferred rent |
|
|
37,531 |
|
|
|
36,552 |
|
|
|
36,739 |
|
Total liabilities |
|
|
63,563 |
|
|
|
67,185 |
|
|
|
66,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock - $.01 par value, 80.0 million shares authorized;
46.2 million, 45.9 million and 45.5 million shares issued at
April 30, 2016, January 30, 2016 and May 2, 2015,
respectively. |
|
|
462 |
|
|
|
459 |
|
|
|
455 |
|
Additional paid-in capital |
|
|
108,737 |
|
|
|
107,693 |
|
|
|
105,000 |
|
Retained
earnings |
|
|
108,637 |
|
|
|
101,556 |
|
|
|
70,645 |
|
Treasury
stock, at cost – 5.7 million, 4.8 million and 3.2 million shares
held at each of April 30, 2016, January 30, 2016 and May 2, 2015,
respectively. |
|
|
(100,113 |
) |
|
|
(83,316 |
) |
|
|
(60,143 |
) |
Total stockholders’
equity |
|
|
117,723 |
|
|
|
126,392 |
|
|
|
115,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
181,286 |
|
|
$ |
193,577 |
|
|
$ |
182,675 |
|
Francesca’s Holdings
CorporationConsolidated Statements of Cash
Flows(In thousands)
|
|
Thirteen Weeks Ended |
|
|
|
April 30, 2016 |
|
|
May 2, 2015 |
|
Cash Flows Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
7,081 |
|
|
$ |
7,241 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
4,649 |
|
|
|
3,822 |
|
Stock-based compensation expense |
|
|
1,052 |
|
|
|
793 |
|
Excess
tax benefit from stock-based compensation |
|
|
(22 |
) |
|
|
(64 |
) |
Loss on
sale of assets |
|
|
88 |
|
|
|
128 |
|
Deferred
income taxes |
|
|
(838 |
) |
|
|
(1,875 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(3,714 |
) |
|
|
485 |
|
Inventories |
|
|
(3,258 |
) |
|
|
(7,594 |
) |
Prepaid
expenses and other assets |
|
|
214 |
|
|
|
460 |
|
Accounts
payable |
|
|
(2,862 |
) |
|
|
6,543 |
|
Accrued
liabilities |
|
|
(1,470 |
) |
|
|
1,795 |
|
Landlord
incentive and deferred rent |
|
|
979 |
|
|
|
3,862 |
|
Net cash provided by
operating activities |
|
|
1,899 |
|
|
|
15,596 |
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in
Investing Activities: |
|
|
|
|
|
|
|
|
Purchase
of property and equipment |
|
|
(5,121 |
) |
|
|
(8,721 |
) |
Others |
|
|
4 |
|
|
|
- |
|
Net cash used in
investing activities |
|
|
(5,117 |
) |
|
|
(8,721 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows (Used in)
Provided by Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds
from the exercise of stock options |
|
|
178 |
|
|
|
109 |
|
Excess
tax benefit from stock-based compensation |
|
|
22 |
|
|
|
64 |
|
Repurchases of common stock |
|
|
(17,785 |
) |
|
|
- |
|
Net cash (used in)
provided by financing activities |
|
|
(17,585 |
) |
|
|
173 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
|
(20,803 |
) |
|
|
7,048 |
|
Cash and cash
equivalents, beginning of year |
|
|
56,224 |
|
|
|
39,071 |
|
Cash and cash
equivalents, end of period |
|
$ |
35,421 |
|
|
$ |
46,119 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid
for income taxes |
|
$ |
6,653 |
|
|
$ |
1,763 |
|
Interest
paid |
|
$ |
47 |
|
|
$ |
47 |
|
Francesca’s Holdings
CorporationSupplemental Information
Quarterly Sales by Merchandise Category
|
Thirteen Weeks Ended |
|
Variance |
|
April 30, 2016 |
|
May 2, 2015 |
|
In Dollars |
|
% |
|
(in
thousands, except percentages) |
Apparel |
$ |
|
54,892 |
|
|
$ |
|
48,170 |
|
|
$ |
6,722 |
|
|
14 |
% |
Jewelry |
|
|
24,062 |
|
|
|
|
21,972 |
|
|
|
2,090 |
|
|
10 |
% |
Accessories |
|
|
16,046 |
|
|
|
|
15,379 |
|
|
|
667 |
|
|
4 |
% |
Gifts and home |
|
|
11,327 |
|
|
|
|
9,837 |
|
|
|
1,490 |
|
|
15 |
% |
Merchandise Sales |
|
|
106,327 |
|
|
|
|
95,358 |
|
|
|
10,969 |
|
|
12 |
% |
Others(1) |
|
|
(214 |
) |
|
|
|
(347 |
) |
|
|
133 |
|
|
38 |
% |
Net sales |
$ |
|
106,113 |
|
|
$ |
|
95,011 |
|
|
$ |
11,102 |
|
|
12 |
% |
(1) Includes gift card
breakage income, shipping and change in return reserve.
Quarterly Comparable Sales
|
FY 2016 |
|
FY 2015 |
|
FY 2014 |
Q1 |
|
2 |
% |
|
|
(2 |
)% |
|
|
(7 |
)% |
Q2 |
|
|
|
(4 |
)% |
|
|
(7 |
)% |
Q3 |
|
|
|
4 |
% |
|
|
(6 |
)% |
Q4 |
|
|
|
11 |
% |
|
|
1 |
% |
Fiscal year |
|
|
|
3 |
% |
|
|
(5 |
)% |
|
|
|
|
|
|
|
|
|
|
CONTACT:
ICR, Inc.
Jean Fontana
646-277-1214
Company
Kelly Dilts
832-494-2236
kelly.dilts@francescas.com / IR@francescas.com
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