Francesca’s Holdings Corporation (NASDAQ:FRAN) today reported
financial results for the third quarter ended October 29, 2016.
Steve Lawrence, President and CEO stated, “We are
very pleased with our third quarter results, as we achieved double
digit growth in sales and EPS exceeded our expectations. Our
strong performance was the result of a 7% comparable sales increase
as well as better than expected gross profit margin and operating
margin. We had a good start to the quarter with a successful
back-to-school season and the strong trends continued in September
and October as our merchandise and boutique experience resonated
well with our guests. Looking ahead, we will continue to
execute on our strategic initiatives and believe we are
well-positioned for a successful holiday season and beyond.”
THIRD QUARTER RESULTS
Net sales increased 15% to $119.5 million from
$103.7 million in the comparable prior year quarter. This was
due to a 7% increase in comparable sales primarily driven by an
increase in the number of transactions both at boutiques and
on-line as well as the addition of 50 net new boutiques since the
prior year quarter. The Company opened 18 boutiques and
closed one boutique during the quarter, bringing the total boutique
count to 669 at the end of the quarter. Ecommerce comparable
sales increased 47% to $5.7 million driven by increased website
traffic and conversion rate.
Gross profit, as a percent of net sales, increased
to 48.2% from 46.6% in the prior year quarter. This increase
was attributable to 40 basis points of higher merchandise margin
and 120 basis points of occupancy costs leverage. The
increase in merchandise margin was mostly due to favorable mix
change and lower markdowns compared to the prior year quarter.
Selling, general and administrative expenses
increased 12% to $41.9 million from $37.3 million in the prior year
quarter. This increase was primarily due to higher boutique and
corporate payroll, professional fees, software costs and
depreciation compared to the prior year quarter. The increase in
boutique payroll was due to the larger boutique base while the
remaining increases were due to investments in strategic
initiatives, including technology and infrastructure.
Income from operations was $15.8 million, or 13.2%
of net sales, compared to $11.1 million, or 10.7% of net sales, in
the prior year quarter.
Diluted earnings per share was $0.26 for the
quarter, a 63% increase over prior year’s third quarter diluted
earnings per share of $0.16. Diluted earnings per share was
also higher than the Company’s guidance of $0.16 to $0.19 due to
the impact of higher sales and a better than expected gross margin
rate as well as an approximately $0.03 per share favorable impact
related to a shift in timing primarily of marketing and
point-of-sale implementation expenses which the Company now expects
to incur in the fourth quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the
quarter were $24.7 million compared to $42.0 million at the end of
the comparable prior year quarter. During the third quarter,
the Company repurchased 263,000 shares of its common stock at a
cost of $4.2 million, bringing the Company’s total year-to-date
repurchases to 3,506,000 shares at a cost of $48.0 million.
The Company ended the quarter with $42.8 million of
inventory on hand compared to $43.9 million at the end of the
comparable prior year period. Average ending inventory per
boutique decreased by 10% versus the comparable prior year
period.
FOURTH QUARTER AND FISCAL YEAR 2016
GUIDANCE
For the fourth quarter ending January 28, 2017, net
sales are expected to be in the range of $143 million to $148
million; assuming comparable sales will be in the low single digit
decrease to low single digit increase range compared to the prior
year increase of 11%. The Company plans to open five new boutiques
and close three boutiques during the fourth quarter. Diluted
earnings per share are expected to be in the range of $0.33 to
$0.37 and includes approximately $0.03 of expense due to a timing
shift from third quarter to fourth quarter.
For the full year ending January 28, 2017, the
Company now expects net sales to be in the range of $484 million to
$489 million; assuming a low-single digit increase in comparable
sales compared to the prior year increase of 3%. The Company
expects to open 64 boutiques and close nine 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 $1.03 to $1.07 compared to the
previous guidance of $0.96 to $1.03. This guidance includes a
$0.03 per share benefit associated with the previously announced
resignation of the Company’s former Chairman, President and Chief
Executive Officer. The number of average diluted shares for
the full year assumed in guidance is 38.6 million shares. The
effective tax rate is estimated to be 37.9%.
Capital expenditures for fiscal year 2016 are
expected to be in the range of $25.0 million to $28.0 million.
Conference Call Information
A conference call to discuss the third quarter
fiscal year 2016 results is scheduled for December 6, 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 December 13, 2016. To access the
telephone replay, listeners should dial 1-877-870-5176. The access
code for the replay is 6784722. 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 and
distribute additional merchandise quantities necessary to support
our growth. 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. Today francesca's® operates
674 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,
Percentages and Basis Points)
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
|
October 29, 2016 |
|
October 31, 2015 |
|
Variance |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
% |
|
Basis Points |
Net sales |
$ |
119,470 |
|
|
|
100.0 |
% |
|
$ |
103,728 |
|
|
|
100.0 |
% |
|
$ |
15,742 |
|
|
|
15 |
% |
|
|
- |
|
Cost of goods sold and
occupancy costs |
|
61,843 |
|
|
|
51.8 |
% |
|
|
55,362 |
|
|
|
53.4 |
% |
|
|
6,481 |
|
|
|
12 |
% |
|
|
(160 |
) |
Gross profit |
|
57,627 |
|
|
|
48.2 |
% |
|
|
48,366 |
|
|
|
46.6 |
% |
|
|
9,261 |
|
|
|
19 |
% |
|
|
160 |
|
Selling, general and
administrative expenses |
|
41,872 |
|
|
|
35.0 |
% |
|
|
37,286 |
|
|
|
35.9 |
% |
|
|
4,586 |
|
|
|
12 |
% |
|
|
(90 |
) |
Income from
operations |
|
15,755 |
|
|
|
13.2 |
% |
|
|
11,080 |
|
|
|
10.7 |
% |
|
|
4,675 |
|
|
|
42 |
% |
|
|
250 |
|
Interest expense |
|
(131 |
) |
|
|
(0.1 |
)% |
|
|
(122 |
) |
|
|
(0.1 |
)% |
|
|
(9 |
) |
|
|
(7 |
)% |
|
|
- |
|
Other income |
|
79 |
|
|
|
0.1 |
% |
|
|
29 |
|
|
|
0.0 |
% |
|
|
50 |
|
|
|
172 |
% |
|
|
10 |
|
Income before income
tax expense |
|
15,703 |
|
|
|
13.1 |
% |
|
|
10,987 |
|
|
|
10.6 |
% |
|
|
4,716 |
|
|
|
43 |
% |
|
|
250 |
|
Income tax expense |
|
6,009 |
|
|
|
5.0 |
% |
|
|
4,036 |
|
|
|
3.9 |
% |
|
|
1,973 |
|
|
|
49 |
% |
|
|
110 |
|
Net income |
$ |
9,694 |
|
|
|
8.1 |
% |
|
$ |
6,951 |
|
|
|
6.7 |
% |
|
$ |
2,743 |
|
|
|
39 |
% |
|
|
140 |
|
(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 |
$ |
0.26 |
|
|
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
37,675 |
|
|
|
|
|
42,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
7 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
|
|
|
|
October 29, 2016 |
|
October 31, 2015 |
|
Variance |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
As a % of Net Sales(1) |
|
In USD |
|
% |
|
Basis Points |
Net sales |
$ |
340,843 |
|
|
|
100.0 |
% |
|
$ |
304,772 |
|
|
|
100.0 |
% |
|
$ |
36,071 |
|
|
|
12 |
% |
|
|
- |
|
Cost of goods sold and
occupancy costs |
|
180,149 |
|
|
|
52.9 |
% |
|
|
161,205 |
|
|
|
52.9 |
% |
|
|
18,944 |
|
|
|
12 |
% |
|
|
- |
|
Gross profit |
|
160,694 |
|
|
|
47.1 |
% |
|
|
143,567 |
|
|
|
47.1 |
% |
|
|
17,127 |
|
|
|
12 |
% |
|
|
- |
|
Selling, general and
administrative expenses |
|
116,353 |
|
|
|
34.1 |
% |
|
|
105,422 |
|
|
|
34.6 |
% |
|
|
10,931 |
|
|
|
10 |
% |
|
|
(50 |
) |
Income from
operations |
|
44,341 |
|
|
|
13.0 |
% |
|
|
38,145 |
|
|
|
12.5 |
% |
|
|
6,196 |
|
|
|
16 |
% |
|
|
50 |
|
Interest expense |
|
(353 |
) |
|
|
(0.1 |
)% |
|
|
(344 |
) |
|
|
(0.1 |
)% |
|
|
(9 |
) |
|
|
(3 |
)% |
|
|
- |
|
Other income
(expense) |
|
118 |
|
|
|
0.0 |
% |
|
|
(91 |
) |
|
|
0.0 |
% |
|
|
209 |
|
|
|
230 |
% |
|
|
- |
|
Income before income
tax expense |
|
44,106 |
|
|
|
12.9 |
% |
|
|
37,710 |
|
|
|
12.4 |
% |
|
|
6,396 |
|
|
|
17 |
% |
|
|
50 |
|
Income tax expense |
|
16,740 |
|
|
|
4.9 |
% |
|
|
14,214 |
|
|
|
4.7 |
% |
|
|
2,526 |
|
|
|
18 |
% |
|
|
20 |
|
Net income |
$ |
27,366 |
|
|
|
8.0 |
% |
|
$ |
23,496 |
|
|
|
7.7 |
% |
|
$ |
3,870 |
|
|
|
16 |
% |
|
|
30 |
|
(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 |
$ |
0.70 |
|
|
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
38,945 |
|
|
|
|
|
42,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
3 |
% |
|
|
(1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francesca’s Holdings CorporationConsolidated Balance
Sheets(In thousands, except share and per share
amounts)
|
|
|
October 29, |
|
|
January 30, |
|
|
October 31, |
|
|
|
2016 |
|
|
2016 |
|
|
2015 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
24,725 |
|
|
$ |
56,224 |
|
|
$ |
42,015 |
|
Accounts receivable |
|
|
8,218 |
|
|
|
9,580 |
|
|
|
8,683 |
|
Inventories |
|
|
42,774 |
|
|
|
31,541 |
|
|
|
43,885 |
|
Deferred income taxes |
|
|
5,709 |
|
|
|
6,411 |
|
|
|
5,737 |
|
Prepaid expenses and other current
assets |
|
|
7,745 |
|
|
|
7,013 |
|
|
|
6,023 |
|
Total current
assets |
|
|
89,171 |
|
|
|
110,769 |
|
|
|
106,343 |
|
Property and equipment,
net |
|
|
82,992 |
|
|
|
77,894 |
|
|
|
79,017 |
|
Deferred income
taxes |
|
|
4,425 |
|
|
|
3,847 |
|
|
|
6,659 |
|
Other assets, net |
|
|
1,370 |
|
|
|
1,067 |
|
|
|
1,656 |
|
TOTAL
ASSETS |
|
$ |
177,958 |
|
|
$ |
193,577 |
|
|
$ |
193,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
16,550 |
|
|
$ |
14,305 |
|
|
$ |
15,933 |
|
Accrued liabilities |
|
|
16,629 |
|
|
|
16,328 |
|
|
|
14,817 |
|
Total current
liabilities |
|
|
33,179 |
|
|
|
30,633 |
|
|
|
30,750 |
|
Landlord incentives and
deferred rent |
|
|
38,821 |
|
|
|
36,552 |
|
|
|
37,540 |
|
Total liabilities |
|
|
72,000 |
|
|
|
67,185 |
|
|
|
68,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - $.01 par value,
80.0 million shares authorized; 46.1 million, 45.9 million and
45.5 million shares issued at October 29, 2016, January 30,
2016 and October 31, 2015, respectively. |
|
|
461 |
|
|
|
459 |
|
|
|
455 |
|
Additional paid-in capital |
|
|
107,908 |
|
|
|
107,693 |
|
|
|
106,722 |
|
Retained earnings |
|
|
128,922 |
|
|
|
101,556 |
|
|
|
86,900 |
|
Treasury stock, at cost – 8.3
million, 4.8 million and 3.8 million shares held at October 29,
2016, January 30, 2016 and October 31, 2015, respectively. |
|
|
(131,333 |
) |
|
|
(83,316 |
) |
|
|
(68,692 |
) |
Total stockholders’
equity |
|
|
105,958 |
|
|
|
126,392 |
|
|
|
125,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
177,958 |
|
|
$ |
193,577 |
|
|
$ |
193,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francesca’s Holdings
CorporationConsolidated Statements of Cash
Flows(In thousands)
|
|
|
Thirty-Nine Weeks Ended |
|
|
|
October 29, 2016 |
|
|
October 31, 2015 |
|
Cash Flows Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
27,366 |
|
|
$ |
23,496 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
14,415 |
|
|
|
12,361 |
|
Stock-based compensation
expense |
|
|
18 |
|
|
|
2,416 |
|
Excess tax benefit from stock-based
compensation |
|
|
(2 |
) |
|
|
(81 |
) |
Impairment charges |
|
|
66 |
|
|
|
- |
|
Loss on sale of assets |
|
|
265 |
|
|
|
360 |
|
Deferred income taxes |
|
|
(81 |
) |
|
|
(5,374 |
) |
Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
1,364 |
|
|
|
3,677 |
|
Inventories |
|
|
(11,233 |
) |
|
|
(20,084 |
) |
Prepaid expenses and other
assets |
|
|
(1,294 |
) |
|
|
(66 |
) |
Accounts payable |
|
|
2,015 |
|
|
|
6,086 |
|
Accrued liabilities |
|
|
301 |
|
|
|
2,913 |
|
Landlord incentives and deferred
rent |
|
|
2,269 |
|
|
|
4,663 |
|
Net cash provided by
operating activities |
|
|
35,469 |
|
|
|
30,367 |
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in
Investing Activities: |
|
|
|
|
|
|
|
|
Purchases of property and
equipment |
|
|
(18,666 |
) |
|
|
(19,850 |
) |
Other |
|
|
8 |
|
|
|
12 |
|
Net cash used in
investing activities |
|
|
(18,658 |
) |
|
|
(19,838 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows Used in
Financing Activities: |
|
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
(48,715 |
) |
|
|
(7,872 |
) |
Proceeds from the exercise of stock
options |
|
|
403 |
|
|
|
206 |
|
Excess tax benefit from stock-based
compensation |
|
|
2 |
|
|
|
81 |
|
Net cash used in
financing activities |
|
|
(48,310 |
) |
|
|
(7,585 |
) |
|
|
|
|
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
|
|
(31,499 |
) |
|
|
2,944 |
|
Cash and cash
equivalents, beginning of year |
|
|
56,224 |
|
|
|
39,071 |
|
Cash and cash
equivalents, end of period |
|
$ |
24,725 |
|
|
$ |
42,015 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
13,014 |
|
|
$ |
14,909 |
|
Interest paid |
|
$ |
143 |
|
|
$ |
142 |
|
|
|
|
|
|
|
|
|
|
Francesca’s Holdings CorporationSupplemental
Information
Quarterly Sales by Merchandise Category |
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
October 29, 2016 |
|
October 31, 2015 |
|
Variance |
|
In Dollars |
|
As a % of Sales |
|
|
In Dollars |
|
As a % of Sales |
|
In Dollars |
|
% |
|
(in thousands, except
percentages) |
Apparel |
$ |
63,926 |
|
|
|
53.5 |
% |
|
$ |
54,326 |
|
|
52.4 |
% |
|
$ |
9,600 |
|
|
18 |
% |
Jewelry |
|
26,143 |
|
|
|
21.9 |
% |
|
|
21,265 |
|
|
20.5 |
% |
|
|
4,878 |
|
|
23 |
% |
Accessories |
|
17,433 |
|
|
|
14.6 |
% |
|
|
17,078 |
|
|
16.5 |
% |
|
|
355 |
|
|
2 |
% |
Gifts |
|
11,638 |
|
|
|
9.7 |
% |
|
|
10,847 |
|
|
10.4 |
% |
|
|
791 |
|
|
7 |
% |
Merchandise sales |
|
119,140 |
|
|
|
99.7 |
% |
|
|
103,516 |
|
|
99.8 |
% |
|
|
15,624 |
|
|
15 |
% |
Others(1) |
|
330 |
|
|
|
0.3 |
% |
|
|
212 |
|
|
0.2 |
% |
|
|
118 |
|
|
56 |
% |
Net sales |
$ |
119,470 |
|
|
|
100.0 |
% |
|
$ |
103,728 |
|
|
100.0 |
% |
|
$ |
15,742 |
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
0 |
% |
|
|
(4 |
)% |
|
|
(7 |
)% |
Q3 |
|
7 |
% |
|
|
4 |
% |
|
|
(6 |
)% |
Q4 |
|
|
|
11 |
% |
|
|
1 |
% |
Fiscal year |
|
|
|
3 |
% |
|
|
(5 |
)% |
Boutique
Count |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended |
Fiscal Year Ended |
Thirty-Nine Weeks Ended |
October 29, 2016 |
January 30, 2016 |
October 31, 2015 |
Number of boutiques
open at the beginning of period |
616 |
|
539 |
|
539 |
Boutiques opened |
59 |
|
83 |
|
80 |
Boutiques closed |
(6 |
) |
(6 |
) |
- |
Number of boutiques
open at the end of period |
669 |
|
616 |
|
619 |
|
|
|
|
|
|
CONTACT:
ICR, Inc.
Jean Fontana
646-277-1214
Company
Kelly Dilts 832-494-2236
Kate Venturina 832-494-2233
IR@francescas.com
Francescas (NASDAQ:FRAN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Francescas (NASDAQ:FRAN)
Historical Stock Chart
From Jul 2023 to Jul 2024