francesca’s® Provides Preliminary Estimated Third Quarter Fiscal Year 2018 Financial Results
November 26 2018 - 4:01PM
Francesca’s Holdings Corporation (Nasdaq: FRAN) today provided
preliminary estimated financial results for the third quarter ended
November 3, 2018. Actual fiscal third quarter results will be
reported before the market opens on December 11, 2018 followed by a
conference call at 8:30 a.m. ET.
The Company is providing preliminary estimated results, or range
of results, as boutique traffic declines persisted throughout the
third quarter.
- Net sales have decreased 10% to $95 million from $106 million
in the third quarter last year, reflecting a comparable sales
decrease of 14% primarily resulting from traffic declines in the
mid-teens.
- A non-cash asset impairment of approximately $15 million is
expected to be taken in the third quarter. This non-cash
asset impairment is primarily associated with long-lived boutique
assets and will have a $0.32 diluted loss per share
impact.
- GAAP loss per share is expected to be between ($0.51) to
($0.49). Excluding the expected non-cash asset impairment
(see Non-GAAP Information below), adjusted loss per share is
expected to be between ($0.19) and ($0.17).
- Average ending inventory per boutique is expected to be
approximately 6% lower as compared to the same prior year period,
excluding last year’s $2.6 million reserve taken on back-to-school
product. Despite the lower than anticipated sales trend, overall
inventories remained controlled through improved receipt and
inventory management disciplines.
- Cash and cash equivalents of $11 million are expected at
quarter-end with no borrowings under the Company’s revolving credit
facility.
The Company’s near-term priorities are to improve traffic trends
through enhanced marketing reach, improve topline revenue trends by
driving faster ecommerce growth and continue emphasis on strong
expense and cash management. A thorough review of the entire
real estate portfolio is ongoing, and the Company expects Fiscal
2019 will have a smaller brick & mortar footprint than the
current year. The closures will largely focus on boutiques
with lease expirations or kick-out provisions that do not meet our
internal hurdle rates together with the recently identified
impaired boutiques.
Steve Lawrence, President and CEO, stated, “It is clearly taking
longer than we anticipated to achieve an inflection point in the
business as we saw continued softness in traffic trends during
third quarter and did not deliver the improved performance we had
anticipated. We believe that the steps we are taking in
resetting our merchandising strategy, enhancing our marketing
approach, investing in our omni-channel and reformatting our
boutiques to better showcase our product will ultimately drive
improved sales and profitability. As we headed into
Thanksgiving and the kickoff to Holiday business, we have ramped up
our marketing spend and are encouraged by the fact that we have
seen some improvement in our traffic trends. The primary
focuses of our marketing initiatives are to win back our lapsed
customers, increase engagement with existing customers and drive
brand awareness amongst target customers that do not currently shop
francesca’s.”
Mr. Lawrence continued, “We have also begun an evaluation of our
real estate portfolio. We maintain that our boutiques are a
key part of our brand strategy and customer experience, however we
need to ensure our locations are optimal for the brand. As
part of our real estate review, we plan on closing under-performing
boutiques in Fiscal 2019 with the goal of increasing the
profitability of our overall fleet. We believe a smaller brick
& mortar boutique footprint for the near term coupled with a
strong .com presence is the right approach going forward.
Overall, we remain committed to driving improved sales and
profitability for our business long term and are encouraged by the
sequential improvement in our November performance to date.
However, we realize that we have a lot of the holiday season still
in front of us and we will continue to prudently employ strong
inventory management disciplines and careful controls over expense,
capital expenditures and our cash position.
The Company will update its fiscal 2018 fourth quarter and full
year outlook on its next conference call.
Conference Call Information
The Company plans to hold a conference call to discuss the third
quarter fiscal year 2018 results on December 11, 2018, at 8:30 a.m.
ET. To participate in the call, please dial 1-866-548-4713
and passcode 9034161. To listen to a live webcast via the
internet, please visit the investor relations section of the
Company’s website, www.francescas.com.
In addition, a replay of the call will be available shortly
after the conclusion of the call and remain available until
December 18, 2018. To access the telephone replay, listeners should
dial 1-844-512-2921. The access code for the replay is 9034161. 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.
Preliminary Estimated Results
The Company’s announced preliminary estimated results for its
fiscal third quarter ended November 3, 2018 are preliminary and may
change. The Company and its auditors have not completed their
normal quarterly closing and review procedures for the quarter
ended November 3, 2018, and there can be no assurance that final
results for the quarter will not differ from the preliminary
estimated results, including as a result of quarter-end closing
procedures or review adjustments. In addition, these
preliminary results should not be viewed as a substitute for full
interim financial statements prepared in accordance with GAAP that
have been reviewed by the Company’s auditors.
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 or changes in
consumer environment, including changing expectations of service
and experience in boutiques and online, and evolve our business
model; our ability to attract a sufficient number of customers to
our boutiques or sell sufficient quantities of our merchandise
through our ecommerce website; our ability to successfully open,
refresh and operate and close boutiques each year, as necessary, to
ensure an appropriate brick and mortar footprint; our ability to
efficiently source, distribute additional merchandise quantities
necessary to support our growth; and the impact of potential tariff
increases or new tariffs. 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 February 3, 2018
filed with the Securities and Exchange Commission (“SEC”) on March
28, 2018 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.
Additionally, the Company may not issue future press releases
discussing guidance or financial results such as this one other
than associated with routine quarterly and annual financial
reporting.
Non-GAAP Information
This press release includes non-GAAP adjusted diluted earnings
per share, a non-GAAP financial measure. The Company believes this
non-GAAP financial measure not only provides our management with
comparable financial data for internal financial analysis but also
provides meaningful supplemental information to investors.
Specifically, this non-GAAP financial measure allows investors to
better understand the performance of the business and facilitate a
meaningful evaluation of our preliminary estimate for diluted loss
per share for the third quarter of fiscal year 2018. This non-GAAP
measure should be considered a supplement to, and not as a
substitute for or superior to, financial measures calculated in
accordance with GAAP.
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 approximately 742 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. Jean Fontana 646-277-1214
CompanyKelly Dilts 832-494-2236 Kate Venturina
832-494-2233IR@francescas.com
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