UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

  

FORM 8-K

 

 

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): March 21, 2017

 

 

FRANCESCA’S HOLDINGS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

    Delaware    
001-35239   (State or Other Jurisdiction of Incorporation)   20-8874704
(Commission File Number)       (I.R.S. Employer Identification No.)
         

8760 Clay Road,

Houston, Texas

     

 

77080

 (Address of Principal Executive Offices)       (Zip Code)

 

(713) 864-1358

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

Item 2.02.  Results of Operations and Financial Condition.

 

On March 21, 2017, Francesca’s Holdings Corporation (the “Company”) issued a press release announcing its consolidated financial results for the fiscal fourth quarter and fiscal year ended January 28, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Item 9.01.  Financial Statements and Exhibits.

 

99.1Press Release issued by Francesca’s Holdings Corporation on March 21, 2017.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  FRANCESCA’S HOLDINGS CORPORATION  
       
       
Date: March 21, 2017 By: /s/ Kal Malik  
  Kal Malik  
  Chief Administrative Officer  

 

 

 

  

EXHIBIT INDEX

 

Exhibit No.

 

Description

     
99.1   Press Release issued by Francesca’s Holdings Corporation on March 21, 2017.

 

 

 

 

Exhibit 99.1

 

 

francesca’s® Exceeds Previous Guidance with Full Year EPS of $1.09, a 20% Increase Versus the Prior Year

 

·Fourth quarter net sales increase 9% to $146.3 million
·Fourth quarter diluted earnings per share were $0.39, an 11% increase versus the prior year

 

HOUSTON, TEXAS — March 21, 2017 — Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported financial results for the fourth quarter and fiscal year ended January 28, 2017.

 

Steve Lawrence, President and CEO, stated, “We are pleased to deliver fourth quarter earnings per share above the high-end of our guidance and flat comparable sales. These comp results were achieved in a challenging retail environment where we were up against an 11% comparable sales increase in the fourth quarter of last year. We worked hard to improve our inventory management and ended the year with total inventories down 24% versus the prior year. This decrease was driven by disciplined receipt flows during the quarter coupled with both markdowns and mark-out-of-stock charges taken at year-end to ensure a clean transition into 2017. Looking ahead, we remain intently focused on invigorating the merchandise assortment, improving inventory management to ensure we maintain a consistent flow of new receipts, optimizing our real estate portfolio, creating an exceptional and personalized guest experience, and growing our ecommerce business. We will also continue to make strategic investments to ensure we have the infrastructure in place to achieve our long term growth objectives.’’

 

FOURTH QUARTER RESULTS

 

Net sales increased 9% to $146.3 million from $134.6 million in the comparable prior year quarter. This increase was due to the addition of 55 net new boutiques since the prior year period and a 42% increase in ecommerce sales driven by increased website traffic and conversion rate. Comparable sales were flat compared to the same period last year as the increase in average transaction value offset the decrease in transactions. The Company opened five new boutiques and closed three boutiques during the quarter, bringing the total count to 671 at the end of the quarter.

 

Gross profit, as a percent of net sales, decreased to 46.4% from 49.1% in the prior year quarter. This unfavorable variance was principally due to the Company’s strategic move to take accelerated markdowns in January, which included marking some merchandise out-of-stock at the end of the year, in order to enter fiscal year 2017 with clean inventories.

 

Selling, general and administrative expenses increased 6% to $44.3 million from $42.0 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll to support the larger boutique base as well as increases in marketing and software costs, partially offset by lower impairment charges. The increase in marketing expense was due to the implementation of new marketing initiatives, while the higher software costs were due to continuing investments in technology and infrastructure.

 

Income from operations was $23.6 million, or 16.1% of net sales, compared to $24.2 million, or 18.0% of net sales, in the prior year quarter.

 

Net income for the fourth quarter was $14.6 million, or $0.39 diluted earnings per share, compared to $14.7 million, or $0.35 diluted earnings per share, in the comparable prior year period.

 

FULL YEAR RESULTS

 

Net sales increased 11% to $487.2 million from $439.4 million in the comparable prior year. This increase was due a 2% increase in comparable sales as well as the addition of 55 net new boutiques since the prior year end. Ecommerce sales increased 42% driven by increased website traffic and conversion rate.

 

During fiscal year 2016, the Company opened 64 new boutiques and closed nine boutiques compared to 83 new boutiques opened and six boutiques closed in fiscal year 2015.

 

 

 

 

Net income for fiscal year 2016 totaled $42.0 million, or $1.09 diluted earnings per share, compared to $38.2 million, or $0.91 diluted earnings per share, in the prior year. Our results for fiscal year 2016 include a $2.0 million, or $0.03 per diluted share, net benefit associated with the previously announced resignation of the Company’s former Chairman, President and CEO.

 

BALANCE SHEET SUMMARY

 

Total cash and cash equivalents at the end of the quarter were $53.2 million compared to $56.2 million at the end of the comparable prior year quarter. During the fourth quarter, the Company repurchased 298,000 shares of its common stock at a cost of $5.2 million, bringing the Company’s total year-to-date repurchases to 3,804,000 shares at a cost of $53.2 million.

 

The Company ended the quarter with $24.0 million of inventory on hand compared to $31.5 million at the end of the comparable prior year period. Average ending inventory per boutique decreased by 30% (14% decrease on a two-year stack basis) versus the comparable prior year period principally due to improved inventory management.

 

FIRST QUARTER AND FISCAL YEAR 2017 GUIDANCE

 

For the first quarter ending April 29, 2017, net sales are expected to be in the range of $111 million to $114 million; assuming comparable sales will be in the low single digit decrease to flat range compared to the prior year increase of 2%. The Company plans to open approximately 15 new boutiques and close approximately four existing boutiques during the first quarter. Diluted earnings per share are expected to be in the range of $0.12 to $0.16.

 

For the fiscal year ending February 3, 2018, net sales are expected to be in the range of $527 million to $543 million; assuming a flat to low-single digit increase in comparable sales compared to the prior year increase of 2%. The Company expects to open approximately 60 to 65 boutiques and close approximately 10 to 15 boutiques in fiscal year 2017, compared to 64 new boutiques opened and nine boutiques closed in fiscal year 2016. Diluted earnings per share are expected to be in the range of $1.11 to $1.21 compared to the prior year of $1.09. The number of average diluted shares for the full year assumed in guidance is 37.4 million shares. The effective tax rate is estimated to be 38%.

 

Capital expenditures for fiscal year 2017 are expected to be in the range of $28 million to $33 million.

 

Conference Call Information

 

A conference call to discuss the fourth quarter and fiscal year 2016 results is scheduled for March 21, 2017, at 8:30 a.m. ET. A live webcast of the conference call will be available in the investor relations section of the Company’s website, www.francescas.com. A replay of the call will be available after the conclusion of the call and remain available until March 28, 2017. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 4604086. 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 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 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, as well as “Risk Factors” in our Annual Report on Form 10-K for the year ended January 28, 2017 that we will file with the SEC, 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 approximately 671 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.

 

 

CONTACT:  
ICR, Inc.                        Company
Jean Fontana                  Kelly Dilts 832-494-2236
646-277-1214                Kate Venturina 832-494-2233
  IR@francescas.com

 

 

 

 

Francesca’s Holdings Corporation

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts, Percentages and Basis Points)

 

   Thirteen Weeks Ended             
   January 28, 2017   January 30, 2016   Variance 
   In USD  

As a %

of Net

Sales(1)

   In USD  

As a %

of Net

Sales(1)

   In USD   %  

Basis

Points

 
Net sales  $146,345    100.0%  $134,605    100.0%  $11,740    9%   - 
Cost of goods sold and occupancy costs   78,412    53.6%   68,468    50.9%   9,944    15%   270 
Gross profit   67,933    46.4%   66,137    49.1%   1,796    3%   (270)
Selling, general and administrative expenses   44,349    30.3%   41,965    31.2%   2,384    6%   (90)
Income from operations   23,584    16.1%   24,172    18.0%   (588)   (2)%   (190)
Interest expense   (111)   (0.1)%   (113)   (0.1)%   2    (2)%   - 
Other income (expense)   29    0.0%   (60)   0.0%   89    148%   - 
Income before income tax expense   23,502    16.1%   23,999    17.8%   (497)   (2)%   (170)
Income tax expense   8,867    6.1%   9,343    6.9%   (476)   (5)%   (80)
Net income  $14,635    10.0%  $14,656    10.9%  $(21)   0%   (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  $0.39     $0.35     
Weighted average diluted share count   37,383      41,391     
                 
Comparable sales change   0%    11%  

 

                             
   Fiscal Year Ended             
   January 28, 2017   January 30, 2016   Variance 
   In USD   As a % of Net Sales   In USD   As a % of Net Sales   In USD   %   Basis Points 
Net sales  $487,188    100.0%  $439,377    100.0%  $47,811    11%   - 
Cost of goods sold and occupancy costs   258,561    53.1%   229,673    52.3%   28,888    13%   80 
Gross profit   228,627    46.9%   209,704    47.7%   18,923    9%   (80)
Selling, general and administrative expenses   160,702    33.0%   147,387    33.5%   13,315    9%   (50)
Income from operations   67,925    13.9%   62,317    14.2%   5,608    9%   (30)
Interest expense   (464)   (0.1)%   (457)   (0.1)%   (7)   (2)%   - 
Other income (expense)   147    0.0%   (151)   0.0%   298    197%   - 
Income before income tax expense   67,608    13.9%   61,709    14.0%   5,899    10%   (10)
Income tax expense   25,607    5.3%   23,557    5.4%   2,050    9%   (10)
Net income  $42,001    8.6%  $38,152    8.7%  $3,849    10%   (10)

 

(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  $1.09     $0.91     
Weighted average diluted share count   38,551      42,117     
                 
Comparable sales change   2%    3%  

 

 

 

 

Francesca’s Holdings Corporation

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

   January 28,   January 30, 
   2017   2016 
ASSETS        
Current assets:        
Cash and cash equivalents  $53,202   $56,224 
Accounts receivable   5,605    9,580 
Inventories   23,958    31,541 
Deferred income taxes   8,487    6,411 
Prepaid expenses and other current assets   8,823    7,013 
Total current assets   100,075    110,769 
Property and equipment, net   80,484    77,894 
Deferred income taxes   6,978    3,847 
Other assets, net   2,056    1,067 
TOTAL ASSETS  $189,593   $193,577 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $9,205   $14,305 
Accrued liabilities   25,761    16,328 
Total current liabilities   34,966    30,633 
Landlord incentives and deferred rent   38,092    36,552 
Total liabilities   73,058    67,185 
Commitments and contingencies          
Stockholders’ equity:          

Common stock-$.01 par value, 80.0 million shares authorized, 46.1 million and

45.9 million shares issued as of January 28, 2017 and January 30, 2016, respectively.

   461    459 
Additional paid-in capital   109,008    107,693 
Retained earnings   143,557    101,556 
Treasury stock, at cost – 8.5 million and 4.8 million shares held at January 28, 2017 and January 30, 2016, respectively.   (136,491)   (83,316)
Total stockholders’ equity   116,535    126,392 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $189,593   $193,577 

 

 

 

 

 

Francesca’s Holdings Corporation

Consolidated Statements of Cash Flows

(In thousands)

   Fiscal Year Ended 
   January 28,   January 30,   January 31, 
   2017   2016   2015 
Cash Flows Provided by Operating Activities:            
Net income  $42,001   $38,152   $32,108 
Adjustments to reconcile net income to net cash provided by operating activities:               
Depreciation and amortization   19,337    16,816    13,151 
Stock-based compensation expense   1,016    2,932    2,668 
Excess tax benefit from stock-based compensation   (34)   (236)   (309)
Impairment charges   141    790    2,470 
Loss on disposal of assets   407    487    364 
Amortization of debt issuance costs   245    245    245 
Deferred income taxes   (5,411)   (3,226)   (1,600)
Changes in assets and liabilities:               
Accounts receivable   3,975    2,935    (2,986)
Inventories   7,583    (7,740)   813 
Prepaid expenses and other assets   (3,160)   (524)   373 
Accounts payable   (4,936)   4,137    (363)
Accrued liabilities   9,467    4,424    2,081 
Landlord incentives and deferred rent   1,540    3,675    5,429 
Net cash provided by operating activities   72,171    62,867    54,444 
                
Cash Flows Used in Investing Activities:               
Purchase of property and equipment   (21,852)   (24,276)   (24,255)
Other   8    12    13 
Net cash used in investing activities   (21,844)   (24,264)   (24,242)
                
Cash Flows Used in Financing Activities:               
Repurchases of common stock   (53,853)   (22,185)   (5,270)
Proceeds from the exercise of stock options   512    499    1,332 
Excess tax benefit from stock-based compensation   34    236    309 
Taxes paid related to net settlement of equity awards   (42)   -    - 
Repayment of borrowings under the revolving credit facility   -    -    (25,000)
Net cash used in financing activities   (53,349)   (21,450)   (28,629)
                
Net increase in cash and cash equivalents   (3,022)   17,153    1,573 
Cash and cash equivalents, beginning of year   56,224    39,071    37,498 
Cash and cash equivalents, end of year  $53,202   $56,224   $39,071 
                
Supplemental Disclosures of Cash Flow Information:               
Cash paid for income taxes  $19,324   $23,958   $24,088 
Interest paid  $192   $190   $388 

 

 

 

 

Francesca’s Holdings Corporation

Supplemental Information

 

Quarterly Sales by Merchandise Category

 

   Thirteen Weeks Ended         
   January 28, 2017   January 30, 2016   Variance 
   In USD  

As a %

of Sales

   In USD  

As a %

of Sales

   In Dollars   % 
   (in thousands, except percentages) 
Apparel  $60,677    41.5%  $53,434    39.7%  $7,243    14%
Jewelry   34,069    23.3%   29,658    22.0%   4,411    15%
Accessories   24,865    17.0%   24,283    18.0%   582    2%
Gifts   25,834    17.6%   26,615    19.8%   (781)   (3)%
Merchandise sales   145,445    99.4%   133,990    99.5%   11,455    9%
Others(1)   900    0.6%   615    0.5%   285    46%
Net sales  $146,345    100.0%  $134,605    100.0%  $11,740    9%

 

(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   0%   11%   1%
Fiscal year   2%   3%   (5)%

 

Boutique Count

 

  

Fiscal Year Ended

January 28, 2017

  

Fiscal Year Ended

January 30, 2016

  

Fiscal Year Ended

January 31, 2015

 
Number of boutiques open at the beginning of period   616    539    451 
Boutiques opened   64    83    88 
Boutiques closed   (9)   (6)   - 
Number of boutiques open at the end of period   671    616    539