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): September 6, 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:

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On September 6, 2017, Francesca’s Holdings Corporation (the “Company”) issued a press release announcing its consolidated financial results for the fiscal second quarter ended July 29, 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.

 

99.1 Press Release issued by Francesca’s Holdings Corporation on September 6, 2017.

 

 

 

 

EXHIBIT INDEX

 

Exhibit No. 

 

Description 

     
99.1   Press Release issued by Francesca’s Holdings Corporation on September 6, 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: September 6, 2017 By: /s/ Kal Malik
    Kal Malik
    Chief Administrative Officer

 

 

 

Exhibit 99.1

 

 

francesca’s® Reports Second Quarter Fiscal Year 2017 Financial Results

 

·Net sales increased 4% to $119.7 million
·Comparable sales decreased 3%
·Diluted earnings per share were $0.20

 

HOUSTON, TEXAS — September 6, 2017 — Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported financial results for the second quarter ended July 29, 2017.

 

Steve Lawrence, President and CEO, stated, “As we previously announced, our second quarter EPS exceeded our expectations as a result of better than expected merchandise margins and SG&A expenses. Comparable sales came in at the low-end of the expected range and further softened in August. We believe that the recent downturn in business is primarily reflective of merchandising missteps. We are taking decisive actions to efficiently move through our back-to-school product and to get back on track as we turn the corner into the holiday season. Our core merchandising philosophy of surprising every guest, every time with a unique, trend-right assortment at a great value will continue to dictate our go-forward strategy. Moreover, we will remain highly disciplined in managing our inventory to ensure a constant flow of newness and swiftly move through slow-sellers.

 

“Hurricane Harvey had a devastating impact on south Texas and Louisiana. Our dedicated team has been resilient and, even though personally impacted, have worked hard to get us back up and running. Our corporate headquarters, ecommerce fulfilment, distribution center, approximately 40 boutiques and many team members located in Houston or neighboring areas were directly impacted by the storm. As of Tuesday, September 5th, we have fully re-opened our corporate facilities and all but one of our impacted boutiques. The disruption to our supply chain is impacting all of our boutiques and we expect it to take a couple of weeks before things normalize. While there is a lot of work to be done, we have a talented and capable team who is firmly committed to taking the necessary steps to reinvigorate our merchandise assortments as well as work through the challenges created by Hurricane Harvey.”

 

SECOND QUARTER RESULTS

 

Net sales increased 4% to $119.7 million from $115.3 million in the comparable prior year quarter. This increase was due to the addition of 40 net new boutiques since the end of the second quarter last year. Comparable sales decreased 3% compared to the same period last year due to a decrease in boutique conversion rates. Prior year second quarter comparable sales were flat. The Company opened 16 new boutiques and closed three boutiques during the quarter, bringing the total count to 692 at the end of the quarter.

 

Gross profit, as a percent of net sales, decreased to 46.3% from 46.8% in the prior year quarter. This was primarily due to deleveraging of occupancy costs as merchandise margin compared to last year was essentially flat.

 

Selling, general and administrative expenses (“SG&A”) increased 18% to $43.5 million from $36.8 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll, professional service fees, software, stock-based compensation and marketing expenses. Additionally, prior year SG&A included a $2.0 million net benefit in connection with the resignation of the Company’s previous Chairman, President and Chief Executive Officer.

 

Income from operations was $11.9 million, or 10.0% of net sales, compared to $17.1 million, or 14.9% of net sales, in the prior year quarter.

 

BALANCE SHEET SUMMARY

 

Total cash and cash equivalents at the end of the second quarter were $33.3 million compared to $26.0 million at the end of the comparable prior year quarter. During the second quarter, the Company repurchased 0.5 million shares of its common stock at a cost of $5.7 million.

 

The Company ended the quarter with $34.0 million of inventory on hand compared to $32.7 million at the end of the comparable prior year period. Average ending inventory per boutique decreased by 2% compared to the comparable prior year period, as the Company continues to diligently control inventory through enhanced inventory management processes that began in the second quarter of 2016.

 

 

 

 

THIRD QUARTER AND REVISED FISCAL YEAR 2017 GUIDANCE

 

For the third quarter ending October 28, 2017, net sales are expected to be in the range of $105 million to $109 million; assuming a comparable sales decrease in the mid- to high-teens compared to a 7% comparable sales increase in the prior year. The Company plans to open approximately 32 new boutiques and close one existing boutique during the third quarter. Diluted earnings per share are expected to be in the range of $0.00 to $0.05. This guidance includes the Company’s best estimate of the impact of Hurricane Harvey.

 

For the fiscal year ending February 3, 2018, net sales are now expected to be in the range of $481 million to $491 million; assuming a high-single digit decrease in comparable sales compared to the prior year increase of 2%. The Company expects to open approximately 60 to 65 boutiques and close approximately 8 to 10 boutiques in fiscal year 2017, compared to 64 new boutiques opened and nine boutiques closed in fiscal year 2016. Diluted earnings per share are now expected to be in the range of $0.71 to $0.81 compared to the prior year of $1.09. The number of average diluted shares for the full year assumed in guidance is 36.5 million shares. The effective tax rate is estimated to be 38.3%.

 

Capital expenditures for fiscal year 2017 are expected to be in the range of $30 million to $33 million.

 

Conference Call Information

 

A conference call to discuss the second quarter results is scheduled for September 6, 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 September 13, 2017. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 2728299. 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; our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth; our ability to successfully attract, hire and integrate our next Chief Merchant and our ability to successfully rebound from the impact of Hurricane Harvey. 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 28, 2017 filed with the Securities and Exchange Commission on March 22, 2017 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 692 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. 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             
   July 29, 2017   July 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  $119,707    100.0%  $115,260    100.0%  $4,447    4%   - 
Cost of goods sold and occupancy costs   64,312    53.7%   61,323    53.2%   2,989    5%   50 
Gross profit   55,395    46.3%   53,937    46.8%   1,458    3%   (50)
Selling, general and administrative expenses   43,456    36.3%   36,815    31.9%   6,641    18%   440 
Income from operations   11,939    10.0%   17,122    14.9%   (5,183)   (30)%   (490)
Interest expense   (110)   (0.1)%   (113)   (0.1)%   3    3%   - 
Other income   19    0.0%   39    0.0%   (20)   (51)%   - 
Income before income tax expense   11,848    9.9%   17,048    14.8%   (5,200)   (31)%   (490)
Income tax expense   4,585    3.8%   6,457    5.6%   (1,872)   (29)%   (180)
Net income  $7,263    6.1%  $10,591    9.2%  $(3,328)   (31)%   (310)

________________

(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  $0.20        $0.27                     
Weighted average diluted share count   36,472         38,755                     
                                    
Comparable sales  (3)%   0%                

 

   Twenty-Six Weeks Ended             
   July 29, 2017   July 30, 2016   Variance 
   In USD  

As a % of

Net Sales

   In USD  

As a % of

Net Sales

   In USD   %  

Basis

Points

 
Net sales  $227,396    100.0%  $221,373    100.0%  $6,023    3%   - 
Cost of goods sold and occupancy costs   123,317    54.2%   118,306    53.4%   5,011    4%   80 
Gross profit   104,079    45.8%   103,067    46.6%   1,012    1%   (80)
Selling, general and administrative expenses   84,934    37.4%   74,481    33.6%   10,453    14%   380 
Income from operations   19,145    8.4%   28,586    12.9%   (9,441)   (33)%   (450)
Interest expense   (223)   (0.1)%   (222)   (0.1)%   (1)   -    - 
Other income   190    0.1%   39    0.0%   151    387%   10 
Income before income tax expense   19,112    8.4%   28,403    12.8%   (9,291)   (33)%   (440)
Income tax expense   7,516    3.3%   10,731    4.8%   (3,215)   (30)%   (150)
Net income  $11,596    5.1%  $17,672    8.0%  $(6,076)   (34)%   (290)

________________

(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  $0.32        $0.45                     
Weighted average diluted share count   36,811         39,580                     
                                    
Comparable sales  (4)%   1%                

 

 

 

 

Francesca’s Holdings Corporation

Consolidated Balance Sheets

(In thousands, except share and per share amount)

 

   July 29, 2017   January 28, 2017   July 30, 2016 
ASSETS               
Current assets:               
Cash and cash equivalents  $33,298   $53,202   $26,021 
Accounts receivable   18,416    5,605    10,791 
Inventories   34,036    23,958    32,667 
Deferred income taxes   -    8,487    6,728 
Prepaid expenses and other current assets   9,433    8,823    6,715 
Total current assets   95,183    100,075    82,922 
Property and equipment, net   83,956    80,484    80,225 
Deferred income taxes   16,009    6,978    4,640 
Other assets, net   3,138    2,056    1,296 
TOTAL ASSETS  $198,286   $189,593   $169,083 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current liabilities:               
Accounts payable  $26,971   $9,205   $16,620 
Accrued liabilities   17,748    25,761    14,327 
Total current liabilities   44,719    34,966    30,947 
Landlord incentives and deferred rent   38,125    38,092    38,673 
Total liabilities   82,844    73,058    69,620 
                
Commitments and contingencies               
                
Stockholders’ equity:               
Common stock - $0.01 par value, 80.0 million shares authorized; 46.4 million, 46.1 million and 45.9 million shares issued at July 29, 2017, January 28, 2017 and July 30, 2016, respectively.   464    461    459 
Additional paid-in capital   111,405    109,008    106,916 
Retained earnings   155,080    143,557    119,228 
Treasury stock, at cost – 9.7 million, 8.5 million and 8.0 million shares at July 29, 2017, January 28, 2017 and July 30, 2016, respectively.   (151,507)   (136,491)   (127,140)
Total stockholders’ equity   115,442    116,535    99,463 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $198,286   $189,593   $169,083 

 

 

 

 

Francesca’s Holdings Corporation

Consolidated Statements of Cash Flows

(In thousands)

 

   Twenty-Six Weeks Ended 
   July 29, 2017   July 30, 2016 
Cash Flows Provided by Operating Activities:          
Net income  $11,596   $17,672 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   10,310    9,482 
Stock-based compensation expense   2,422    (857)
Excess tax benefit from stock-based compensation   -    (6)
Loss on disposal of assets   233    155 
Deferred income taxes   (497)   (1,315)
Impairment charges   100    - 
Changes in operating assets and liabilities:          
Accounts receivable   (12,538)   (1,205)
Inventories   (10,078)   (1,126)
Prepaid expenses and other assets   (1,978)   (55)
Accounts payable   16,864    2,599 
Accrued liabilities   (8,013)   (2,001)
Landlord incentives and deferred rent   33    2,121 
Net cash provided by operating activities   8,454    25,464 
           
Cash Flows Used in Investing Activities:          
Purchases of property and equipment   (12,890)   (11,149)
Other   -    8 
Net cash used in investing activities   (12,890)   (11,141)
           
Cash Flows Used in Financing Activities:          
Repurchases of common stock   (15,326)   (44,812)
Taxes paid related to net settlement of equity awards   (142)   - 
Proceeds from the exercise of stock options   -    280 
Excess tax benefit from stock-based compensation   -    6 
Net cash used in financing activities   (15,468)   (44,526)
           
Net decrease in cash and cash equivalents   (19,904)   (30,203)
Cash and cash equivalents, beginning of year   53,202    56,224 
Cash and cash equivalents, end of period  $33,298   $26,021 
           
Supplemental Disclosures of Cash Flow Information:          
Cash paid for income taxes  $23,742   $9,175 
Interest paid  $97   $95 

 

 

 

 

Francesca’s Holdings Corporation

Supplemental Information

 

Quarterly Sales by Merchandise Category

 

   Thirteen Weeks Ended         
   July 29, 2017   July 30, 2016   Variance 
   In USD   As a % of Sales   In USD   As a % of Sales   In Dollars   % 
   (in thousands, except percentages)         
Apparel (1)  $65,396    54.6%  $62,367    54.1%  $3,029    5%
Jewelry   25,560    21.4%   25,368    22.0%   192    1%
Accessories (1)   14,735    12.3%   13,850    12.0%   885    6%
Gifts   12,836    10.7%   13,209    11.5%   (373)   (3)%
Merchandise sales   118,527    99.0%   114,794    99.6%   3,733    3%
Others (2)   1,180    1.0%   466    0.4%   714    153%
   $119,707    100.0%  $115,260    100.0%  $4,447    4%

________________

(1)In the first quarter of fiscal 2017, swimwear was reclassified out of accessories to apparel. To facilitate comparability, prior year amounts were reclassified.
(2)Includes gift card breakage income, shipping and change in return reserve.

 

Quarterly Comparable Sales

 

   FY 2017   FY 2016   FY 2015 
Q1   (5)%   2%   (2)%
Q2   (3)%   0%   (4)%
Q3        7%   4%
Q4        0%   11%
Fiscal year        2%   3%

 

Boutique Count

 

  

Twenty-Six Weeks Ended

July 29, 2017

  

Fiscal Year Ended

January 28, 2017

  

Twenty-Six Weeks Ended

July 30, 2016

 
Number of boutiques open at the beginning of period   671    616    616 
Boutiques opened   28    64    41 
Boutiques closed   (7)   (9)   (5)
Number of boutiques open at the end of period   692    671    652