December 6, 2016

francesca's® Reports a 15% Net Sales and a 7% Comparable Sales Increase for the Third Quarter 2016 and Increases Full Year Guidance

  • Diluted earnings per share were $0.26 for the third quarter compared to $0.16 last year, a 63% increase
  • Company raises fiscal 2016 sales and diluted earnings per share outlook to $1.03 to $1.07

HOUSTON, Dec. 06, 2016 (GLOBE NEWSWIRE) -- 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 Corporation
Consolidated 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 Corporation
Consolidated 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 Corporation
Consolidated 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 Corporation
Supplemental 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 EndedFiscal Year EndedThirty-Nine Weeks Ended
October 29, 2016 January 30, 2016October 31, 2015
Number of boutiques open at the beginning of period616 539 539
Boutiques opened59 83 80
Boutiques closed(6)(6)-
Number of boutiques open at the end of period669 616 619
      
CONTACT:

ICR, Inc.

Jean Fontana

646-277-1214



Company

Kelly Dilts 832-494-2236

Kate Venturina 832-494-2233

IR@francescas.com

Primary Logo

Source: Francesca's Holdings Corporation

News Provided by Acquire Media


Close window | Back to top

Copyright 2017 francesca's