francesca’s® Reports First Quarter Fiscal Year 2018 Financial Results and Provides Second Quarter Guidance
- Net sales decreased 7% to
$100.4 million and comparable sales decreased 16% - Diluted loss per share was
$0.11 - Reaffirms full year sales and EPS guidance
- Entered into a new revolving credit facility
Mr. Lawrence continued, “Looking ahead, with our assortments fully reflecting our new vision for merchandising and the launch of our new customer loyalty program, we expect our business to inflect back into positive comps during the back half of the year. I am proud of the team’s hard work and dedication and look forward to building upon our efforts to get our business back on track to deliver sustainable long term sales and profitability growth.”
FIRST QUARTER RESULTS
Net sales decreased 7% to
Gross profit, as a percent of net sales, decreased to 38.2% from 45.2% in the comparable prior year quarter. This unfavorable variance was due to deleveraging of occupancy costs as well as a decrease in merchandise margin. The decrease in merchandise margin was due to increased markdowns.
Selling, general and administrative expenses increased 4% to
Loss from operations was
The Company’s effective tax rate for the quarter was 13.4% compared to 40.3% in the comparable prior year quarter. The decrease in the Company’s effective tax rate was due to the lower corporate tax rate under the Tax Cuts and Jobs Act enacted in
Net loss for the first quarter was
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were
The Company ended the first quarter with
SECOND QUARTER AND FISCAL YEAR 2018 GUIDANCE
For the second quarter ending
The fiscal year 2018 sales and EPS guidance remains unchanged from the initial guidance given on
Capital expenditures for fiscal year 2018 are still expected to be approximately
NEW REVOLVING CREDIT FACILITY
On
Conference Call Information
A conference call to discuss the first quarter fiscal year 2018 results is scheduled for
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 new boutiques each year; our ability to efficiently source, distribute additional merchandise quantities necessary to support our growth; and new tax legislation developments or guidance that may influence our effective tax rate. 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
SEC Regulation G – 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 fiscal year 2017 diluted earnings per share on a comparable basis with our expected fiscal year 2018 results. 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® 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 744 boutiques in 47 states and the
CONTACT:
ICR, Inc. Company
Jean Fontana
646-277-1214
IR@francescas.com
Francesca’s
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Percentages and Basis Points)
Thirteen Weeks Ended | |||||||||||||||||||||||
May 5, 2018 | April 29, 2017 | Variance | |||||||||||||||||||||
In USD | As a % of Net Sales(1) |
In USD | As a % of Net Sales(1) |
In USD | % | Basis Points |
|||||||||||||||||
Net sales | $ | 100,405 | 100.0 | % | $ | 107,689 | 100.0 | % | $ | (7,284 | ) | (7 | )% | - | |||||||||
Cost of goods sold and occupancy costs | 62,042 | 61.8 | % | 59,006 | 54.8 | % | 3,036 | 5 | % | 700 | |||||||||||||
Gross profit | 38,363 | 38.2 | % | 48,683 | 45.2 | % | (10,320 | ) | (21 | )% | (700 | ) | |||||||||||
Selling, general and administrative expenses | 42,883 | 42.7 | % | 41,281 | 38.3 | % | 1,602 | 4 | % | 440 | |||||||||||||
(Loss) income from operations | (4,520 | ) | (4.5 | )% | 7,402 | 6.9 | % | (11,922 | ) | (161 | )% | (1,140 | ) | ||||||||||
Interest expense | (117 | ) | (0.1 | )% | (113 | ) | (0.1 | )% | (4 | ) | 4 | % | - | ||||||||||
Other income (expense) | 150 | 0.1 | % | (25 | ) | (0.0 | )% | 175 | 700 | % | 10 | ||||||||||||
(Loss) income before income tax expense | (4,487 | ) | (4.5 | )% | 7,264 | 6.7 | % | (11,751 | ) | (162 | )% | (1,120 | ) | ||||||||||
Income tax (benefit) expense | (602 | ) | (0.6 | )% | 2,931 | 2.7 | % | (3,533 | ) | (121 | )% | (330 | ) | ||||||||||
Net (loss) income | $ | (3,885 | ) | (3.9 | )% | $ | 4,333 | 4.0 | % | $ | (8,218 | ) | (190 | )% | (790 | ) | |||||||
(1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. |
|||||||||||||||||||||||
Diluted (loss) earnings per share | $ | (0.11 | ) | $ | 0.12 | ||||||||||||||||||
Weighted average diluted share count | 34,836 | 37,149 | |||||||||||||||||||||
Comparable sales change | (16)% | (5)% | |||||||||||||||||||||
Francesca’s
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
May 5, 2018 | February 3, 2018 | April 29, 2017 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 21,833 | $ | 31,331 | $ | 48,101 | ||||||
Accounts receivable | 20,488 | 16,642 | 8,145 | |||||||||
Inventories | 32,728 | 26,816 | 31,365 | |||||||||
Prepaid expenses and other current assets | 10,326 | 9,714 | 9,479 | |||||||||
Total current assets | 85,375 | 84,503 | 97,090 | |||||||||
Property and equipment, net | 89,321 | 87,702 | 81,577 | |||||||||
Deferred income taxes | 7,726 | 9,413 | 15,859 | |||||||||
Other assets, net | 4,222 | 3,622 | 2,896 | |||||||||
TOTAL ASSETS | $ | 186,644 | $ | 185,240 | $ | 197,422 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 24,827 | $ | 17,801 | $ | 21,305 | ||||||
Accrued liabilities | 14,634 | 14,654 | 25,085 | |||||||||
Total current liabilities | 39,461 | 32,455 | 46,390 | |||||||||
Landlord incentives and deferred rent | 37,616 | 38,337 | 38,261 | |||||||||
Total liabilities | 77,077 | 70,792 | 84,651 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Common stock - $0.01 par value, 80.0 million shares authorized; 47.1 million, 46.3 million and 46.3 million shares issued at May 5, 2018, February 3, 2018 and April 29, 2017, respectively. |
471 | 463 | 463 | |||||||||
Additional paid-in capital | 111,823 | 111,439 | 110,267 | |||||||||
Retained earnings | 157,294 | 159,045 | 147,817 | |||||||||
Treasury stock, at cost – 11.1 million, 10.3 million and 9.2 million shares at May 5, 2018, February 3, 2018 and April 29, 2017, respectively. |
(160,021 | ) | (156,499 | ) | (145,776 | ) | ||||||
Total stockholders’ equity | 109,567 | 114,448 | 112,771 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 186,644 | $ | 185,240 | $ | 197,422 | ||||||
Francesca’s
Consolidated Statements of Cash Flows
(In thousands)
Thirteen Weeks Ended | ||||||||
May 5, 2018 | April 29, 2017 | |||||||
Cash Flows Provided by Operating Activities: | ||||||||
Net (loss) income | $ | (3,885 | ) | $ | 4,333 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 5,912 | 5,101 | ||||||
Stock-based compensation expense | 418 | 1,254 | ||||||
Loss on sale of assets | 61 | 110 | ||||||
Deferred income taxes | 980 | (347 | ) | |||||
Impairment charges | 27 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (3,846 | ) | (2,540 | ) | ||||
Inventories | (5,912 | ) | (7,407 | ) | ||||
Prepaid expenses and other assets | (1,276 | ) | (1,638 | ) | ||||
Accounts payable | 8,721 | 10,341 | ||||||
Accrued liabilities | 2,728 | (676 | ) | |||||
Landlord incentives and deferred rent | (721 | ) | 169 | |||||
Net cash provided by operating activities | 3,207 | 8,700 | ||||||
Cash Flows Used in Investing Activities: | ||||||||
Purchases of property and equipment | (8,725 | ) | (4,634 | ) | ||||
Net cash used in investing activities | (8,725 | ) | (4,634 | ) | ||||
Cash Flows Used in Financing Activities: | ||||||||
Repurchases of common stock | (3,980 | ) | (9,054 | ) | ||||
Taxes paid related to net settlement of equity awards | - | (113 | ) | |||||
Net cash used in financing activities | (3,980 | ) | (9,167 | ) | ||||
Net decrease in cash and cash equivalents | (9,498 | ) | (5,101 | ) | ||||
Cash and cash equivalents, beginning of year | 31,331 | 53,202 | ||||||
Cash and cash equivalents, end of period | $ | 21,833 | $ | 48,101 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for income taxes | $ | 24 | $ | 73 | ||||
Interest paid | $ | 47 | $ | 49 | ||||
Francesca’s
Supplemental Information
Quarterly Sales by Merchandise Category
Thirteen Weeks Ended | |||||||||||||||||||
May 5, 2018 | April 29, 2017 | Variance | |||||||||||||||||
In USD | As a % of Sales |
In USD | As a % f Sales |
In Dollars | % | ||||||||||||||
(in thousands, except percentages) | |||||||||||||||||||
Apparel | $ | 49,534 | 49.3 | % | $ | 60,012 | 55.7 | % | $ | (10,478 | ) | (17 | )% | ||||||
Jewelry | 23,858 | 23.8 | % | 23,771 | 22.1 | % | 87 | 0 | % | ||||||||||
Accessories | 15,484 | 15.4 | % | 13,981 | 13.0 | % | 1,503 | 11 | % | ||||||||||
Gifts | 11,105 | 11.1 | % | 11,115 | 10.3 | % | (10 | ) | (0 | )% | |||||||||
Merchandise sales | 99,981 | 99.6 | % | 108,879 | 101.1 | % | (8,898 | ) | (8 | )% | |||||||||
Others(1) | 424 | 0.4 | % | (1,190 | ) | (1.1 | )% | 1,614 | 136 | % | |||||||||
Net sales | $ | 100,405 | 100.0 | % | $ | 107,689 | 100.0 | % | $ | (7,284 | ) | (7 | )% | ||||||
(1) Includes gift card breakage income, shipping and change in return reserve.
Quarterly Comparable Sales
FY 2018 | FY 2017 | FY 2016 | ||||||
Q1 | (16 | )% | (5 | )% | 2 | % | ||
Q2 | (3 | )% | 0 | % | ||||
Q3 | (18 | )% | 7 | % | ||||
Q4 | (15 | )% | 0 | % | ||||
Fiscal year | (11 | )% | 2 | % | ||||
Boutique Count
Thirteen Weeks Ended May 5, 2018 |
Fiscal Year Ended February 3, 2018 |
Thirteen Weeks Ended April 29, 2017 |
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Number of boutiques open at the beginning of period | 721 | 671 | 671 | |||
Boutiques opened | 27 | 60 | 12 | |||
Boutiques closed | (4 | ) | (10 | ) | (4 | ) |
Number of boutiques open at the end of period | 744 | 721 | 679 | |||
Source: Francesca's Holdings Corporation