francesca’s® Reports Third Quarter Fiscal Year 2017 Financial Results
- Net sales, comparable sales and diluted earnings per share were within guidance range
- Net sales decreased 11% to
$105.8 million and comparable sales decreased 18% - Diluted earnings per share were
$0.01 - Company revises full year guidance
“Looking ahead, we remain focused on the initiatives that will be critical for our success in the long term. We have spent the better part of 2017 putting in place building blocks for our future with the infrastructure investments we have made. Growing our ecommerce business remains our number one long term focus and many of the things we have put in place this year will help us drive our online business now and in the future. We are also taking steps to rationalize our store fleet with a focus on openings in A and B malls and closings in C and D malls. We believe this strategy is aligned with our goal to be in the most relevant locations. Overall, we remain focused on taking steps to reinvigorate our merchandise assortments and making investments in our business that will drive sustainable profitable growth for the long term.”
THIRD QUARTER RESULTS
Net sales decreased 11% to
Gross profit, as a percent of net sales, decreased to 39.6% from 48.2% in the prior year quarter. This was due to a decrease in merchandise margin and deleveraging of occupancy costs. The decrease in merchandise margin was due to increased markdowns in order to sell-through our back-to-school assortment.
Selling, general and administrative expenses decreased 1% to
Income from operations was
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the third quarter were
The Company ended the quarter with
FOURTH QUARTER AND REVISED FISCAL YEAR 2017 GUIDANCE
For the fourth quarter ending
For the fiscal year ending
Capital expenditures for fiscal year 2017 are expected to be in the range of
Conference Call Information
A conference call to discuss the third quarter 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 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 and our ability to successfully integrate our new Chief Merchant. 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
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 714 boutiques in 47 states and the
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 | |||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | Variance | |||||||||||||||||||||
In USD | As a % of Net Sales(1) |
In USD | As a % of Net Sales(1) |
In USD | % | Basis Points | |||||||||||||||||
Net sales | $ | 105,791 | 100.0 | % | $ | 119,470 | 100.0 | % | $ | (13,679 | ) | (11 | )% | - | |||||||||
Cost of goods sold and occupancy costs | 63,931 | 60.4 | % | 61,843 | 51.8 | % | 2,088 | 3 | % | 860 | |||||||||||||
Gross profit | 41,860 | 39.6 | % | 57,627 | 48.2 | % | (15,767 | ) | (27 | )% | (860 | ) | |||||||||||
Selling, general and administrative expenses | 41,405 | 39.1 | % | 41,872 | 35.0 | % | (467 | ) | (1 | )% | 410 | ||||||||||||
Income from operations | 455 | 0.4 | % | 15,755 | 13.2 | % | (15,300 | ) | (97 | )% | (1,280 | ) | |||||||||||
Interest expense | (109 | ) | (0.1 | )% | (131 | ) | (0.1 | )% | (22 | ) | (17 | )% | - | ||||||||||
Other income | 88 | 0.1 | % | 79 | 0.1 | % | 9 | 11 | % | - | |||||||||||||
Income before income tax expense | 434 | 0.4 | % | 15,703 | 13.1 | % | (15,269 | ) | (97 | )% | (1,270 | ) | |||||||||||
Income tax expense | 195 | 0.2 | % | 6,009 | 5.0 | % | (5,814 | ) | (97 | )% | (480 | ) | |||||||||||
Net income | $ | 239 | 0.2 | % | $ | 9,694 | 8.1 | % | $ | (9,455 | ) | (98 | )% | (790 | ) | ||||||||
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(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 | $ | 0.01 | $ | 0.26 | |||||||||||||||||||
Weighted average diluted share count | 35,959 | 37,675 | |||||||||||||||||||||
Comparable sales | (18)% |
7% |
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Thirty-Nine Weeks Ended | |||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | Variance | |||||||||||||||||||||
In USD | As a % of Net Sales(1) |
In USD | As a % of Net Sales(1) |
In USD | % | Basis Points | |||||||||||||||||
Net sales | $ | 333,187 | 100.0 | % | $ | 340,843 | 100.0 | % | $ | (7,656 | ) | (2 | )% | - | |||||||||
Cost of goods sold and occupancy costs | 187,249 | 56.2 | % | 180,149 | 52.9 | % | 7,100 | 4 | % | 330 | |||||||||||||
Gross profit | 145,938 | 43.8 | % | 160,694 | 47.1 | % | (14,756 | ) | (9 | )% | (330 | ) | |||||||||||
Selling, general and administrative expenses | 126,338 | 37.9 | % | 116,353 | 34.1 | % | 9,985 | 9 | % | 380 | |||||||||||||
Income from operations | 19,600 | 5.9 | % | 44,341 | 13.0 | % | (24,741 | ) | (56 | )% | (710 | ) | |||||||||||
Interest expense | (332 | ) | (0.1 | )% | (353 | ) | (0.1 | )% | (21 | ) | (6 | )% | - | ||||||||||
Other income | 278 | 0.1 | % | 118 | 0.0 | % | 160 | 136 | % | 10 | |||||||||||||
Income before income tax expense | 19,546 | 5.9 | % | 44,106 | 12.9 | % | (24,560 | ) | (56 | )% | (700 | ) | |||||||||||
Income tax expense | 7,711 | 2.3 | % | 16,740 | 4.9 | % | (9,029 | ) | (54 | )% | (260 | ) | |||||||||||
Net income | $ | 11,835 | 3.6 | % | $ | 27,366 | 8.0 | % | $ | (15,531 | ) | (57 | )% | (440 | ) | ||||||||
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(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 | $ | 0.70 | |||||||||||||||||||
Weighted average diluted share count | 36,525 | 38,945 | |||||||||||||||||||||
Comparable sales | (9)% |
3% |
Francesca’s Holdings Corporation | ||||||||||||
Consolidated Balance Sheets | ||||||||||||
(In thousands, except share and per share amount) | ||||||||||||
October 28, 2017 | January 28, 2017 | October 29, 2016 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 19,020 | $ | 53,202 | $ | 24,725 | ||||||
Accounts receivable | 18,150 | 5,605 | 8,218 | |||||||||
Inventories | 38,824 | 23,958 | 42,774 | |||||||||
Deferred income taxes | - | 8,487 | 5,709 | |||||||||
Prepaid expenses and other current assets | 10,179 | 8,823 | 7,745 | |||||||||
Total current assets | 86,173 | 100,075 | 89,171 | |||||||||
Property and equipment, net | 85,710 | 80,484 | 82,992 | |||||||||
Deferred income taxes | 15,577 | 6,978 | 4,425 | |||||||||
Other assets, net | 3,794 | 2,056 | 1,370 | |||||||||
TOTAL ASSETS | $ | 191,254 | $ | 189,593 | $ | 177,958 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 28,239 | $ | 9,205 | $ | 16,550 | ||||||
Accrued liabilities | 12,848 | 25,761 | 16,629 | |||||||||
Total current liabilities | 41,087 | 34,966 | 33,179 | |||||||||
Landlord incentives and deferred rent | 38,327 | 38,092 | 38,821 | |||||||||
Total liabilities | 79,414 | 73,058 | 72,000 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Common stock - $0.01 par value, 80.0 million shares authorized; 46.4 million, 46.1 million and 46.1 million shares issued at October 28, 2017, January 28, 2017 and October 29, 2016, respectively. | 464 | 461 | 461 | |||||||||
Additional paid-in capital | 111,065 | 109,008 | 107,908 | |||||||||
Retained earnings | 155,319 | 143,557 | 128,922 | |||||||||
Treasury stock, at cost – 10.2 million, 8.5 million and 8.3 million shares at October 28, 2017, January 28, 2017 and October 29, 2016, respectively. | (155,008 | ) | (136,491 | ) | (131,333 | ) | ||||||
Total stockholders’ equity | 111,840 | 116,535 | 105,958 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 191,254 | $ | 189,593 | $ | 177,958 | ||||||
Francesca’s Holdings Corporation | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
Thirty-Nine Weeks Ended | ||||||||
October 28, 2017 | October 29, 2016 | |||||||
Cash Flows Provided by Operating Activities: | ||||||||
Net income | $ | 11,835 | $ | 27,366 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 15,749 | 14,415 | ||||||
Stock-based compensation expense | 2,082 | 18 | ||||||
Excess tax benefit from stock-based compensation | - | (2 | ) | |||||
Loss on disposal of assets | 565 | 265 | ||||||
Deferred income taxes | (65 | ) | (81 | ) | ||||
Impairment charges | 100 | 66 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (12,272 | ) | 1,364 | |||||
Inventories | (14,866 | ) | (11,233 | ) | ||||
Prepaid expenses and other assets | (3,529 | ) | (1,294 | ) | ||||
Accounts payable | 16,987 | 2,015 | ||||||
Accrued liabilities | (12,913 | ) | 301 | |||||
Landlord incentives and deferred rent | 235 | 2,269 | ||||||
Net cash provided by operating activities | 3,908 | 35,469 | ||||||
Cash Flows Used in Investing Activities: | ||||||||
Purchases of property and equipment | (19,121 | ) | (18,666 | ) | ||||
Other | - | 8 | ||||||
Net cash used in investing activities | (19,121 | ) | (18,658 | ) | ||||
Cash Flows Used in Financing Activities: | ||||||||
Repurchases of common stock | (18,827 | ) | (48,715 | ) | ||||
Taxes paid related to net share settlement of equity awards | (142 | ) | - | |||||
Proceeds from the exercise of stock options | - | 403 | ||||||
Excess tax benefit from stock-based compensation | - | 2 | ||||||
Net cash used in financing activities | (18,969 | ) | (48,310 | ) | ||||
Net decrease in cash and cash equivalents | (34,182 | ) | (31,499 | ) | ||||
Cash and cash equivalents, beginning of year | 53,202 | 56,224 | ||||||
Cash and cash equivalents, end of period | $ | 19,020 | $ | 24,725 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for income taxes | $ | 23,806 | $ | 13,014 | ||||
Interest paid | $ | 144 | $ | 143 | ||||
Francesca’s Holdings Corporation | ||||||||||||||||||||||||
Supplemental Information | ||||||||||||||||||||||||
Quarterly Sales by Merchandise Category | ||||||||||||||||||||||||
Thirteen Weeks Ended |
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October 28, 2017 |
October 29, 2016 |
Variance |
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In Dollars |
As a % of Net Sales |
In Dollars | As a % of Net Sales |
In Dollars | % |
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(in thousands, except percentages) | ||||||||||||||||||||||||
Apparel(1) | $ | 54,663 | 51.7 | % | $ | 64,013 | 53.6 | % | $ | (9,350 | ) | (15 | )% | |||||||||||
Jewelry | 22,826 | 21.6 | % | 26,143 | 21.9 | % | (3,317 | ) | (13 | )% | ||||||||||||||
Accessories(1) | 15,360 | 14.5 | % | 17,346 | 14.5 | % | (1,986 | ) | (11 | )% | ||||||||||||||
Gifts | 10,922 | 10.3 | % | 11,638 | 9.7 | % | (716 | ) | (6 | )% | ||||||||||||||
Merchandise sales | 103,771 | 98.1 | % | 119,140 | 99.7 | % | (15,369 | ) | (13 | )% | ||||||||||||||
Other (2) | 2,020 | 1.9 | % | 330 | 0.3 | % | 1,690 | 512 | % | |||||||||||||||
$ | 105,791 | 100.0 | % | $ | 119,470 | 100.0 | % | $ | (13,679 | ) | (11 | )% | ||||||||||||
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(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 | (18)% |
7% |
4% |
|||||
Q4 | 0% |
11% |
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Fiscal year | 2% |
3% |
Boutique Count | ||||||
Thirty-Nine Weeks Ended October 28, 2017 |
Fiscal Year Ended January 28, 2017 |
Thirty-Nine Weeks Ended October 29, 2016 |
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Number of boutiques open at the beginning of period | 671 | 616 | 616 | |||
Boutiques opened | 51 | 64 | 59 | |||
Boutiques closed | (8 | ) | (9 | ) | (6 | ) |
Number of boutiques open at the end of period | 714 | 671 | 669 | |||
Source: Francesca's Holdings Corporation