francesca’s® Reports Third Quarter Fiscal Year 2019 Financial Results
- Comparable sales increased 1%
- Net sales were relatively flat at
$95.5 million - Loss per share was
$1.76 compared to$5.59 in the same period last year - Adjusted loss per share was
$1.12 compared to$2.08 in the same period last year (see Non-GAAP Information below)
Mr. Prendergast continued, “Overall, we are highly encouraged by our results, which further increases our confidence that we are quickly moving in the right direction with our turnaround plan. We look forward to building on these successes and driving positive momentum in our business through the holiday season and beyond.”
THIRD QUARTER RESULTS
Net sales were relatively flat at
Gross profit, as a percent of net sales, increased to 39.3% from 35.3% in the prior year quarter. The 400 basis points improvement in gross profit was primarily due to higher merchandise margins as a result of lower inventory reserve and less marked-out-of-stock charges. Additionally, occupancy costs decreased due to lower depreciation expense associated with boutiques impaired in fiscal year 2018 and prior year demolition costs associated with boutique remodels.
Selling, general and administrative (SG&A) expenses decreased 4% to
The
Non-cash asset impairment charges totaled
Loss from operations was
Income tax expense was
Net loss for the third quarter was
Please see the reconciliation of adjusted SG&A, adjusted loss from operations, adjusted loss before income tax expense, adjusted income tax expense, adjusted net loss, and adjusted loss per share, each a non-GAAP financial measure, to the most directly comparable GAAP financial measure provided in the tables at the end of this press release.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the third quarter ended
The Company ended the quarter with
CEO SEARCH UPDATE
The Board of Directors has hired an executive search firm to initiate a formal search for a permanent Chief Executive Officer.
Conference Call Information
A conference call to discuss the third quarter fiscal year 2019 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 the Company’s 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 are expected. These risks and uncertainties include, but are not limited to, the following: the risk that the Company may not be able to successfully execute its turnaround plan; the risk that the Company may not be able to successfully attract and integrate a new permanent Chief Executive Officer; the risk that the Company may not be able to identify suitably qualified and experienced candidates to add to its Board of Directors; the risk that the Company 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 its business model; the Company’s ability to attract a sufficient number of customers to its boutiques or sell sufficient quantities of its merchandise through its ecommerce website; the Company’s ability to successfully open, close, refresh, and operate our boutiques each year; the Company’s ability to efficiently source and distribute merchandise quantities necessary to support its operations; and the impact of potential tariff increases or new tariffs. For additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from those contained in the Company’s forward-looking statements, please refer to “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended February 3, 2019 filed with the SEC on May 3, 2019 and any risk factors contained in subsequent quarterly and annual reports it files with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statement.
Non-GAAP Information
This press release includes non-GAAP adjusted SG&A, adjusted loss from operations, adjusted loss before income tax expense, adjusted income tax expense, adjusted net loss, and adjusted loss per share, each of which are non-GAAP financial measures. The Company believes these non-GAAP financial measures not only provides the Company’s management with comparable financial data for internal financial analysis but also provides meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the business and facilitate a meaningful evaluation of the Company’s third quarter fiscal year 2019 SG&A, loss from operations, loss before income tax expense, income tax expense, net loss and loss per share on a comparable basis with the Company’s third quarter fiscal year 2018 results. These non-GAAP measures 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 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. As of today, francesca's® operated approximately 714 boutiques in 47 states throughout
CONTACT: | |
ICR, Inc. Jean Fontana 646-277-1214 |
Company Cindy Thomassee 832-494-2240 Kate Venturina 713-864-1358 ext. 1145 IR@francescas.com |
Francesca’s
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts, Percentages and Basis Points)
Thirteen Weeks Ended |
||||||||||||||||||||||||
November 2, 2019 | November 3, 2018 |
Variance | ||||||||||||||||||||||
In USD | As a % of Net Sales(1) |
In USD | As a % of Net Sales(1) |
In USD | % | Basis Points |
||||||||||||||||||
Net sales | $ | 95,503 | 100.0 | % | $ | 95,375 | 100.0 | % | $ | 128 | 0 | % | - | |||||||||||
Cost of goods sold and occupancy costs | 57,985 | 60.7 | % | 61,730 | 64.7 | % | (3,745 | ) | (6 | )% | (400 | ) | ||||||||||||
Gross profit | 37,518 | 39.3 | % | 33,645 | 35.3 | % | 3,873 | 12 | % | 400 | ||||||||||||||
Selling, general and administrative expenses | 40,401 | 42.3 | % | 42,286 | 44.3 | % | (1,885 | ) | (4 | )% | (200 | ) | ||||||||||||
Asset impairment charges | 1,356 | 1.4 | % | 14,419 | 15.1 | % | (13,063 | ) | (91 | )% | (1,370 | ) | ||||||||||||
Loss from operations | (4,239 | ) | (4.4 | )% | (23,060 | ) | (24.2 | )% | (18,821 | ) | (82 | )% | (1,970 | ) | ||||||||||
Interest expense | 394 | 0.4 | % | 51 | 0.1 | % | 343 | 673 | % | 40 | ||||||||||||||
Other expense (income) | 107 | 0.1 | % | (151 | ) | (0.2 | )% | 258 | 171 | % | 30 | |||||||||||||
Loss before income tax expense (benefit) | (4,740 | ) | (5.0 | )% | (22,960 | ) | (24.1 | )% | (18,220 | ) | (79 | )% | (1,910 | ) | ||||||||||
Income tax expense (benefit) | 395 | 0.4 | % | (6,737 | ) | (7.1 | )% | 7,132 | 106 | % | 750 | |||||||||||||
Net loss | $ | (5,135 | ) | (5.4 | )% | $ | (16,223 | ) | (17.0 | )% | $ | (11,088 | ) | (68 | )% | (1,160 | ) | |||||||
________________________ (1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. |
||||||||||||||||||||||||
Loss per share* | $ | (1.76 | ) | $ | (5.59 | ) | ||||||||||||||||||
Weighted average share count* | 2,910 | 2,900 | ||||||||||||||||||||||
Comparable sales change | 1% |
(14)% | ||||||||||||||||||||||
Thirty-Nine Weeks Ended | ||||||||||||||||||||||||
November 2, 2019 | November 3, 2018 | Variance | ||||||||||||||||||||||
In USD | As a % of Net Sales(1) |
In USD | As a % of Net Sales(1) |
In USD | % | Basis Points |
||||||||||||||||||
Net sales | $ | 288,600 | 100.0 | % | $ | 308,805 | 100.0 | % | $ | (20,205 | ) | (7 | )% | - | ||||||||||
Cost of goods sold and occupancy costs | 180,252 | 62.5 | % | 192,690 | 62.4 | % | (12,438 | ) | (6 | )% | 10 | |||||||||||||
Gross profit | 108,348 | 37.5 | % | 116,115 | 37.6 | % | (7,767 | ) | (7 | )% | (10 | ) | ||||||||||||
Selling, general and administrative expenses | 119,330 | 41.3 | % | 128,298 | 41.5 | % | (8,968 | ) | (7 | )% | (20 | ) | ||||||||||||
Asset impairment charges | 1,545 | 0.5 | % | 14,567 | 4.7 | % | (13,022 | ) | (89 | )% | (420 | ) | ||||||||||||
Loss from operations | (12,527 | ) | (4.3 | )% | (26,750 | ) | (8.7 | )% | (14,223 | ) | (53 | )% | (430 | ) | ||||||||||
Interest expense | 719 | 0.2 | % | 280 | 0.1 | % | 439 | 157 | % | 20 | ||||||||||||||
Other income | (265 | ) | (0.1 | )% | (403 | ) | (0.1 | )% | (138 | ) | (34 | )% | - | |||||||||||
Loss before income tax expense (benefit) | (12,981 | ) | (4.5 | )% | (26,627 | ) | (8.6 | )% | (13,646 | ) | (51 | )% | (410 | ) | ||||||||||
Income tax expense (benefit) | 491 | 0.2 | % | (6,973 | ) | (2.3 | )% | 7,464 | 107 | % | 240 | |||||||||||||
Net loss | $ | (13,472 | ) | (4.7 | )% | $ | (19,654 | ) | (6.4 | )% | $ | 6,182 | (31 | )% | 170 | |||||||||
________________________ (1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. |
||||||||||||||||||||||||
Loss earnings per share* | $ | (4.64 | ) | $ | (6.78 | ) | ||||||||||||||||||
Weighted average share count* | 2,906 | 2,900 | ||||||||||||||||||||||
Comparable sales change | (6)% |
(15)% |
*Reflects the 12-to-1 reverse stock split that became effective on
Francesca’s
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
November 2, 2019 | February 2, 2019 | November 3, 2018 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 21,154 | $ | 20,103 | $ | 10,720 | ||||||
Accounts receivable | 5,292 | 16,309 | 17,134 | |||||||||
Inventories | 47,983 | 30,478 | 40,404 | |||||||||
Prepaid expenses and other current assets | 12,024 | 10,357 | 10,854 | |||||||||
Total current assets | 86,453 | 77,247 | 79,112 | |||||||||
Operating lease right-of-use assets, net | 227,204 | - | - | |||||||||
Property and equipment, net | 56,653 | 71,207 | 79,842 | |||||||||
Deferred income taxes | - | - | 15,554 | |||||||||
Other assets, net | 3,471 | 4,588 | 4,958 | |||||||||
TOTAL ASSETS | $ | 373,781 | $ | 153,042 | $ | 179,466 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 22,488 | $ | 24,330 | $ | 37,436 | ||||||
Accrued liabilities | 13,929 | 11,333 | 12,264 | |||||||||
Operating lease liabilities | 48,845 | - | - | |||||||||
Total current liabilities | 85,262 | 35,663 | 49,700 | |||||||||
Operating lease liabilities | 211,123 | - | - | |||||||||
Landlord incentives and deferred rent | - | 33,989 | 34,997 | |||||||||
Long-term debt | 18,904 | 10,000 | - | |||||||||
Other liabilities | 552 | - | - | |||||||||
Total liabilities | 315,841 | 79,652 | 84,697 | |||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Common stock – $0.01 par value, 80.0 million shares authorized; 4.0 million, 3.9 million and 3.9 million issued at November 2, 2019, February 2, 2019 and November 3, 2018* | 40 | 39 | 40 | |||||||||
Additional paid-in capital* | 112,967 | 113,121 | 113,225 | |||||||||
Retained earnings | 104,954 | 120,251 | 141,525 | |||||||||
Treasury stock, at cost – 0.9 million shares at each of November 2, 2019, February 2, 2019 and November 3, 2018* | (160,021 | ) | (160,021 | ) | (160,021 | ) | ||||||
Total stockholders’ equity | 57,940 | 73,390 | 94,769 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 373,781 | $ | 153,042 | $ | 179,466 |
*Reflects the 12-to-1 reverse stock split that became effective on
Francesca’s
Consolidated Statements of Cash Flows
(In thousands)
Thirty-Nine Weeks Ended | ||||||||
November 2, 2019 | November 3, 2018 | |||||||
Cash Flows (Used in) Provided by Operating Activities: | ||||||||
Net loss | $ | (13,472 | ) | $ | (19,654 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 16,698 | 18,742 | ||||||
Stock-based compensation expense | 403 | 1,440 | ||||||
Loss on sale of assets | 99 | 633 | ||||||
Asset impairment charges | 1,545 | 14,567 | ||||||
Deferred income taxes | - | (6,848 | ) | |||||
Other | 161 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 11,017 | (492 | ) | |||||
Inventories | (17,505 | ) | (13,588 | ) | ||||
Prepaid expenses and other assets | (1,566 | ) | (2,983 | ) | ||||
Accounts payable | 257 | 16,966 | ||||||
Accrued liabilities | 2,596 | 359 | ||||||
Operating lease right-of-use assets and lease liabilities, net | (4,449 | ) | - | |||||
Landlord incentives and deferred rent | - | (3,340 | ) | |||||
Net cash (used in) provided by operating activities | (4,216 | ) | 5,802 | |||||
Cash Flows Used in Investing Activities: | ||||||||
Purchases of property and equipment | (3,299 | ) | (21,885 | ) | ||||
Net cash used in investing activities | (3,299 | ) | (21,885 | ) | ||||
Cash Flows Provided by (Used in) Financing Activities: | ||||||||
Proceeds from borrowings under the revolving credit facility | 15,000 | - | ||||||
Proceeds from borrowings under the term loan | 10,000 | - | ||||||
Repayments of borrowings under the revolving credit facility | (15,000 | ) | - | |||||
Payment of debt issuance costs | (1,434 | ) | (471 | ) | ||||
Taxes paid related to net settlement of equity awards | - | (77 | ) | |||||
Repurchases of common stock | - | (3,980 | ) | |||||
Net cash provided by (used in) financing activities | 8,566 | (4,528 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 1,051 | (20,611 | ) | |||||
Cash and cash equivalents, beginning of year | 20,103 | 31,331 | ||||||
Cash and cash equivalents, end of period | $ | 21,154 | $ | 10,720 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash (received) paid for income taxes | $ | (8,747 | ) | $ | 244 | |||
Interest paid | $ | 475 | $ | 121 | ||||
Francesca’s
Supplemental Information
Quarterly Sales by Merchandise Category
Thirteen Weeks Ended | ||||||||||||||||||
November 2, 2019 | November 3, 2018 | Variance | ||||||||||||||||
In USD | As a % of Sales |
In USD | As a % of Sales |
In Dollars | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||||
Apparel | $ | 46,523 | 48.7 | % | $ | 48,397 | 50.7 | % | $ | (1,874 | ) | (4 | )% | |||||
Jewelry | 26,073 | 27.3 | % | 22,855 | 24.0 | % | 3,218 | 14 | % | |||||||||
Accessories | 15,147 | 15.9 | % | 14,844 | 15.6 | % | 303 | 2 | % | |||||||||
Gifts | 7,064 | 7.4 | % | 8,685 | 9.1 | % | (1,621 | ) | (19 | )% | ||||||||
Others(1) | 696 | 0.7 | % | 594 | 0.6 | % | 102 | 17 | % | |||||||||
Net sales | $ | 95,503 | 100.0 | % | $ | 95,375 | 100.0 | % | 128 | 0 | % |
(1) Includes gift card breakage income, shipping and change in return reserve.
Quarterly Comparable Sales
FY 2019 | FY 2018 | FY 2017 | |||
Q1 | (13)% | (16)% | (5)% | ||
Q2 | (5)% | (13)% | (3)% | ||
Q3 | 1% | (14)% | (18)% | ||
Q4 | (14)% | (15)% | |||
Fiscal year | (14)% | (11)% |
Boutique Count
Thirty-Nine Weeks Ended |
Fiscal Year Ended |
Thirty-Nine Weeks Ended |
||||
November 2, 2019 | February 2, 2019 | November 3, 2018 | ||||
Number of boutiques open at the beginning of period | 727 | 721 | 721 | |||
Boutiques opened | 5 | 32 | 31 | |||
Boutiques closed | (18 | ) | (26 | ) | (14 | ) |
Number of boutiques open at the end of period | 714 | 727 | 738 | |||
Francesca’s
GAAP to Non-GAAP Reconciliation
(In Thousands, Except Per Share Amounts and Percentages)
Thirteen Weeks Ended
As Reported (GAAP) |
Other Payroll Costs(1) |
Net Charges Related to Employee Departure(2) |
Asset Impairment Charges(3) |
Adjusted (Non-GAAP) |
|||||||||||||||
SG&A | $ | 40,401 | $ | (386 | ) | $ | (301 | ) | $ | - | $ | 39,714 | |||||||
Loss from operations | (4,239 | ) | 386 | 301 | 1,356 | (2,196 | ) | ||||||||||||
Loss before income tax | (4,740 | ) | 386 | 301 | 1,356 | (2,697 | ) | ||||||||||||
Income tax expense(4) | 395 | 32 | 25 | 113 | 565 | ||||||||||||||
Net loss | (5,135 | ) | 354 | 276 | 1,243 | (3,262 | ) | ||||||||||||
Loss per share | (1.76 | ) | 0.12 | 0.09 | 0.43 | (1.12 | ) |
- Consists of other payroll costs associated with our turnaround plan.
- Consists of net charges associated with an employee departure.
- Non-cash asset impairment charges mostly associated with the write down of operating lease right-of-use asset for four underperforming boutiques for which the remaining carrying value of their assets are no longer expected to be recoverable.
- The income tax impact of each adjustment was calculated using the effective income tax rate of 8.3% during the thirteen weeks ended
November 2, 2019 .
Thirteen Weeks Ended
As Reported (GAAP) |
Asset Impairment Charges(1) |
Adjusted (Non-GAAP) |
|||||||
Loss from operations | $ | (23,060 | ) | $ | 14,419 | $ | (8,641 | ) | |
Loss before income tax | (22,960 | ) | 14,419 | (8,541 | ) | ||||
Income tax benefit (2) | (6,737 | ) | 4,231 | (2,506 | ) | ||||
Net loss | (16,223 | ) | 10,188 | (6,035 | ) | ||||
Loss per share(3) | (5.59 | ) | 3.51 | (2.08 | ) |
- Non-cash asset impairment charges mostly associated with the write down of property and equipment for 129 underperforming boutiques for which the remaining carrying value of their assets are no longer expected to be recoverable.
- The income tax impact of the adjustment was calculated using the effective income tax rate of 29.3% during the thirteen weeks ended
November 3, 2018 . - Reflects the 12-to-1 reverse stock split that became effective on
July 1, 2019 .
Source: Francesca's Holdings Corporation