Francesca’s Holdings Corporation (NASDAQ:FRAN) today reported
financial results for the fourth quarter and fiscal year ended
January 28, 2017.
Steve Lawrence, President and CEO, stated, “We are
pleased to deliver fourth quarter earnings per share above the
high-end of our guidance and flat comparable sales. These comp
results were achieved in a challenging retail environment where we
were up against an 11% comparable sales increase in the fourth
quarter of last year. We worked hard to improve our inventory
management and ended the year with total inventories down 24%
versus the prior year. This decrease was driven by
disciplined receipt flows during the quarter coupled with both
markdowns and mark-out-of-stock charges taken at year-end to ensure
a clean transition into 2017. Looking ahead, we remain intently
focused on invigorating the merchandise assortment, improving
inventory management to ensure we maintain a consistent flow of new
receipts, optimizing our real estate portfolio, creating an
exceptional and personalized guest experience, and growing our
ecommerce business. We will also continue to make strategic
investments to ensure we have the infrastructure in place to
achieve our long term growth objectives.’’
FOURTH QUARTER RESULTS
Net sales increased 9% to $146.3 million from
$134.6 million in the comparable prior year quarter. This
increase was due to the addition of 55 net new boutiques since the
prior year period and a 42% increase in ecommerce sales driven by
increased website traffic and conversion rate. Comparable
sales were flat compared to the same period last year as the
increase in average transaction value offset the decrease in
transactions. The Company opened five new boutiques and
closed three boutiques during the quarter, bringing the total count
to 671 at the end of the quarter.
Gross profit, as a percent of net sales, decreased
to 46.4% from 49.1% in the prior year quarter. This
unfavorable variance was principally due to the Company’s strategic
move to take accelerated markdowns in January, which included
marking some merchandise out-of-stock at the end of the year, in
order to enter fiscal year 2017 with clean inventories.
Selling, general and administrative expenses
increased 6% to $44.3 million from $42.0 million in the prior year
quarter. This increase was primarily due to higher boutique and
corporate payroll to support the larger boutique base as well as
increases in marketing and software costs, partially offset by
lower impairment charges. The increase in marketing expense was due
to the implementation of new marketing initiatives, while the
higher software costs were due to continuing investments in
technology and infrastructure.
Income from operations was $23.6 million, or 16.1%
of net sales, compared to $24.2 million, or 18.0% of net sales, in
the prior year quarter.
Net income for the fourth quarter was $14.6
million, or $0.39 diluted earnings per share, compared to $14.7
million, or $0.35 diluted earnings per share, in the comparable
prior year period.
FULL YEAR RESULTS
Net sales increased 11% to $487.2 million from
$439.4 million in the comparable prior year. This increase
was due a 2% increase in comparable sales as well as the addition
of 55 net new boutiques since the prior year end. Ecommerce
sales increased 42% driven by increased website traffic and
conversion rate.
During fiscal year 2016, the Company opened 64 new
boutiques and closed nine boutiques compared to 83 new boutiques
opened and six boutiques closed in fiscal year 2015.
Net income for fiscal year 2016 totaled $42.0
million, or $1.09 diluted earnings per share, compared to $38.2
million, or $0.91 diluted earnings per share, in the prior
year. Our results for fiscal year 2016 include a $2.0
million, or $0.03 per diluted share, net benefit associated with
the previously announced resignation of the Company’s former
Chairman, President and CEO.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the
quarter were $53.2 million compared to $56.2 million at the end of
the comparable prior year quarter. During the fourth quarter,
the Company repurchased 298,000 shares of its common stock at a
cost of $5.2 million, bringing the Company’s total year-to-date
repurchases to 3,804,000 shares at a cost of $53.2 million.
The Company ended the quarter with $24.0 million of
inventory on hand compared to $31.5 million at the end of the
comparable prior year period. Average ending inventory per
boutique decreased by 30% (14% decrease on a two-year stack basis)
versus the comparable prior year period principally due to improved
inventory management.
FIRST QUARTER AND FISCAL YEAR 2017
GUIDANCE
For the first quarter ending April 29, 2017, net
sales are expected to be in the range of $111 million to $114
million; assuming comparable sales will be in the low single digit
decrease to flat range compared to the prior year increase of 2%.
The Company plans to open approximately 15 new boutiques and close
approximately four existing boutiques during the first quarter.
Diluted earnings per share are expected to be in the range of $0.12
to $0.16.
For the fiscal year ending February 3, 2018, net
sales are expected to be in the range of $527 million to $543
million; assuming a flat to low-single digit increase in comparable
sales compared to the prior year increase of 2%. The Company
expects to open approximately 60 to 65 boutiques and close
approximately 10 to 15 boutiques in fiscal year 2017, compared to
64 new boutiques opened and nine boutiques closed in fiscal year
2016. Diluted earnings per share are expected to be in the
range of $1.11 to $1.21 compared to the prior year of $1.09.
The number of average diluted shares for the full year assumed in
guidance is 37.4 million shares. The effective tax rate is
estimated to be 38%.
Capital expenditures for fiscal year 2017 are
expected to be in the range of $28 million to $33 million.
Conference Call Information
A conference call to discuss the fourth quarter and
fiscal year 2016 results is scheduled for March 21, 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 March 28,
2017. To access the telephone replay, listeners should dial
1-844-512-2921. The access code for the replay is 4604086. 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; 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, as
well as “Risk Factors” in our Annual Report on Form 10-K for the
year ended January 28, 2017 that we will file with the SEC, 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 671 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 |
|
|
|
|
|
|
|
January 28, 2017 |
|
January 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 |
$ |
146,345 |
|
|
100.0 |
% |
|
$ |
134,605 |
|
|
100.0 |
% |
|
$ |
11,740 |
|
|
9 |
% |
|
- |
|
Cost of goods sold and
occupancy costs |
|
78,412 |
|
|
53.6 |
% |
|
|
68,468 |
|
|
50.9 |
% |
|
|
9,944 |
|
|
15 |
% |
|
270 |
|
Gross profit |
|
67,933 |
|
|
46.4 |
% |
|
|
66,137 |
|
|
49.1 |
% |
|
|
1,796 |
|
|
3 |
% |
|
(270 |
) |
Selling, general and
administrative expenses |
|
44,349 |
|
|
30.3 |
% |
|
|
41,965 |
|
|
31.2 |
% |
|
|
2,384 |
|
|
6 |
% |
|
(90 |
) |
Income from
operations |
|
23,584 |
|
|
16.1 |
% |
|
|
24,172 |
|
|
18.0 |
% |
|
|
(588 |
) |
|
(2 |
)% |
|
(190 |
) |
Interest expense |
|
(111 |
) |
|
(0.1 |
)% |
|
|
(113 |
) |
|
(0.1 |
)% |
|
|
2 |
|
|
(2 |
)% |
|
- |
|
Other income
(expense) |
|
29 |
|
|
0.0 |
% |
|
|
(60 |
) |
|
0.0 |
% |
|
|
89 |
|
|
148 |
% |
|
- |
|
Income before income
tax expense |
|
23,502 |
|
|
16.1 |
% |
|
|
23,999 |
|
|
17.8 |
% |
|
|
(497 |
) |
|
(2 |
)% |
|
(170 |
) |
Income tax expense |
|
8,867 |
|
|
6.1 |
% |
|
|
9,343 |
|
|
6.9 |
% |
|
|
(476 |
) |
|
(5 |
)% |
|
(80 |
) |
Net income |
$ |
14,635 |
|
|
10.0 |
% |
|
$ |
14,656 |
|
|
10.9 |
% |
|
$ |
(21 |
) |
|
0 |
% |
|
(90 |
) |
(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 |
$ |
0.39 |
|
|
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
37,383 |
|
|
|
|
|
41,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
0 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
January 28, 2017 |
|
January 30, 2016 |
|
Variance |
|
In USD |
|
As a % of Net Sales |
|
In USD |
|
As a % of Net Sales |
|
In USD |
|
% |
|
Basis Points |
Net sales |
$ |
487,188 |
|
|
100.0 |
% |
|
$ |
439,377 |
|
|
100.0 |
% |
|
$ |
47,811 |
|
|
11 |
% |
|
- |
|
Cost of goods sold and
occupancy costs |
|
258,561 |
|
|
53.1 |
% |
|
|
229,673 |
|
|
52.3 |
% |
|
|
28,888 |
|
|
13 |
% |
|
80 |
|
Gross profit |
|
228,627 |
|
|
46.9 |
% |
|
|
209,704 |
|
|
47.7 |
% |
|
|
18,923 |
|
|
9 |
% |
|
(80 |
) |
Selling, general and
administrative expenses |
|
160,702 |
|
|
33.0 |
% |
|
|
147,387 |
|
|
33.5 |
% |
|
|
13,315 |
|
|
9 |
% |
|
(50 |
) |
Income from
operations |
|
67,925 |
|
|
13.9 |
% |
|
|
62,317 |
|
|
14.2 |
% |
|
|
5,608 |
|
|
9 |
% |
|
(30 |
) |
Interest expense |
|
(464 |
) |
|
(0.1 |
)% |
|
|
(457 |
) |
|
(0.1 |
)% |
|
|
(7 |
) |
|
(2 |
)% |
|
- |
|
Other income
(expense) |
|
147 |
|
|
0.0 |
% |
|
|
(151 |
) |
|
0.0 |
% |
|
|
298 |
|
|
197 |
% |
|
- |
|
Income before income
tax expense |
|
67,608 |
|
|
13.9 |
% |
|
|
61,709 |
|
|
14.0 |
% |
|
|
5,899 |
|
|
10 |
% |
|
(10 |
) |
Income tax expense |
|
25,607 |
|
|
5.3 |
% |
|
|
23,557 |
|
|
5.4 |
% |
|
|
2,050 |
|
|
9 |
% |
|
(10 |
) |
Net income |
$ |
42,001 |
|
|
8.6 |
% |
|
$ |
38,152 |
|
|
8.7 |
% |
|
$ |
3,849 |
|
|
10 |
% |
|
(10 |
) |
(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 |
$ |
1.09 |
|
|
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
Weighted average
diluted share count |
|
38,551 |
|
|
|
|
|
42,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable sales
change |
|
2 |
% |
|
|
3 |
% |
|
|
|
|
|
|
Francesca’s Holdings Corporation |
Consolidated Balance Sheets |
(In thousands, except share and per share
amounts) |
|
|
|
January 28, |
|
|
January 30, |
|
|
|
2017 |
|
|
2016 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
53,202 |
|
|
$ |
56,224 |
|
Accounts
receivable |
|
|
5,605 |
|
|
|
9,580 |
|
Inventories |
|
|
23,958 |
|
|
|
31,541 |
|
Deferred
income taxes |
|
|
8,487 |
|
|
|
6,411 |
|
Prepaid
expenses and other current assets |
|
|
8,823 |
|
|
|
7,013 |
|
Total current
assets |
|
|
100,075 |
|
|
|
110,769 |
|
Property and equipment,
net |
|
|
80,484 |
|
|
|
77,894 |
|
Deferred income
taxes |
|
|
6,978 |
|
|
|
3,847 |
|
Other assets, net |
|
|
2,056 |
|
|
|
1,067 |
|
TOTAL ASSETS |
|
$ |
189,593 |
|
|
$ |
193,577 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
9,205 |
|
|
$ |
14,305 |
|
Accrued
liabilities |
|
|
25,761 |
|
|
|
16,328 |
|
Total current
liabilities |
|
|
34,966 |
|
|
|
30,633 |
|
Landlord incentives and
deferred rent |
|
|
38,092 |
|
|
|
36,552 |
|
Total liabilities |
|
|
73,058 |
|
|
|
67,185 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
Common
stock-$.01 par value, 80.0 million shares authorized, 46.1 million
and 45.9 million shares issued as of January 28, 2017 and January
30, 2016, respectively. |
|
|
461 |
|
|
|
459 |
|
Additional paid-in capital |
|
|
109,008 |
|
|
|
107,693 |
|
Retained
earnings |
|
|
143,557 |
|
|
|
101,556 |
|
Treasury
stock, at cost – 8.5 million and 4.8 million shares held at January
28, 2017 and January 30, 2016, respectively. |
|
|
(136,491 |
) |
|
|
(83,316 |
) |
Total stockholders’
equity |
|
|
116,535 |
|
|
|
126,392 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
189,593 |
|
|
$ |
193,577 |
|
Francesca’s Holdings Corporation |
Consolidated Statements of Cash Flows |
(In thousands) |
|
|
|
Fiscal Year Ended |
|
|
|
January 28, |
|
|
January 30, |
|
|
January 31, |
|
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|
Cash Flows Provided by
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
42,001 |
|
|
$ |
38,152 |
|
|
$ |
32,108 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
19,337 |
|
|
|
16,816 |
|
|
|
13,151 |
|
|
Stock-based compensation expense |
|
|
1,016 |
|
|
|
2,932 |
|
|
|
2,668 |
|
|
Excess
tax benefit from stock-based compensation |
|
|
(34 |
) |
|
|
(236 |
) |
|
|
(309 |
) |
|
Impairment charges |
|
|
141 |
|
|
|
790 |
|
|
|
2,470 |
|
|
Loss on
disposal of assets |
|
|
407 |
|
|
|
487 |
|
|
|
364 |
|
|
Amortization of debt issuance costs |
|
|
245 |
|
|
|
245 |
|
|
|
245 |
|
|
Deferred
income taxes |
|
|
(5,411 |
) |
|
|
(3,226 |
) |
|
|
(1,600 |
) |
|
Changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
3,975 |
|
|
|
2,935 |
|
|
|
(2,986 |
) |
|
Inventories |
|
|
7,583 |
|
|
|
(7,740 |
) |
|
|
813 |
|
|
Prepaid
expenses and other assets |
|
|
(3,160 |
) |
|
|
(524 |
) |
|
|
373 |
|
|
Accounts
payable |
|
|
(4,936 |
) |
|
|
4,137 |
|
|
|
(363 |
) |
|
Accrued
liabilities |
|
|
9,467 |
|
|
|
4,424 |
|
|
|
2,081 |
|
|
Landlord
incentives and deferred rent |
|
|
1,540 |
|
|
|
3,675 |
|
|
|
5,429 |
|
|
Net cash provided by
operating activities |
|
|
72,171 |
|
|
|
62,867 |
|
|
|
54,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment |
|
|
(21,852 |
) |
|
|
(24,276 |
) |
|
|
(24,255 |
) |
|
Other |
|
|
8 |
|
|
|
12 |
|
|
|
13 |
|
|
Net cash used in
investing activities |
|
|
(21,844 |
) |
|
|
(24,264 |
) |
|
|
(24,242 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
(53,853 |
) |
|
|
(22,185 |
) |
|
|
(5,270 |
) |
|
Proceeds
from the exercise of stock options |
|
|
512 |
|
|
|
499 |
|
|
|
1,332 |
|
|
Excess
tax benefit from stock-based compensation |
|
|
34 |
|
|
|
236 |
|
|
|
309 |
|
|
Taxes
paid related to net settlement of equity awards |
|
|
(42 |
) |
|
|
- |
|
|
|
- |
|
|
Repayment
of borrowings under the revolving credit facility |
|
|
- |
|
|
|
- |
|
|
|
(25,000 |
) |
|
Net cash used in
financing activities |
|
|
(53,349 |
) |
|
|
(21,450 |
) |
|
|
(28,629 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents |
|
|
(3,022 |
) |
|
|
17,153 |
|
|
|
1,573 |
|
|
Cash and cash
equivalents, beginning of year |
|
|
56,224 |
|
|
|
39,071 |
|
|
|
37,498 |
|
|
Cash and cash
equivalents, end of year |
|
$ |
53,202 |
|
|
$ |
56,224 |
|
|
$ |
39,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
for income taxes |
|
$ |
19,324 |
|
|
$ |
23,958 |
|
|
$ |
24,088 |
|
|
Interest
paid |
|
$ |
192 |
|
|
$ |
190 |
|
|
$ |
388 |
|
|
Francesca’s Holdings
CorporationSupplemental Information
Quarterly Sales by Merchandise Category |
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
January 28, 2017 |
|
January 30, 2016 |
|
Variance |
|
In USD |
|
As a % of Sales |
|
|
In USD |
|
As a % of Sales |
|
In Dollars |
|
% |
|
(in thousands, except
percentages) |
Apparel |
$ |
60,677 |
|
41.5 |
% |
|
$ |
53,434 |
|
39.7 |
% |
|
$ |
7,243 |
|
|
14 |
% |
Jewelry |
|
34,069 |
|
23.3 |
% |
|
|
29,658 |
|
22.0 |
% |
|
|
4,411 |
|
|
15 |
% |
Accessories |
|
24,865 |
|
17.0 |
% |
|
|
24,283 |
|
18.0 |
% |
|
|
582 |
|
|
2 |
% |
Gifts |
|
25,834 |
|
17.6 |
% |
|
|
26,615 |
|
19.8 |
% |
|
|
(781 |
) |
|
(3 |
)% |
Merchandise sales |
|
145,445 |
|
99.4 |
% |
|
|
133,990 |
|
99.5 |
% |
|
|
11,455 |
|
|
9 |
% |
Others(1) |
|
900 |
|
0.6 |
% |
|
|
615 |
|
0.5 |
% |
|
|
285 |
|
|
46 |
% |
Net sales |
$ |
146,345 |
|
100.0 |
% |
|
$ |
134,605 |
|
100.0 |
% |
|
$ |
11,740 |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
0 |
% |
|
11 |
% |
|
1 |
% |
Fiscal year |
2 |
% |
|
3 |
% |
|
(5 |
)% |
Boutique Count |
|
|
Fiscal Year EndedJanuary 28,
2017 |
|
Fiscal Year EndedJanuary 30,
2016 |
|
Fiscal Year EndedJanuary 31,
2015 |
Number of boutiques
open at the beginning of period |
616 |
|
539 |
|
451 |
Boutiques opened |
64 |
|
83 |
|
88 |
Boutiques closed |
(9 |
) |
(6 |
) |
- |
Number of boutiques
open at the end of period |
671 |
|
616 |
|
539 |
CONTACT:
ICR, Inc.
Jean Fontana
646-277-1214
Company
Kelly Dilts 832-494-2236
Kate Venturina 832-494-2233
IR@francescas.com
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