FRANCESCA'S HOLDINGS CORP - Net sales increased 11% to $95.0 million
- Comparable sales decreased 2%
- Diluted earnings per share was $0.17
- Opened 50 boutiques during the quarter
HOUSTON, June 10, 2015 (GLOBE NEWSWIRE) -- Francesca's Holdings Corporation (Nasdaq:FRAN) today reported financial results for the first quarter ended May 2, 2015.
Michael W. Barnes, Chairman, President, and CEO stated, "We delivered on our top and bottom line objectives during the first quarter. Merchandise margins rose slightly above last year's rate and ending inventory per boutique was down 5% compared to last year. We had continued strong performance in our non-apparel departments and our new boutiques are opening above last year's sales levels. While we did see some bright spots in apparel, particularly in dresses around the Easter holiday, we believe that it will take time to achieve positive comparable results in this business."
Mr. Barnes noted that, "Looking ahead, we are maintaining our prior financial guidance for fiscal year 2015. Improving comparable sales is our number one priority. We continue to be focused on maintaining the right levels and composition of inventory and taking a disciplined approach to managing promotional activity and merchandise margins. I continue to be enthusiastic about the long-term prospects of francesca's and want to thank our associates for their hard work and dedication."
FIRST QUARTER RESULTS
Net sales increased 11% to $95.0 million from $85.4 million in the comparable prior year period. This increase was driven by 76 new boutiques opened since the comparable prior year quarter. We opened 50 boutiques during the quarter bringing our total boutique count to 589 at the end of the first quarter.
Our comparable sales decreased 2% due to lower boutique transaction count as compared to last year but was partially offset by a 19% increase in DTC sales. The increase in DTC sales was driven by increased traffic and conversion rates.
Gross profit, as a percentage of net sales, decreased to 47.3% from 49.0% in the prior year quarter. This decrease is attributable to 180 basis points of deleveraging of occupancy costs partially offset by 10 basis points improvement in merchandise margin. Our merchandise margin improved due to lesser promotions and markdowns compared to last year but was partially offset by disposal of certain slow-moving inventory.
Selling, general and administrative expenses ("SG&A") increased 19% to $33.0 million from $27.8 million in the prior year quarter. The increase in SG&A expenses is primarily due to higher boutique and corporate payroll expenses to support the larger boutique base.
Income from operations was $11.9 million, or 12.5% of net sales, compared to $14.0 million, or 16.4% of net sales, in the prior year quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were $46.1 million compared to $25.4 million at the end of the comparable prior year quarter.
We ended the quarter with $31.4 million of inventory on hand compared to $28.8 million at the comparable prior year period. Average ending inventory per boutique decreased by 5% versus the comparable prior year period.
SECOND QUARTER AND FISCAL YEAR 2015 GUIDANCE
For the second quarter ending August 1, 2015, net sales are expected to be in the range of $104.0 million to $107.0 million; assuming a mid to low single digit decrease in comparable sales compared to the prior year comparable sales decrease of 7%. The Company plans to open 20 new boutiques during the second quarter. Diluted earnings per share are expected to be in the range of $0.20 to $0.23.
For the full year ending January 30, 2016, we are maintaining our previous financial guidance. We expect net sales to be in the range of $412.0 million and $424.0 million; assuming a flat to low single digit decrease in comparable sales compared to a prior year comparable sales decrease of 5%. The Company expects to open approximately 80 to 85 boutiques in fiscal year 2015 compared to 88 new boutiques opened in fiscal year 2014. Diluted earnings per share are expected to be in the range of $0.81 to $0.90. The number of average diluted shares for the full year assumed in guidance is expected to be 42.4 million shares. The effective tax rate is estimated to be 38.1%.
Capital expenditures for fiscal year 2015 are expected to be in the range of $30.0 million to $32.0 million.
Conference Call Information
A conference call to discuss the first quarter fiscal year 2015 results is scheduled for June 10, 2015, at 8:30 a.m. ET. A live web cast 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 June 17, 2015. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 9068887. 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 direct-to-consumer 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 31, 2015 filed with the Securities and Exchange Commission on March 27, 2015 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 with retail locations designed and merchandised to feel like unique, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 597 boutiques in 47 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 and Percentages) | |||||||
| Thirteen Weeks Ended | |||||||
| May 2, 2015 | May 3, 2014 | Variance | |||||
| In USD | As a % of Net Sales(1) | In USD | As a % of Net Sales(1) | In USD | % | Basis Points | |
| Net sales | $ 95,011 | 100.0 % | $ 85,424 | 100.0 % | $ 9,587 | 11 % | -- |
| Cost of goods sold and occupancy costs | 50,118 | 52.7 % | 43,592 | 51.0 % | 6,526 | 15 % | 170 |
| Gross profit | 44,893 | 47.3 % | 41,832 | 49.0 % | 3,061 | 7 % | (170) |
| Selling, general and administrative expenses | 33,003 | 34.7 % | 27,812 | 32.6 % | 5,191 | 19 % | 210 |
| Income from operations | 11,890 | 12.5 % | 14,020 | 16.4 % | (2,130) | (15)% | (390) |
| Interest expense | (110) | (0.1)% | (221) | (0.3)% | 111 | 50 % | 20 |
| Other income | (66) | (0.1)% | 103 | 0.1 % | (169) | (164)% | (20) |
| Income before income tax expense | 11,714 | 12.3 % | 13,902 | 16.3 % | (2,188) | (16)% | (400) |
| Income tax expense | 4,473 | 4.7 % | 5,342 | 6.3 % | (869) | (16)% | (160) |
| Net income | $ 7,241 | 7.6 % | $ 8,560 | 10.0 % | $ (1,319) | (15)% | (240) |
| (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 | $ 0.17 | $ 0.20 | |||||
| Weighted average diluted share count | 42,418 | 42,362 | |||||
| Comparable sales change | (2)% | (7)% | |||||
| Francesca's Holdings Corporation | |||
| Consolidated Balance Sheets | |||
| (In thousands, except share amounts) | |||
| May 2, 2015 | January 31, 2015 | May 3, 2014 | |
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 46,119 | $ 39,071 | $ 25,413 |
| Accounts receivable | 11,858 | 12,279 | 10,822 |
| Inventories | 31,395 | 23,801 | 28,779 |
| Deferred income taxes | 5,288 | 4,858 | 4,643 |
| Prepaid expenses and other current assets | 5,547 | 5,890 | 6,179 |
| Total current assets | 100,207 | 85,899 | 75,836 |
| Property and equipment, net | 77,114 | 74,095 | 69,799 |
| Deferred income taxes | 3,623 | 3,642 | 3,113 |
| Other assets, net | 1,731 | 1,909 | 1,724 |
| TOTAL ASSETS | $ 182,675 | $ 165,545 | $ 150,472 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||
| Current liabilities: | |||
| Accounts payable | $ 16,280 | $ 11,550 | $ 9,758 |
| Accrued liabilities | 13,699 | 11,904 | 9,640 |
| Total current liabilities | 29,979 | 23,454 | 19,398 |
| Landlord incentives and deferred rent | 36,739 | 32,877 | 32,333 |
| Long-term debt | -- | -- | 15,000 |
| Total liabilities | 66,718 | 56,331 | 66,731 |
| Commitments and contingencies | |||
| Stockholders' equity: | |||
| Common stock - $.01 par value, 80.0 million shares authorized; 45.5 million, 45.5 million and 45.4 million shares issued at May 2, 2015, January 31, 2015 and May 3, 2014, respectively. | 455 | 455 | 454 |
| Additional paid-in capital | 105,000 | 105,498 | 103,574 |
| Retained earnings | 70,645 | 63,404 | 39,856 |
| Treasury stock, at cost - 3.2 million shares held at each of May 2, 2015, January 31, 2015 and May 3, 2014. | (60,143) | (60,143) | (60,143) |
| Total stockholders' equity | 115,957 | 109,214 | 83,741 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 182,675 | $ 165,545 | $ 150,472 |
| Francesca's Holdings Corporation | ||
| Consolidated Statements of Cash Flows | ||
| (In thousands) | ||
| Thirteen Weeks Ended | ||
| May 2, 2015 | May 3, 2014 | |
| Cash Flows From Operating Activities: | ||
| Net income | $ 7,241 | $ 8,560 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 3,822 | 3,043 |
| Stock-based compensation expense | 793 | 832 |
| Excess tax benefit from stock-based compensation | (64) | (581) |
| Loss on sale of assets | 128 | 17 |
| Deferred income taxes | (1,875) | (855) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 485 | (1,256) |
| Inventories | (7,594) | (4,164) |
| Prepaid expenses and other assets | 460 | 453 |
| Accounts payable | 6,543 | (1,039) |
| Accrued liabilities | 1,795 | (185) |
| Landlord incentive and deferred rent | 3,862 | 4,885 |
| Net cash provided by operating activities | 15,596 | 9,710 |
| Cash Flows Used in Investing Activities: | ||
| Purchase of property and equipment | (8,721) | (8,078) |
| Net cash used in investing activities | (8,721) | (8,078) |
| Cash Flows Provided by (Used in) Financing Activities: | ||
| Proceeds from the exercise of stock options | 109 | 972 |
| Excess tax benefit from stock-based compensation | 64 | 581 |
| Repayments of borrowings under the revolving credit facility | -- | (10,000) |
| Repurchases of common stock | -- | (5,270) |
| Net cash provided by (used in) financing activities | 173 | (13,717) |
| Net increase (decrease) in cash and cash equivalents | 7,048 | (12,085) |
| Cash and cash equivalents, beginning of year | 39,071 | 37,498 |
| Cash and cash equivalents, end of period | $ 46,119 | $ 25,413 |
| Supplemental Disclosures of Cash Flow Information: | ||
| Cash paid for income taxes | $ 1,763 | $ 459 |
| Interest paid | $ 47 | $ 181 |
| Francesca's Holdings Corporation | ||||
| Supplemental Information | ||||
| Quarterly Sales by Merchandise Category | ||||
| Thirteen Weeks Ended | Variance | |||
| May 2, 2015 | May 3, 2014 | In Dollars | % | |
| (in thousands, except percentages) | ||||
| Apparel | $ 48,170 | $ 44,764 | $ 3,406 | 8 % |
| Jewelry | 21,972 | 18,321 | 3,651 | 20 % |
| Accessories | 15,379 | 14,144 | 1,235 | 9 % |
| Gifts | 9,837 | 8,399 | 1,438 | 17 % |
| Merchandise Sales | 95,358 | 85,628 | 9,730 | 11 % |
| Others(1) | (347) | (204) | (143) | (70)% |
| Net sales | $ 95,011 | $ 85,424 | $ 9,587 | 11 % |
| (1) Includes gift card breakage income, shipping and change in return reserve. | ||||
| Quarterly Comparable Transactions Results for Fiscal Year 2015 | |||
| Transactions(1) | Average Transaction Value(2) | ||
| Q1 | (5)% | 3% | |
| (1) The number of comparable transactions (including merchandise and gift card purchases, returns and gift card redemptions) processed through our point-of-sale system for which a receipt was issued. | |||
| (2) Average transaction value is calculated by dividing total comparable sales by the number of comparable transactions during the period. | |||
| Quarterly Comparable Sales | |||
| FY 2013 | FY 2014 | FY 2015 | |
| Q1 | 2 % | (7)% | (2)% |
| Q2 | (1)% | (7)% | |
| Q3 | (3)% | (6)% | |
| Q4 | (6)% | 1 % | |
| Fiscal year | (2)% | (5)% | |
CONTACT: ICR, Inc.
Jean Fontana
646-277-1214
Company
Mark Vendetti
832-494-2315
Mark.Vendetti@francescas.com / IR@francescas.com
