- Diluted earnings per share were $0.26 for the third quarter compared to $0.16 last year, a 63% increase
- Company raises fiscal 2016 sales and diluted earnings per share outlook to $1.03 to $1.07
HOUSTON, Dec. 06, 2016 (GLOBE NEWSWIRE) -- Francesca’s Holdings Corporation (NASDAQ: FRAN ) today reported financial results for the third quarter ended October 29, 2016.
Steve Lawrence, President and CEO stated, “We are very pleased with our third quarter results, as we achieved double digit growth in sales and EPS exceeded our expectations. Our strong performance was the result of a 7% comparable sales increase as well as better than expected gross profit margin and operating margin. We had a good start to the quarter with a successful back-to-school season and the strong trends continued in September and October as our merchandise and boutique experience resonated well with our guests. Looking ahead, we will continue to execute on our strategic initiatives and believe we are well-positioned for a successful holiday season and beyond.”
THIRD QUARTER RESULTS
Net sales increased 15% to $119.5 million from $103.7 million in the comparable prior year quarter. This was due to a 7% increase in comparable sales primarily driven by an increase in the number of transactions both at boutiques and on-line as well as the addition of 50 net new boutiques since the prior year quarter. The Company opened 18 boutiques and closed one boutique during the quarter, bringing the total boutique count to 669 at the end of the quarter. Ecommerce comparable sales increased 47% to $5.7 million driven by increased website traffic and conversion rate.
Gross profit, as a percent of net sales, increased to 48.2% from 46.6% in the prior year quarter. This increase was attributable to 40 basis points of higher merchandise margin and 120 basis points of occupancy costs leverage. The increase in merchandise margin was mostly due to favorable mix change and lower markdowns compared to the prior year quarter.
Selling, general and administrative expenses increased 12% to $41.9 million from $37.3 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll, professional fees, software costs and depreciation compared to the prior year quarter. The increase in boutique payroll was due to the larger boutique base while the remaining increases were due to investments in strategic initiatives, including technology and infrastructure.
Income from operations was $15.8 million, or 13.2% of net sales, compared to $11.1 million, or 10.7% of net sales, in the prior year quarter.
Diluted earnings per share was $0.26 for the quarter, a 63% increase over prior year’s third quarter diluted earnings per share of $0.16. Diluted earnings per share was also higher than the Company’s guidance of $0.16 to $0.19 due to the impact of higher sales and a better than expected gross margin rate as well as an approximately $0.03 per share favorable impact related to a shift in timing primarily of marketing and point-of-sale implementation expenses which the Company now expects to incur in the fourth quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were $24.7 million compared to $42.0 million at the end of the comparable prior year quarter. During the third quarter, the Company repurchased 263,000 shares of its common stock at a cost of $4.2 million, bringing the Company’s total year-to-date repurchases to 3,506,000 shares at a cost of $48.0 million.
The Company ended the quarter with $42.8 million of inventory on hand compared to $43.9 million at the end of the comparable prior year period. Average ending inventory per boutique decreased by 10% versus the comparable prior year period.
FOURTH QUARTER AND FISCAL YEAR 2016 GUIDANCE
For the fourth quarter ending January 28, 2017, net sales are expected to be in the range of $143 million to $148 million; assuming comparable sales will be in the low single digit decrease to low single digit increase range compared to the prior year increase of 11%. The Company plans to open five new boutiques and close three boutiques during the fourth quarter. Diluted earnings per share are expected to be in the range of $0.33 to $0.37 and includes approximately $0.03 of expense due to a timing shift from third quarter to fourth quarter.
For the full year ending January 28, 2017, the Company now expects net sales to be in the range of $484 million to $489 million; assuming a low-single digit increase in comparable sales compared to the prior year increase of 3%. The Company expects to open 64 boutiques and close nine boutiques in fiscal year 2016, compared to 83 new boutiques opened and six boutiques closed in fiscal year 2015. Diluted earnings per share are now expected to be in the range of $1.03 to $1.07 compared to the previous guidance of $0.96 to $1.03. This guidance includes a $0.03 per share benefit associated with the previously announced resignation of the Company’s former Chairman, President and Chief Executive Officer. The number of average diluted shares for the full year assumed in guidance is 38.6 million shares. The effective tax rate is estimated to be 37.9%.
Capital expenditures for fiscal year 2016 are expected to be in the range of $25.0 million to $28.0 million.
Conference Call Information
A conference call to discuss the third quarter fiscal year 2016 results is scheduled for December 6, 2016, at 8:30 a.m. ET. A live webcast 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 December 13, 2016. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 6784722. 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 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 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 674 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 | |||||||||||||||||||||||||||
| October 29, 2016 | October 31, 2015 | Variance | |||||||||||||||||||||||||
| In USD | As a % of Net Sales (1) | In USD | As a % of Net Sales (1) | In USD | % | Basis Points | |||||||||||||||||||||
| Net sales | $ | 119,470 | 100.0 | % | $ | 103,728 | 100.0 | % | $ | 15,742 | 15 | % | - | ||||||||||||||
| Cost of goods sold and occupancy costs | 61,843 | 51.8 | % | 55,362 | 53.4 | % | 6,481 | 12 | % | (160 | ) | ||||||||||||||||
| Gross profit | 57,627 | 48.2 | % | 48,366 | 46.6 | % | 9,261 | 19 | % | 160 | |||||||||||||||||
| Selling, general and administrative expenses | 41,872 | 35.0 | % | 37,286 | 35.9 | % | 4,586 | 12 | % | (90 | ) | ||||||||||||||||
| Income from operations | 15,755 | 13.2 | % | 11,080 | 10.7 | % | 4,675 | 42 | % | 250 | |||||||||||||||||
| Interest expense | (131 | ) | (0.1 | )% | (122 | ) | (0.1 | )% | (9 | ) | (7 | )% | - | ||||||||||||||
| Other income | 79 | 0.1 | % | 29 | 0.0 | % | 50 | 172 | % | 10 | |||||||||||||||||
| Income before income tax expense | 15,703 | 13.1 | % | 10,987 | 10.6 | % | 4,716 | 43 | % | 250 | |||||||||||||||||
| Income tax expense | 6,009 | 5.0 | % | 4,036 | 3.9 | % | 1,973 | 49 | % | 110 | |||||||||||||||||
| Net income | $ | 9,694 | 8.1 | % | $ | 6,951 | 6.7 | % | $ | 2,743 | 39 | % | 140 | ||||||||||||||
| (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 | $ | 0.26 | $ | 0.16 | |||||||||||||||||||||||
| Weighted average diluted share count | 37,675 | 42,246 | |||||||||||||||||||||||||
| Comparable sales change | 7 | % | 4 | % | |||||||||||||||||||||||
| Thirty-Nine Weeks Ended | |||||||||||||||||||||||||||
| October 29, 2016 | October 31, 2015 | Variance | |||||||||||||||||||||||||
| In USD | As a % of Net Sales (1) | In USD | As a % of Net Sales (1) | In USD | % | Basis Points | |||||||||||||||||||||
| Net sales | $ | 340,843 | 100.0 | % | $ | 304,772 | 100.0 | % | $ | 36,071 | 12 | % | - | ||||||||||||||
| Cost of goods sold and occupancy costs | 180,149 | 52.9 | % | 161,205 | 52.9 | % | 18,944 | 12 | % | - | |||||||||||||||||
| Gross profit | 160,694 | 47.1 | % | 143,567 | 47.1 | % | 17,127 | 12 | % | - | |||||||||||||||||
| Selling, general and administrative expenses | 116,353 | 34.1 | % | 105,422 | 34.6 | % | 10,931 | 10 | % | (50 | ) | ||||||||||||||||
| Income from operations | 44,341 | 13.0 | % | 38,145 | 12.5 | % | 6,196 | 16 | % | 50 | |||||||||||||||||
| Interest expense | (353 | ) | (0.1 | )% | (344 | ) | (0.1 | )% | (9 | ) | (3 | )% | - | ||||||||||||||
| Other income (expense) | 118 | 0.0 | % | (91 | ) | 0.0 | % | 209 | 230 | % | - | ||||||||||||||||
| Income before income tax expense | 44,106 | 12.9 | % | 37,710 | 12.4 | % | 6,396 | 17 | % | 50 | |||||||||||||||||
| Income tax expense | 16,740 | 4.9 | % | 14,214 | 4.7 | % | 2,526 | 18 | % | 20 | |||||||||||||||||
| Net income | $ | 27,366 | 8.0 | % | $ | 23,496 | 7.7 | % | $ | 3,870 | 16 | % | 30 | ||||||||||||||
| (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 | $ | 0.70 | $ | 0.55 | |||||||||||||||||||||||
| Weighted average diluted share count | 38,945 | 42,365 | |||||||||||||||||||||||||
| Comparable sales change | 3 | % | (1 | )% | |||||||||||||||||||||||
Francesca’s Holdings Corporation Consolidated Balance Sheets (In thousands, except share and per share amounts)
| October 29, | January 30, | October 31, | ||||||||||
| 2016 | 2016 | 2015 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 24,725 | $ | 56,224 | $ | 42,015 | ||||||
| Accounts receivable | 8,218 | 9,580 | 8,683 | |||||||||
| Inventories | 42,774 | 31,541 | 43,885 | |||||||||
| Deferred income taxes | 5,709 | 6,411 | 5,737 | |||||||||
| Prepaid expenses and other current assets | 7,745 | 7,013 | 6,023 | |||||||||
| Total current assets | 89,171 | 110,769 | 106,343 | |||||||||
| Property and equipment, net | 82,992 | 77,894 | 79,017 | |||||||||
| Deferred income taxes | 4,425 | 3,847 | 6,659 | |||||||||
| Other assets, net | 1,370 | 1,067 | 1,656 | |||||||||
| TOTAL ASSETS | $ | 177,958 | $ | 193,577 | $ | 193,675 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 16,550 | $ | 14,305 | $ | 15,933 | ||||||
| Accrued liabilities | 16,629 | 16,328 | 14,817 | |||||||||
| Total current liabilities | 33,179 | 30,633 | 30,750 | |||||||||
| Landlord incentives and deferred rent | 38,821 | 36,552 | 37,540 | |||||||||
| Total liabilities | 72,000 | 67,185 | 68,290 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock - $.01 par value, 80.0 million shares authorized; 46.1 million, 45.9 million and 45.5 million shares issued at October 29, 2016, January 30, 2016 and October 31, 2015, respectively. | 461 | 459 | 455 | |||||||||
| Additional paid-in capital | 107,908 | 107,693 | 106,722 | |||||||||
| Retained earnings | 128,922 | 101,556 | 86,900 | |||||||||
| Treasury stock, at cost – 8.3 million, 4.8 million and 3.8 million shares held at October 29, 2016, January 30, 2016 and October 31, 2015, respectively. | (131,333 | ) | (83,316 | ) | (68,692 | ) | ||||||
| Total stockholders’ equity | 105,958 | 126,392 | 125,385 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 177,958 | $ | 193,577 | $ | 193,675 | ||||||
Francesca’s Holdings Corporation Consolidated Statements of Cash Flows (In thousands)
| Thirty-Nine Weeks Ended | ||||||||
| October 29, 2016 | October 31, 2015 | |||||||
| Cash Flows Provided by Operating Activities: | ||||||||
| Net income | $ | 27,366 | $ | 23,496 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 14,415 | 12,361 | ||||||
| Stock-based compensation expense | 18 | 2,416 | ||||||
| Excess tax benefit from stock-based compensation | (2 | ) | (81 | ) | ||||
| Impairment charges | 66 | - | ||||||
| Loss on sale of assets | 265 | 360 | ||||||
| Deferred income taxes | (81 | ) | (5,374 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 1,364 | 3,677 | ||||||
| Inventories | (11,233 | ) | (20,084 | ) | ||||
| Prepaid expenses and other assets | (1,294 | ) | (66 | ) | ||||
| Accounts payable | 2,015 | 6,086 | ||||||
| Accrued liabilities | 301 | 2,913 | ||||||
| Landlord incentives and deferred rent | 2,269 | 4,663 | ||||||
| Net cash provided by operating activities | 35,469 | 30,367 | ||||||
| Cash Flows Used in Investing Activities: | ||||||||
| Purchases of property and equipment | (18,666 | ) | (19,850 | ) | ||||
| Other | 8 | 12 | ||||||
| Net cash used in investing activities | (18,658 | ) | (19,838 | ) | ||||
| Cash Flows Used in Financing Activities: | ||||||||
| Repurchases of common stock | (48,715 | ) | (7,872 | ) | ||||
| Proceeds from the exercise of stock options | 403 | 206 | ||||||
| Excess tax benefit from stock-based compensation | 2 | 81 | ||||||
| Net cash used in financing activities | (48,310 | ) | (7,585 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (31,499 | ) | 2,944 | |||||
| Cash and cash equivalents, beginning of year | 56,224 | 39,071 | ||||||
| Cash and cash equivalents, end of period | $ | 24,725 | $ | 42,015 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | 13,014 | $ | 14,909 | ||||
| Interest paid | $ | 143 | $ | 142 | ||||
Francesca’s Holdings Corporation Supplemental Information
| Quarterly Sales by Merchandise Category | |||||||||||||||||||||
| Thirteen Weeks Ended | |||||||||||||||||||||
| October 29, 2016 | October 31, 2015 | Variance | |||||||||||||||||||
| In Dollars | As a % of Sales | In Dollars | As a % of Sales | In Dollars | % | ||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||
| Apparel | $ | 63,926 | 53.5 | % | $ | 54,326 | 52.4 | % | $ | 9,600 | 18 | % | |||||||||
| Jewelry | 26,143 | 21.9 | % | 21,265 | 20.5 | % | 4,878 | 23 | % | ||||||||||||
| Accessories | 17,433 | 14.6 | % | 17,078 | 16.5 | % | 355 | 2 | % | ||||||||||||
| Gifts | 11,638 | 9.7 | % | 10,847 | 10.4 | % | 791 | 7 | % | ||||||||||||
| Merchandise sales | 119,140 | 99.7 | % | 103,516 | 99.8 | % | 15,624 | 15 | % | ||||||||||||
| Others (1) | 330 | 0.3 | % | 212 | 0.2 | % | 118 | 56 | % | ||||||||||||
| Net sales | $ | 119,470 | 100.0 | % | $ | 103,728 | 100.0 | % | $ | 15,742 | 15 | % | |||||||||
| (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 | 11 | % | 1 | % | |||||||
| Fiscal year | 3 | % | (5 | )% | |||||||
| Boutique Count | |||||
| Thirty-Nine Weeks Ended | Fiscal Year Ended | Thirty-Nine Weeks Ended | |||
| October 29, 2016 | January 30, 2016 | October 31, 2015 | |||
| Number of boutiques open at the beginning of period | 616 | 539 | 539 | ||
| Boutiques opened | 59 | 83 | 80 | ||
| Boutiques closed | (6 | ) | (6 | ) | - |
| Number of boutiques open at the end of period | 669 | 616 | 619 | ||
CONTACT: ICR, Inc. Jean Fontana 646-277-1214 Company Kelly Dilts 832-494-2236 Kate Venturina 832-494-2233 IR@francescas.com
