Francesca's Conference Call Highlights; Shares Plummet

Shares of Francesca's FRAN traded down 11 percent following its first quarter earnings release on Tuesday. Shares are down 28 percent year-to-date.

Below are some highlights and key takeaways from its conference call:

Growth, Sales, and Expansion:

• Sales growth this past quarter, from our new and non-comparable boutique sales and direct-to-consumer initiatives, contribute incremental total year-over-year growth of 16 percent.

• We opened 62 new boutiques this quarter

• Expanded footprint to 513 locations nationwide including five new outlets

• We expect new boutiques of 2014 will meet our thresholds for sales productivity

• Our comparable boutiques offset a significant amount of that growth with comps being down seven percent in the quarter.

• Although we had expected this quarter to be challenging, from a comparable sales perspective, the rate of decline was at the lower end of our expected ranges.

• This is the second consecutive quarter of decreasing comp sales.

• Apparel business improved remarkably in April and May as the weather turned warmer and driven by strong customer response to our separates categories, kimonos, tank, shorts and unstructured bottom specifically.

• The retail environment has been challenging since the beginning of the calendar year with soft traffic trends and competitively aggressive promotions.

• Total company net sales for the first quarter increased eight percent to $85.4 million.

• Comparable sales decreased seven percent.

• April comp was positive.

• Seven percent decrease in comparable transaction counts and a flat average transaction size.

• We had severe weather effects in the early part of the quarter with February experiencing over 360 partial or full boutique closings.

• This impacted comparable sales performance for the quarter by approximately two percentage points.

• We saw our business strengthen in April but not to the degree, which would have delivered to the upper end of our guidance.

• Store closures happened primarily across southern, northeast, and central geographic regions.
Jewelry Trends:

• We continue to be impacted by the lack of a strong global trend in jewelry category.

• Jewelry constrained overall comparable sales by approximately 400 basis points in the first quarter.

• We did see jewelry statements begin to emerge toward the end of the first quarter.

• We believe we can begin to start to deliver flat to positive jewelry comps starting in the third quarter.

• We have actively chasing new styles which began to arrive in early June.

• Our customer demographic tends to respond best to well-edited assortments, newness and lower price point items with a higher perceived value.

• Although motivated, she is not heavily interested in clearance.

• We believe this along with additional sales, service and visual merchandise training will foster an elevated customer experience.

• This will also increase traffic conversion in its boutiques.

Financials:

• Income from operations was $14 million with operating profit margin of 16.4 percent.

• Income from operations of $18 million with an operating profit margin of 22.8 percent year before.

• The company paid down $10 million of outstanding debt and has $15 million outstanding.

• The company repurchased approximately 300,000 shares of the company's common stock for $5.3 million at an average price of $18.49.

• Net sales expected at $98 million and $103 million, an increase of nine percent to 15 percent over the prior year period.

• Net earnings per diluted share expected at $0.24 to $0.29 compared to second quarter 2013 earnings per diluted share of $0.33.

• We plan to open approximately 85 new boutiques during the year and 60 percent of those will be mall-based.

• Plan to remodel approximately 50 boutiques during the fiscal year.