Francesca's Conference Call Highlights; Shares Plummet
Shares of Francesca's (NASDAQ: 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.
• 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.
• 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.
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