UPDATE: Francesca's Posts Downbeat Q1 Results, Lowers Forecast

Shares of Francesca's Holdings

dropped around 10% in pre-market trading after the company reported downbeat Q1 results and issued a weak outlook. Francesca's posted a quarterly profit of $8.6 million, or $0.20 per share, versus a year-ago profit of $10.9 million, or $0.24 per share. Its sales rose 8% to $85.4 million, driven by 62 new boutiques opened during the quarter. The company had expected earnings of $0.20 to $0.24 per share on net sales of $85 million to $90 million. Francesca's comparable-store sales fell 7%, while gross margin declined to 49% from 52.4%. Total apparel merchandise sales rose 12%, while total non-apparel merchandise sales gained 5%. Neill P. Davis, the Company's Chief Executive Officer and President said, "Total sales growth of 8% to $85.4 million was driven by the strength of our new and non-comparable boutique sales and direct-to-consumer initiatives, contributing to incremental year over year growth of 16%. Our new boutiques continue to open strong and are meeting our expectations of payback periods of less than one year. Declining sales within our comparable boutiques partially offset these gains and were a reflection of decreases in boutique transactions, which has limited the effectiveness of our merchandise clearance strategies through existing channels." For the fiscal year, Francesca's lowered its earnings forecast to $1.05 to $1.17 per share on net sales of $387 million to $399 million, versus its earlier outlook for a profit of $1.16 to $1.31 per share on sales of $391 million to $409 million. For the current quarter, Francesca's expects earnings of $0.24 to $0.29 per share on net sales of $98 million to $103 million. However, analysts were expecting a profit of $0.36 per share on sales of $104 million. Mr. Davis added, "Our second quarter guidance reflect May sales trends and our plans to dispose of sufficient amount of slow moving inventory which has been built up due to the negative impact of various macro conditions on our planned sales levels in the apparel and jewelry categories.” Francesca's shares tumbled 10.01% to $13.75 in pre-market trading.