UPDATE: Francesca's Posts Downbeat Q2 Earnings, Lowers FY14 Forecast

Shares of Francesca's Holdings

tumbled more than 13% in pre-market trading after the company reported weaker-than-expected second-quarter results and lowered its earnings forecast for fiscal year 2014. The Houston, Texas-based company posted quarterly net income of $10.3 million, or $0.24 per share, down from $14.6 million, or $0.33 per share, in the year-ago quarter. Its net sales surged to $97.3 million from $89.6 million. However, analysts were expecting earnings of $0.26 per share on revenue of $99.99 million. Its total comparable sales slipped 7% in the quarter. Francesca's total apparel sales climbed 14%, while accessories sales rose 14%. Gift sales surged 25% in the quarter, while jewelry sales dropped 12%. Direct-to-consumer sales jumped 98%. Gross profit, as a percentage of net sales, narrowed to 46.6% from 53.3%, while selling, general and administrative expenses rose 21% to $28.7 million versus $23.7 million. At quarter end, Francesca's had total cash and cash equivalents of $24.9 million, versus $39.6 million at earlier year quarter end. The company ended the quarter with $30.2 million of inventory on hand, versus $25.6 million at the end of the year-ago quarter. Neill P. Davis, the Company's Chief Executive Officer and President said, "In spite of the challenging environment and after implementing the previously announced inventory disposal during the quarter, we were able to deliver diluted earnings per share of $0.24, grow net sales by 9% driven by new boutique sales and a 98% increase in our direct-to-consumer business, and open 13 new boutiques bringing the total to 75 for the year-to-date." Francesca's expects Q3 sales of $87.0 million to $92.0 million, versus analysts' estimates of $92.60 million. It also expects Q3 earnings of $0.17 to $0.22 per share, versus analysts' expectations of $0.25 per share. Francesca's also plans to open 13 new boutiques in the third quarter. Francesca's now expects FY14 earnings of $0.88-0.98 versus its earlier forecast of $1.05 to $1.17 per share. It also expects sales of $373.0 million to $383.0 million assuming a mid- to low-single digit fall in comparable sales. Francesca's shares dipped 13.03% to $12.15 in pre-market trading.