Attached files
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| 8-K - FORM 8-K - FHC Holdings Corp | v419973_8k.htm |
Exhibit 99.1
francesca’s® Reports Second Quarter Fiscal Year 2015 Financial Results
| · | Net sales increased 9% to $106.0 million |
| · | Comparable sales decreased 4% |
| · | Diluted earnings per share was $0.22 |
| · | Opened 69 boutiques year-to-date |
HOUSTON, TEXAS — September 9, 2015 — Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported financial results for the second quarter ended August 1, 2015.
Michael W. Barnes, Chairman, President, and CEO stated, “We are pleased to announce this morning that we met our expectations for second quarter sales and earnings, which, reflect in-line results across merchandise categories, strong new boutique performance and healthy gross margin expansion. Inventory per boutique at the end of the quarter was down four percent to last year’s second quarter. We are very pleased with the results for the back-to-school period through Labor Day. Our customers continue to respond favorably to our fall merchandise assortment and we are seeing significant improvement in our apparel and accessories offerings.”
Mr. Barnes continued, “Looking ahead, our focus remains on driving profitable sales as we continue to enhance our merchandise offerings and maintain appropriate inventory levels with a disciplined approach to our promotional strategy. Based on our recent performance and expectations for the remainder of the year, we are maintaining the top end of our prior sales outlook and tightening our earnings per share guidance for fiscal 2015. As we continue to develop and execute our strategic plan, including building out our leadership team for the future, I am excited about the long-term prospects of francesca’s. I want to thank all of our team members for their continued hard work and dedication.”
SECOND QUARTER RESULTS
Net sales increased 9% to $106.0 million from $97.3 million in the comparable prior year period. This increase was driven by 82 new boutiques opened since the comparable prior year quarter. We opened 19 boutiques during the quarter bringing the total boutique count to 608 at the end of the second quarter.
Comparable sales decreased 4% due to lower comparable transactions. DTC sales were flat at $3.6 million in each of the thirteen weeks ended August 1, 2015 and August 2, 2014.
Gross profit, as a percentage of net sales, increased to 47.4% from 46.6% in the prior year quarter. This increase is driven by 260 basis points improvement in merchandise margin partially offset by 170 basis points deleveraging of occupancy costs. The merchandise margin improvement is attributable to the decreased amount of charges related to the disposal of slow-moving merchandise as well as lower promotions compared to last year.
Selling, general and administrative expenses (“SG&A”) increased 23% to $35.1 million from $28.7 million in the prior year quarter. The increase in SG&A expenses is primarily due to higher boutique and corporate payroll expenses to support the larger boutique base.
Income from operations was $15.2 million, or 14.3% of net sales, compared to $16.7 million, or 17.1% of net sales, in the prior year quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were $48.8 million compared to $24.9 million at the end of the comparable prior year quarter.
We ended the quarter with $33.6 million of inventory on hand compared to $30.2 million at the comparable prior year period. Average ending inventory per boutique decreased by 4% versus the comparable prior year period.
THIRD QUARTER AND FISCAL YEAR 2015 GUIDANCE
For the third quarter ending October 31, 2015, net sales are expected to be in the range of $98.0 million to $101.0 million; assuming a low single digit decrease to flat comparable sales compared to the prior year comparable sales decrease of 6%. The Company plans to open 11 new boutiques during the third quarter. Diluted earnings per share are expected to be in the range of $0.12 to $0.15.
For the full year ending January 30, 2016, we now expect net sales to be in the range of $416.0 million to $424.0 million; assuming a low single digit decrease in comparable sales compared to a prior year comparable sales decrease of 5%. The Company expects to open 83 boutiques in fiscal year 2015 compared to 88 new boutiques opened in fiscal year 2014. Diluted earnings per share are expected to be in the range of $0.83 to $0.88. The number of average diluted shares for the full year assumed in guidance is expected to be 42.4 million shares. The effective tax rate is estimated to be 38.1%.
Our expected capital expenditures for fiscal year 2015 have decreased to approximately $25.0 million to $27.0 million from approximately $30.0 million to $32.0 million previously disclosed due to the postponement of infrastructure investments in our DTC website which we now expect to commence development in fiscal year 2016. Additionally, current year spending for new boutiques that will open in fiscal year 2016 is planned to decrease as we now expect to open fewer boutiques in fiscal year 2016 compared to an average of 85 boutiques we have opened in the last three fiscal years.
Conference Call Information
A conference call to discuss the second quarter fiscal year 2015 results is scheduled for September 9, 2015, at 8:30 a.m. ET. A live web cast of the conference call will be available in the investor relations section of our website, www.francescas.com. A replay of the webcast will also be available shortly after the conclusion of the call and will remain on the website for ninety days. A replay of the call will be available after the conclusion of the call and remain available until September 16, 2015. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 8391867.
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 direct-to-consumer business; our ability to successfully open and operate new boutiques each year; our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth; and our ability to attract and integrate a new Chief Merchandising Officer. 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 31, 2015 filed with the Securities and Exchange Commission on March 27, 2015 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 with retail locations designed and merchandised to feel like unique, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 612 boutiques in 47 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.
| CONTACT: | |
| ICR, Inc. | Company |
| Jean Fontana | Mark Vendetti |
| 646-277-1214 | 832-494-2315 |
| Mark.Vendetti@francescas.com / IR@francescas.com |
Francesca’s Holdings Corporation
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts and Percentages)
| Thirteen Weeks Ended | ||||||||||||||||||||||||||||
| August 1, 2015 | August 2, 2014 | Variance | ||||||||||||||||||||||||||
| In USD | As
a % of Net Sales(1) | In USD | As
a % of Net Sales(1) | In USD | % | Basis Points | ||||||||||||||||||||||
| Net sales | $ | 106,033 | 100.0 | % | $ | 97,319 | 100.0 | % | $ | 8,714 | 9 | % | - | |||||||||||||||
| Cost of goods sold and occupancy costs | 55,725 | 52.6 | % | 52,004 | 53.4 | % | 3,721 | 7 | % | (90 | ) | |||||||||||||||||
| Gross profit | 50,308 | 47.4 | % | 45,315 | 46.6 | % | 4,993 | 11 | % | 90 | ||||||||||||||||||
| Selling, general and administrative expenses | 35,133 | 33.1 | % | 28,653 | 29.4 | % | 6,480 | 23 | % | 370 | ||||||||||||||||||
| Income from operations | 15,175 | 14.3 | % | 16,662 | 17.1 | % | (1,487 | ) | (9 | )% | (280 | ) | ||||||||||||||||
| Interest expense | (112 | ) | (0.1 | )% | (169 | ) | (0.2 | )% | 57 | (34 | )% | 10 | ||||||||||||||||
| Other (expense) income | (54 | ) | (0.1 | )% | 56 | 0.1 | % | (110 | ) | (196 | )% | (20 | ) | |||||||||||||||
| Income before income tax expense | 15,009 | 14.2 | % | 16,549 | 17.0 | % | (1,540 | ) | (9 | )% | (280 | ) | ||||||||||||||||
| Income tax expense | 5,705 | 5.4 | % | 6,242 | 6.4 | % | (537 | ) | (9 | )% | (100 | ) | ||||||||||||||||
| Net income | $ | 9,304 | 8.8 | % | $ | 10,307 | 10.6 | % | $ | (1,003 | ) | (10 | )% | (180 | ) | |||||||||||||
| (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 | $ | 0.22 | $ | 0.24 | ||||||||||||||||||||||||
| Weighted average diluted share count | 42,433 | 42,367 | ||||||||||||||||||||||||||
| Comparable sales change | (4)% | (7)% | ||||||||||||||||||||||||||
| Twenty Six Weeks Ended | ||||||||||||||||||||||||||||
| August 1, 2015 | August 2, 2014 | Variance | ||||||||||||||||||||||||||
| In USD | As
a % of Net Sales(1) | In USD | As
a % of Net Sales(1) | In USD | % | Basis Points | ||||||||||||||||||||||
| Net sales | $ | 201,044 | 100.0 | % | $ | 182,743 | 100.0 | % | $ | 18,301 | 10 | % | - | |||||||||||||||
| Cost of goods sold and occupancy costs | 105,843 | 52.6 | % | 95,596 | 52.3 | % | 10,247 | 11 | % | 30 | ||||||||||||||||||
| Gross profit | 95,201 | 47.4 | % | 87,147 | 47.7 | % | 8,054 | 9 | % | (30 | ) | |||||||||||||||||
| Selling, general and administrative expenses | 68,136 | 33.9 | % | 56,465 | 30.9 | % | 11,671 | 21 | % | 300 | ||||||||||||||||||
| Income from operations | 27,065 | 13.5 | % | 30,682 | 16.8 | % | (3,617 | ) | (12 | )% | (330 | ) | ||||||||||||||||
| Interest expense | (222 | ) | (0.1 | )% | (390 | ) | (0.2 | )% | 168 | (43 | )% | 10 | ||||||||||||||||
| Other (expense) income | (120 | ) | (0.1 | )% | 159 | 0.1 | % | (279 | ) | (175 | )% | (20 | ) | |||||||||||||||
| Income before income tax expense | 26,723 | 13.3 | % | 30,451 | 16.7 | % | (3,728 | ) | (12 | )% | (340 | ) | ||||||||||||||||
| Income tax expense | 10,178 | 5.1 | % | 11,584 | 6.3 | % | (1,406 | ) | (12 | )% | (130 | ) | ||||||||||||||||
| Net income | $ | 16,545 | 8.2 | % | $ | 18,867 | 10.3 | % | $ | (2,322 | ) | (12 | )% | (210 | ) | |||||||||||||
| (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 | $ | 0.39 | $ | 0.45 | ||||||||||||||||||||||||
| Weighted average diluted share count | 42,425 | 42,364 | ||||||||||||||||||||||||||
| Comparable sales change | (3)% | (7)% | ||||||||||||||||||||||||||
Francesca’s Holdings Corporation
Consolidated Balance Sheets
(In thousands, except share amounts)
August 1, 2015 | January 31, 2015 | August 2, 2014 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 48,840 | $ | 39,071 | $ | 24,861 | ||||||
| Accounts receivable | 9,061 | 12,279 | 9,905 | |||||||||
| Inventories | 33,642 | 23,801 | 30,191 | |||||||||
| Deferred income taxes | 5,537 | 4,858 | 4,726 | |||||||||
| Prepaid expenses and other current assets | 5,915 | 5,890 | 6,965 | |||||||||
| Total current assets | 102,995 | 85,899 | 76,648 | |||||||||
| Property and equipment, net | 80,176 | 74,095 | 71,217 | |||||||||
| Deferred income taxes | 5,426 | 3,642 | 4,562 | |||||||||
| Other assets, net | 1,677 | 1,909 | 1,538 | |||||||||
| TOTAL ASSETS | $ | 190,274 | $ | 165,545 | $ | 153,965 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 13,301 | $ | 11,550 | $ | 11,380 | ||||||
| Accrued liabilities | 13,465 | 11,904 | 9,088 | |||||||||
| Total current liabilities | 26,766 | 23,454 | 20,468 | |||||||||
| Landlord incentives and deferred rent | 37,404 | 32,877 | 33,097 | |||||||||
| Long-term debt | - | - | 5,000 | |||||||||
| Total liabilities | 64,170 | 56,331 | 58,565 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock - $0.01 par value, 80.0 million shares authorized; 45.5 million shares issued at each August 1, 2015, January 31, 2015 and August 2, 2014. | 455 | 455 | 455 | |||||||||
| Additional paid-in capital | 105,843 | 105,498 | 104,925 | |||||||||
| Retained earnings | 79,949 | 63,404 | 50,163 | |||||||||
| Treasury stock, at cost - 3.2 million shares at each August 1, 2015, January 31, 2015 and August 2, 2014. | (60,143 | ) | (60,143 | ) | (60,143 | ) | ||||||
| Total stockholders’ equity | 126,104 | 109,214 | 95,400 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 190,274 | $ | 165,545 | $ | 153,965 | ||||||
Francesca’s Holdings Corporation
Consolidated Statements of Cash Flows
(In thousands)
| Twenty Six Weeks Ended | ||||||||
August 1, 2015 | August 2, 2014 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income | $ | 16,545 | $ | 18,867 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 8,000 | 6,366 | ||||||
| Stock-based compensation expense | 1,591 | 1,629 | ||||||
| Excess tax benefit from stock-based compensation | (61 | ) | (775 | ) | ||||
| Loss on sale of assets | 282 | 121 | ||||||
| Deferred income taxes | (3,940 | ) | (2,388 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 3,279 | (146 | ) | |||||
| Inventories | (9,841 | ) | (5,577 | ) | ||||
| Prepaid expenses and other assets | 86 | (208 | ) | |||||
| Accounts payable | 2,466 | 1,480 | ||||||
| Accrued liabilities | 1,561 | (735 | ) | |||||
| Landlord incentives and deferred rent | 4,527 | 5,649 | ||||||
| Net cash provided by operating activities | 24,495 | 24,283 | ||||||
| Cash Flows From Investing Activities: | ||||||||
| Purchases of property and equipment | (14,959 | ) | (13,759 | ) | ||||
| Proceeds from sale of assets | 3 | 2 | ||||||
| Net cash used in investing activities | (14,956 | ) | (13,757 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from the exercise of stock options | 169 | 1,332 | ||||||
| Excess tax benefit from stock-based compensation | 61 | 775 | ||||||
| Repayments of borrowings under the revolving credit facility | - | (20,000 | ) | |||||
| Repurchases of common stock | - | (5,270 | ) | |||||
| Net cash provided by (used in) financing activities | 230 | (23,163 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 9,769 | (12,637 | ) | |||||
| Cash and cash equivalents, beginning of year | 39,071 | 37,498 | ||||||
| Cash and cash equivalents, end of period | $ | 48,840 | $ | 24,861 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | 8,335 | $ | 9,413 | ||||
| Interest paid | $ | 94 | $ | 288 | ||||
Francesca’s Holdings Corporation
Supplemental Information
Quarterly Sales by Merchandise Category
| Thirteen Weeks Ended | Change | |||||||||||||||
| August 1, 2015 | August 2, 2014 | Dollar | % | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Apparel | $ | 56,441 | $ | 52,128 | $ | 4,313 | 8 | % | ||||||||
| Jewelry | 23,442 | 20,594 | 2,848 | 14 | % | |||||||||||
| Accessories | 14,537 | 14,526 | 11 | 0 | % | |||||||||||
| Gifts | 11,069 | 9,865 | 1,204 | 12 | % | |||||||||||
| Merchandise sales | 105,489 | 97,113 | 8,376 | 9 | % | |||||||||||
| Others(1) | 544 | 206 | 338 | 164 | % | |||||||||||
| $ | 106,033 | $ | 97,319 | $ | 8,714 | 9 | % | |||||||||
| (1) | Includes gift card breakage income, shipping and change in return reserve. |
Quarterly Comparable Transactions Results for Fiscal Year 2015
| Transactions(1) | Average Transaction Value(2) | |||||||
| Q1 | (5 | )% | 3 | % | ||||
| Q2 | (3 | )% | (1 | )% | ||||
| (1) | The number of comparable transactions (including merchandise and gift card purchases, returns and gift card redemptions) processed through our point-of-sale system for which a receipt was issued. |
| (2) | Average transaction value is calculated by dividing total comparable sales by the number of comparable transactions during the period. |
Quarterly Comparable Sales
| FY 2013 | FY 2014 | FY 2015 | ||||||||||
| Q1 | 2 | % | (7 | )% | (2 | )% | ||||||
| Q2 | (1 | )% | (7 | )% | (4 | )% | ||||||
| Q3 | (3 | )% | (6 | )% | ||||||||
| Q4 | (6 | )% | 1 | % | ||||||||
| Fiscal year | (2 | )% | (5 | )% | ||||||||