Shares of Francesca’s Holdings Corp. fell 14.2 percent Wednesday after the retailer posted lower first-quarter earnings and disappointed investors with its guidance for the second quarter.
For the first quarter ended May 2, net income slipped 15.4 percent to $7.2 million, or 17 cents a diluted share, from $8.6 million, or 20 cents, a year ago. Net sales increased 11.2 percent to $95 million from $85.4 million, although comparable-store sales fell 2 percent due to lower boutique transactions that were offset by a 19 percent in direct-to-consumer sales. Wall Street projected earnings per share of 18 cents on revenues of $95.2 million for the first quarter.
For the second quarter ending Aug. 1, the company projected diluted earnings per share at between 20 cents and 23 cents, on a net sales range of $104 million to $107 million. The company kept its prior projections for the full year ending Jan. 30, which called for diluted EPS of 81 cents to 90 cents, on net sales of $412 million to $424 million.
Both quarterly and full-year estimates were below the consensus expectations of analysts. They were projecting 27 cents on revenues of $109.8 million for the quarter, and $1.01 on revenues of $474.5 million for the full fiscal year.
Investors, in turn, sent the stock down $2.28 to $13.81.
Michael W. Barnes, chairman, president, and chief executive officer, said, “Merchandise margins rose slightly above last year’s rate….We had continued strong performance in our nonapparel departments and our boutiques are opening above last year’s sales levels. While we did see some bright spots in apparel, particularly in dresses around the Easter holiday, we believe that it will take time to achieve positive comparable results in this business.”
Barnes added that improving comparable sales is the company’s number-one priority. “We continue to be focused on maintaining the right levels and composition of inventory and taking a disciplined approach to managing promotional activity and merchandise margins,” he said.
CL King’s analyst Steven L. Marotta said first-quarter results were in line with expectations, but noted that investors were likely hoping for either continued improvement or a flat first-quarter comp following a fourth-quarter comp gain of 1 percent.
He added that the initial second-quarter comp guidance of “negative low-to midsingle-digit was also a disappointment.”
John Kernan, analyst at Cowen & Co., said as the company transitions to back-to-school and the second half, “newness should increase, merchandise margin comparisons will ease due to heavy markdown activity in the year-ago period and management has plenty of open-to-buy on hand to chase trends.”