Francesca's Q2 Profit Declines, Cuts FY Outlook Yet Again; Stock Down - Update

(RTTNews) - Women's apparel retailer Francesca's Holdings Corp. (FRAN) Tuesday reported a decline in the second-quarter profit, reflecting mainly higher boutique and payroll expenses. Quarterly sales increased 9 percent, while comparable sales fell 7 percent. Both earnings and sales fell short of analysts' estimates.

The company forecast third-quarter earnings and sales below analysts estimates, and cut its full-year outlook yet again. The shares fell more than 5 percent in the morning trade.

While reporting its first-quarter results, the company had slashed its expectations for the full year.

Neill Davis, chief executive officer and president stated, "Our sales trends improved in apparel, accessories and gift in the second quarter; however, were offset by challenging results in our jewelry category. We are making progress in reversing the negative trends in jewelry as reflected in improved performance of new merchandise in late July and August."

Looking ahead, the firm expects the improving sales trend that started at the end of the second quarter to continue through the third quarter as jewelry sales continue to strengthen.

For the second quarter, the company's net income declined to $10.31 million or $0.24 per share from $14.62 million or $0.33 per share in the previous year.

On average, 20 analysts polled by Thomson-Reuters were looking for earnings of $0.26. Analysts' estimates typically exclude one-time items.

Quarterly sales increased 9 percent to $97.32 million from $89.57 million last year, but came below analysts' estimate of $99.79 million. Comparable sales declined 7 percent.

The increase in second quarter sales was driven by 90 new boutiques opened since the end of the second quarter last year, the firm said.

Total apparel sales increased 14 percent, accessories sales were up 14 percent and gift sales climbed 25 percent. But, these gains were offset by a 12 percent decrease in jewelry sales, which contributed 6 percentage points of the total company comparable sales decrease of 7 percent.

Selling, general and administrative expenses advanced to $ 28.65 million from $23.68 million in the preceding year, mainly due to higher boutique and corporate payroll expenses to support the larger boutique base and direct-to-consumer sales growth.

The firm opened 13 new boutiques during the quarter bringing year-to-date total to 75 new boutiques and a total boutique count to 526 at quarter end.

For the third quarter, the company expects earnings to be in the range of $0.17 to $0.22 per share, on sales of $87 million and $92 million, and comparable sales decrease in mid-to-low single digit.

Analysts currently project third-quarter earnings of $0.25 per share, on sales of $92.59 million.

For the fiscal year ending January 2015, the firm now sees earnings of $0.88 to $0.98 per share, on sales of $373 million to $383 million, and comparable sales decrease in mid-to-low single digit.

Analysts expect annual earnings of $1.05 per share, on sales of $384.06 million for the year.

Francesca's earlier projected earnings of $1.05 to $1.17 per share and sales of $387 million to $399 million.

FRAN is currently trading at $13.23, down 5.23 percent, on a volume of 1.15 million shares.