Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Aug. 01, 2020 | Sep. 01, 2020 | |
Cover page | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Aug. 1, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Francesca's Holdings CORP | |
Entity Central Index Key | 0001399935 | |
Current Fiscal Year End Date | --02-01 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Trading Symbol | FRAN | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 3,032,839 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Aug. 01, 2020 | Feb. 01, 2020 | Aug. 03, 2019 |
Current assets: | |||
Cash and cash equivalents | $ 20,204 | $ 17,839 | $ 21,962 |
Accounts receivable | 16,688 | 3,743 | 7,987 |
Inventories | 22,947 | 31,636 | 30,942 |
Prepaid expenses and other current assets | 8,945 | 12,325 | 10,759 |
Total current assets | 68,784 | 65,543 | 71,650 |
Operating lease right-of-use assets, net | 186,135 | 208,503 | 230,295 |
Property and equipment, net | 44,476 | 51,469 | 61,874 |
Other assets, net | 9,053 | 3,093 | 4,197 |
TOTAL ASSETS | 308,448 | 328,608 | 368,016 |
Current liabilities: | |||
Accounts payable | 27,642 | 10,823 | 18,773 |
Accrued liabilities | 10,394 | 12,410 | 12,398 |
Current portion of long-term debt | 12,146 | 8,936 | 0 |
Current portion of operating lease liabilities | 57,724 | 48,691 | 49,937 |
Total current liabilities | 107,906 | 80,860 | 81,108 |
Operating lease liabilities | 185,761 | 200,938 | 213,870 |
Long-term debt, net | 0 | 0 | 10,000 |
Other liabilities | 433 | 284 | 61 |
Total liabilities | 294,100 | 282,082 | 305,039 |
Commitments and contingencies | |||
Stockholders' equity: | |||
Common stock - $0.01 par value, 80.0 million shares authorized; 4.0 million at each August 1, 2020, February 1, 2020, and August 3, 2019 | 40 | 40 | 40 |
Additional paid-in capital | 113,425 | 113,101 | 112,869 |
Retained earnings | 60,904 | 93,406 | 110,089 |
Treasury stock, at cost - 0.9 million shares at each of August 1, 2020, February 1, 2020 and August 3, 2019 | (160,021) | (160,021) | (160,021) |
Total stockholders' equity | 14,348 | 46,526 | 62,977 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 308,448 | $ 328,608 | $ 368,016 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Millions | Aug. 01, 2020 | Feb. 01, 2020 | Aug. 03, 2019 |
Consolidated Balance Sheets | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 80 | 80 | 80 |
Common stock, shares issued | 4 | 4 | 4 |
Treasury stock, shares | 0.9 | 0.9 | 0.9 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | |
Consolidated Statements of Operations | ||||
Net sales | $ 75,723 | $ 105,972 | $ 119,476 | $ 193,097 |
Cost of goods sold and occupancy costs | 62,453 | 65,469 | 109,077 | 122,267 |
Gross profit | 13,270 | 40,503 | 10,399 | 70,830 |
Selling, general and administrative expenses | 26,018 | 38,935 | 50,969 | 78,929 |
Asset impairment charges | 0 | 189 | 7,472 | 189 |
(Loss) income from operations | (12,748) | 1,379 | (48,042) | (8,288) |
Interest expense | 457 | 152 | 886 | 325 |
Other income | (25) | (259) | (84) | (372) |
(Loss) income before income tax expense (benefit) | (13,180) | 1,486 | (48,844) | (8,241) |
Income tax expense (benefit) | 3,980 | (326) | (16,342) | 96 |
Net (loss) income | $ (17,160) | $ 1,812 | $ (32,502) | $ (8,337) |
Basic (loss) income per common share | $ (5.80) | $ 0.62 | $ (11.06) | $ (2.87) |
Diluted (loss) income per common share | $ (5.80) | $ 0.61 | $ (11.06) | $ (2.87) |
Weighted average shares outstanding: | ||||
Basic shares | 2,959 | 2,907 | 2,939 | 2,904 |
Diluted shares | 2,959 | 2,960 | 2,939 | 2,904 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock Outstanding | Common Stock | Additional Paid-in Capital | Retained EarningsCumulative effect adjustment on adoption of new accounting standard [Member] | Retained Earnings | Treasury Stock, at cost | Cumulative effect adjustment on adoption of new accounting standard [Member] | Total |
Balance at Feb. 02, 2019 | $ 39 | $ 113,121 | $ (1,825) | $ 120,251 | $ (160,021) | $ (1,825) | $ 73,390 | |
Balance (in shares) at Feb. 02, 2019 | 2,972 | |||||||
Net (loss) income | 0 | (10,149) | (10,149) | |||||
Stock-based compensation | (271) | 0 | (271) | |||||
Fractional shares cancelled | 0 | 0 | 0 | |||||
Restricted stocks forfeited (in shares) | (14) | |||||||
Balance at May. 04, 2019 | 39 | 112,850 | 108,277 | (160,021) | 61,145 | |||
Balance (in shares) at May. 04, 2019 | 2,958 | |||||||
Balance at Feb. 02, 2019 | 39 | 113,121 | $ (1,825) | 120,251 | (160,021) | $ (1,825) | 73,390 | |
Balance (in shares) at Feb. 02, 2019 | 2,972 | |||||||
Net (loss) income | (8,337) | |||||||
Balance at Aug. 03, 2019 | 40 | 112,869 | 110,089 | (160,021) | 62,977 | |||
Balance (in shares) at Aug. 03, 2019 | 3,056 | |||||||
Balance at May. 04, 2019 | 39 | 112,850 | 108,277 | (160,021) | 61,145 | |||
Balance (in shares) at May. 04, 2019 | 2,958 | |||||||
Net (loss) income | 0 | 0 | 1,812 | 0 | 1,812 | |||
Stock-based compensation | 0 | 24 | 0 | 0 | 24 | |||
Fractional shares cancelled | 0 | (4) | 0 | 0 | (4) | |||
Fractional shares cancelled (in shares) | (1) | |||||||
Restricted stocks issued, net of forfeitures | 1 | (1) | 0 | 0 | 0 | |||
Restricted stocks issued, net of forfeitures (in shares) | 99 | |||||||
Balance at Aug. 03, 2019 | 40 | 112,869 | 110,089 | (160,021) | 62,977 | |||
Balance (in shares) at Aug. 03, 2019 | 3,056 | |||||||
Balance at Feb. 01, 2020 | 40 | 113,101 | 93,406 | (160,021) | 46,526 | |||
Balance (in shares) at Feb. 01, 2020 | 3,036 | |||||||
Net (loss) income | 0 | 0 | (15,342) | 0 | (15,342) | |||
Stock-based compensation | 0 | 211 | 0 | 0 | 211 | |||
Restricted stocks forfeited | 0 | 0 | 0 | 0 | 0 | |||
Restricted stocks forfeited (in shares) | (2) | |||||||
Balance at May. 02, 2020 | 40 | 113,312 | 78,064 | (160,021) | 31,395 | |||
Balance (in shares) at May. 02, 2020 | 3,034 | |||||||
Balance at Feb. 01, 2020 | 40 | 113,101 | 93,406 | (160,021) | 46,526 | |||
Balance (in shares) at Feb. 01, 2020 | 3,036 | |||||||
Net (loss) income | (32,502) | |||||||
Balance at Aug. 01, 2020 | 40 | 113,425 | 60,904 | (160,021) | 14,348 | |||
Balance (in shares) at Aug. 01, 2020 | 3,033 | |||||||
Balance at May. 02, 2020 | 40 | 113,312 | 78,064 | (160,021) | 31,395 | |||
Balance (in shares) at May. 02, 2020 | 3,034 | |||||||
Net (loss) income | 0 | 0 | (17,160) | 0 | (17,160) | |||
Stock-based compensation | 0 | 113 | 0 | 0 | 113 | |||
Restricted stocks issued, net of forfeitures | 0 | 0 | 0 | 0 | 0 | |||
Restricted stocks issued, net of forfeitures (in shares) | (1) | |||||||
Balance at Aug. 01, 2020 | $ 40 | $ 113,425 | $ 60,904 | $ (160,021) | $ 14,348 | |||
Balance (in shares) at Aug. 01, 2020 | 3,033 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Aug. 01, 2020 | Aug. 03, 2019 | |
Cash Flows Provided by Operating Activities: | ||
Net loss | $ (32,502) | $ (8,337) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 8,924 | 11,320 |
Operating lease right-of-use asset amortization | 21,240 | 23,273 |
Stock-based compensation expense | 295 | (190) |
(Gain) loss on sale of assets | (44) | 99 |
Asset impairment charges | 7,472 | 189 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (12,951) | 8,322 |
Inventories | 8,639 | (464) |
Prepaid expenses and other assets | (3,263) | (373) |
Accounts payable | 16,619 | (3,765) |
Accrued liabilities | (2,014) | 1,064 |
Operating lease liabilities | (11,832) | (25,763) |
Net cash provided by operating activities | 583 | 5,375 |
Cash Flows Used in Investing Activities: | ||
Purchases of property and equipment | (1,319) | (3,372) |
Proceeds from insurance for damaged boutique | 101 | 0 |
Net cash used in investing activities | (1,218) | (3,372) |
Cash Flows Provided by (Used in) Financing Activities: | ||
Proceeds from borrowings under the revolving credit facility | 5,000 | 5,000 |
Repayments of borrowings under the revolving credit facility | (2,000) | (5,000) |
Payment of debt issuance costs | 0 | (144) |
Net cash provided by (used in) financing activities | 3,000 | (144) |
Net increase in cash and cash equivalents | 2,365 | 1,859 |
Cash and cash equivalents, beginning of year | 17,839 | 20,103 |
Cash and cash equivalents, end of period | 20,204 | 21,962 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid (received) for income taxes | 126 | (8,601) |
Interest paid | $ 537 | $ 330 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Aug. 01, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Nature of Business Francesca’s Holdings Corporation is a holding company incorporated in 2007 under the laws of the State of Delaware whose business operations are conducted through its subsidiaries. Unless the context otherwise requires, the “Company,” refers to Francesca’s Holdings Corporation and its consolidated subsidiaries. The Company operates a nationwide-chain of boutiques providing its customers with a unique, fun and personalized shopping experience. The merchandise assortment the Company offers is a diverse and balanced mix of apparel, jewelry, accessories and gifts at attractive values. The Company aims to offer a differentiated shopping experience and quality, on-trend merchandise at a compelling value, across a wide variety of geographic markets and shopping venues. At August 1, 2020, the Company operated 700 boutiques, which are located in 47 states throughout the United States and the District of Columbia, and also served its customers though www.francescas.com, its ecommerce website. Going Concern As previously disclosed, the COVID-19 pandemic has and continues to result in an overall disruption in the Company’s operations and supply chain. As of September 4, 2020, nine boutiques were still temporarily closed, most of which are located in California. The majority of reopened boutiques are operating at reduced capacity and hours in accordance with local regulations. All boutiques strictly adhere to current Centers for Disease Control and Prevention recommendations and local regulations to protect the health and safety of its sales associates and customers. Additionally, as of September 4, 2020, the Company’s ecommerce and distribution facility continue to operate at reduced capacity due to social distancing measures that have been put in place. As a result, the Company’s revenues, results of operations and cash flows continue to be materially adversely impacted, which raises substantial doubt about the Company’s ability to continue as a going concern. Management continues to take aggressive and prudent actions to drive sales and monetize existing inventory, reduce expenses, and manage cash flows. These actions include making limited payments of accounts payables, paying approximately 50% and 40% of its total lease obligations for the months of August and September of fiscal year 2020, respectively, and limiting new inventory purchases to preserve cash on hand. Additionally, the Company currently expects to continue making partial lease payments for the remainder of fiscal year 2020, subject to negotiations with landlords and cash flows. The Company also expects to receive an income tax refund of $10.7 million related to certain provisions under the Corona Aid, Relief and Economic Security Act (“CARES Act”) during fiscal year 2020. This refund is required to be used to repay any then outstanding borrowings under the Company’s Amended ABL Credit Agreement in accordance with the certain letter agreement entered into between the Company and the Amended ABL Credit Agreement lenders on May 1, 2020. See Note 6, Income Taxes and Note 7, Credit Facilities for additional information. As a result of the challenging conditions described above, the Company has engaged FTI Capital Advisors (“FTI”) to assist with management’s evaluation and pursuit of available strategic alternatives. The Company, with FTI’s assistance, is evaluating various alternatives to improve its liquidity and financial position, including but not limited to, further lease concessions and deferrals, further reductions of operating and capital expenditures, raising additional capital including seeking a refinancing of the Company’s debt, and restructuring its debt and liabilities through a private restructuring or a restructuring under the protection of applicable bankruptcy laws. However, there can be no assurance that the Company will be able improve its financial position and liquidity, complete a refinancing, raise additional capital or successfully restructure its indebtedness and liabilities. The Company’s strategic plans are not yet finalized and are subject to numerous uncertainties including negotiations with creditors and investors and conditions in the credit and capital markets. There is significant uncertainty around the disruptions related to the COVID-19 pandemic and its impact on the global economy. The Company has experienced, and could continue to experience, other impacts as a result of the COVID-19 pandemic, including, but not limited to, significant impacts on its results of operations and charges from potential adjustments to the carrying amount of its inventory and long-lived asset impairment charges. While the Company anticipates future results of operations will continue to be adversely impacted, the full extent to which the COVID-19 pandemic impacts the Company’s future results will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic in the United States, actions taken to contain it or treat its impact, resurgence(s) of COVID-19 that occur after the initial outbreak subsides, and how quickly and to what extent normal economic and operating conditions can resume. The Company’s unaudited consolidated financial statement as of August 1, 2020 were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations, changes in equity, and cash flows at the dates and for the periods presented. The financial information as of February 1, 2020 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended February 1, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on May 1, 2020. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the fiscal year ended February 1, 2020 included in the Company’s Annual Report on Form 10-K. Due to seasonal variations in the Company’s business, interim results are not necessarily indicative of results that may be expected for any other interim period or for a full year. Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of the Company and all its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Fiscal Year The Company maintains its accounts on a 52- or 53-week year ending on the Saturday closest to January 31st. Fiscal years 2020 and 2019 each include 52 weeks of operations. The fiscal quarters ended August 1, Management Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales returns, and expenses during the reporting periods. Actual results could differ materially from those estimates. Reclassification The non-cash amortization of operating lease right-of-use (“ROU”) assets of $23.3 million in the twenty-six weeks ended August 3, 2019 and the asset impairment charges of $0.2 million in the thirteen and twenty-six weeks ended August 3, 2019 have been presented separately in the unaudited consolidated statement of cash flows and unaudited consolidation statements of operations, respectively, to conform to the current period presentation. These reclassifications do not materially impact the unaudited consolidated financial statements for the prior periods presented. New Accounting Pronouncements Recently Adopted Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill and Other-Internal-Use-Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the provisions of this guidance on February 2, 2020 and such adoption did not have a material impact on its consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The ASU intends to enhance and simplify aspects of the income tax accounting guidance in Accounting Standards Codification 740, “Income Taxes” as part of the FASB's simplification initiative. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2020 with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 changes the methodology for measuring credit losses on financial instruments and timing of when such losses are recorded. Since the original issuance of ASU 2016-13, the FASB has issued several amendments and updates to this guidance. This new guidance is effective for public companies, except for smaller reporting companies, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For smaller reporting companies, such as the Company, this new guidance will be effective for fiscal year beginning after December 15, 2022, and interim periods within those fiscal year. Early adoption is permitted. The guidance is to be adopted using the modified retrospective approach. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. |
Revenues
Revenues | 6 Months Ended |
Aug. 01, 2020 | |
Revenues | |
Revenues | 2. Revenues The Company disaggregates net sales into the following major merchandise departments. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands) Apparel $ 39,080 $ 52,389 $ 61,164 $ 94,213 Jewelry 18,272 27,957 28,962 51,835 Accessories 11,424 16,211 18,075 29,851 Gifts 6,839 8,532 10,570 16,375 Others (1) 108 883 705 823 $ 75,723 $ 105,972 $ 119,476 $ 193,097 (1) Includes gift card breakage income, shipping revenue and change in return reserve. Contract liability The Company recognizes a contract liability related to its gift cards. The Company accounts for the sale of gift cards as a liability at the time a gift card is sold. The liability is relieved and revenue is recognized upon redemption of the gift card. The Company’s gift cards do not have an expiration date. Income from gift card breakage is estimated based on historical redemption patterns and recognized over the historical redemption period. Liability for unredeemed gift cards totaled $3.2 million, $4.1 million, and $4.0 million as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively. Unredeemed gift cards at the end of the prior fiscal year recognized in revenues during the thirteen and twenty-six weeks ended August 1, 2020 totaled $0.6 million and $1.5 million, respectively, and for the thirteen and twenty-six weeks ended August 3, 2019 totaled $1.3 million and $3.1 million, respectively. |
(Loss) Income Per Share
(Loss) Income Per Share | 6 Months Ended |
Aug. 01, 2020 | |
(Loss) Income Per Share | |
(Loss) Income Per Share | 3. (Loss) Income Per Share (Loss) income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted (loss) income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of restricted stock awards, restricted stock units and stock option grants using the treasury stock method. The following table summarizes the potential dilution that could occur if stock options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted (loss) income per common share. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands, except per share data) Numerator: Net (loss) income $ (17,160) $ 1,812 $ (32,502) $ (8,337) Denominator Weighted-average common shares outstanding - basic 2,959 2,907 2,939 2,904 Restricted stocks awards, restricted stock units and stock options — (1) 53 — (1) — (1) Weighted-average common shares outstanding - diluted 2,959 2,960 2,939 2,904 Per common share: Basic (loss) income per common share $ (5.80) $ 0.62 $ (11.06) $ (2.87) Diluted (loss) income per common share $ (5.80) $ 0.61 $ (11.06) $ (2.87) (1) Due to the Company being in a net loss position in the thirteen and twenty-six weeks ended August 1, 2020 and twenty-six weeks ended August 3, 2019, no restricted stocks and stock options were included in the computation of diluted (loss) income per common share as their effect would have been anti-dilutive. Potentially issuable shares under the Company’s stock-based compensation plans, which amounted to 0.3 |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Aug. 01, 2020 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount reflected in the consolidated balance sheets of financial assets and liabilities, which includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximated their fair values due to the short term nature of these financial assets and liabilities. The carrying amount of the Company’s debt approximates its fair value due to the short-term nature of its debt. |
Asset Impairment Charges
Asset Impairment Charges | 6 Months Ended |
Aug. 01, 2020 | |
Asset Impairment Charges | |
Asset Impairment Charges | 5 . Asset Impairment Charges The COVID-19 pandemic has also resulted in lower than expected sales and profitability for each of the Company’s boutiques as a result of the temporary boutique closures which indicates that its long-lived assets may be impaired. In determining whether an impairment has occurred, the Company considered both qualitative and quantitative factors. The quantitative analysis involves estimating the undiscounted future cash flows of the boutique long-lived assets and comparing such cash flows against the carrying value of the boutique’s assets. If the carrying value of the boutique’s assets is greater than the sum of the undiscounted future cash flows, an impairment charge is recognized for the difference between the carrying value of the boutique’s assets and its fair value. The fair value of the asset group is generally determined using discounted future cash flows or a market participant’s ability to generate economic benefits using the asset in its highest and best use, whichever is appropriate. The discounted future cash flows are determined based on such boutique’s historical experience, current sales trends, market conditions and other relevant factors deemed material, and discounted using a rate commensurate with the risk. The inputs used in the determination of discounted future cash flows are considered as Level 3 inputs in the fair value hierarchy, which require a significant degree of judgment and are based on the Company’s own assumptions. Based on the results of such assessment, the Company recorded non-cash asset impairment charges of $7.5 million in the twenty-six weeks ended August 1, 2020. Of the total amount, $6.8 million was related to the write-down of operating lease ROU assets for 107 underperforming boutiques and $0.7 million was related to the write-down of property and equipment for 41 underperforming boutiques. No asset impairment charges were recorded in the thirteen weeks ended August 1, 2020. This compares to non-cash asset impairment charges of $0.2 million recorded in the thirteen and twenty-six weeks ended August 3, 2019. |
Income Taxes
Income Taxes | 6 Months Ended |
Aug. 01, 2020 | |
Income Taxes | |
Income Taxes | 6. Income Taxes The effective income tax expense (benefit) rates for the thirteen and twenty-six weeks ended August 1, 2020 were 30.2% and (33.5)%, respectively. The Company expects that any net operating loss generated for tax purposes for fiscal year 2020 will be carried back to prior years as allowed under the CARES Act and the Company will be entitled to an income tax refund when it files its fiscal year 2020 income tax return. An income tax benefit is currently reflected in the Company’s estimated annual effective tax rate for fiscal year 2020. Additionally, the income tax benefit for the twenty-six weeks ended August 1, 2020 included a $10.7 million income tax refund filed with the IRS in April 2020 related to net operating loss for fiscal year 2018 that may be carried back to prior years also under the CARES Act. The income tax (benefit) expense for the thirteen and twenty-six weeks August 3, 2019 were immaterial due to the full valuation allowance provided on the Company’s net deferred tax assets during fiscal year 2019. As of August 1, 2020 and August 3, 2019, the Company had $17.3 million and $1.9 million of income tax receivable, respectively. Of the total income tax receivable as of August 1, 2020, $10.7 million is related to the income tax refund under the CARES Act discussed above and is included in accounts receivable in the unaudited consolidated balance sheet while $6.6 million is for the net operating loss carryback for fiscal years 2019 and 2020 that the Company intends to carry back to prior years under the CARES Act and is included in other assets in the unaudited consolidated balance sheet. |
Credit Facilities
Credit Facilities | 6 Months Ended |
Aug. 01, 2020 | |
Credit Facilities | |
Credit Facilities | 7. Credit Facilities The Company’s credit facilities and outstanding borrowings consisted of the following: August 1, 2020 February 1, 2020 August 3, 2019 (in thousands) Asset based revolving credit facility $ 3,000 $ — $ 10,000 Term loan 10,000 10,000 — Unamortized debt issuance costs (854) (1,064) — Total long-term debt, net 12,146 8,936 — Less: Current portion of long-term debt (12,146) (8,936) — Total long-term debt, net of current portion $ — $ — $ 10,000 Asset Based Revolving Credit Facility On May 25, 2018, Francesca’s Holdings Corporation (the “Holdings”), as guarantor, certain of its subsidiaries, as borrowers (the “Borrowers”), and certain of its subsidiaries as guarantors (together with Holdings, and the Borrowers, the “Loan Parties”), entered into an asset based revolving credit agreement (the “ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., ("JPMorgan") as administrative agent and the lenders party thereto. The ABL Credit Agreement provided for Aggregate Revolving Commitments (as defined in the ABL Credit Agreement) of $50.0 million (including up to $10.0 million for letters of credit) and was scheduled to mature on May 25, 2023. On August 13, 2019, concurrent with entering into the Term Loan Credit Agreement (described below), the Borrowers entered into the first amendment to ABL Credit Agreement (the "First Amendment to ABL Credit Agreement"), which amends the Company's existing ABL Credit Agreement (the ABL Credit Agreement, as amended by the First Amendment to ABL Credit Agreement, the "Amended ABL Credit Agreement"). The Amended ABL Credit Agreement provided for Aggregate Revolving Commitments (as defined in the Amended ABL Credit Agreement) of $40.0 million and matures on the earlier of (a) May 23, 2023 and (b) the date that is 90 days prior to any scheduled maturity of the Term Loan . Although the maturity of borrowings under the Amended ABL Credit Agreement is currently beyond 12 months from the balance sheet date, the Company classified the outstanding amount as current liability in the unaudited consolidated balance sheet as of August 1, 2020 due to uncertainties concerning the Company's future liquidity and on-going covenant compliance under the Amended ABL Credit Agreement as a result of the impact of the COVID-19 pandemic on the Company's business. The inclusion of a going concern qualification in the report of the Company's independent registered public accountant on its accompanying financial statements for the fiscal year ended February 1, 2020 and the Company's non-payment of rent at its leased locations for the months of April, May, and June of fiscal year 2020 resulted in a violation of certain covenants under its Amended ABL Credit Agreement and Term Loan Credit Agreement. On May 1, 2020, the Company entered into a letter agreement (the "First JPM Letter Agreement") in connection with its Amended ABL Credit Agreement and a letter agreement (the "First Tiger Letter Agreement") in connection with its Term Loan Credit Agreement , in each case, to obtain a waiver from its lenders of any default or event of default arising from its failure to (i) deliver annual audited consolidated financial statements for the fiscal year ended February 1, 2020 without a "going concern" or a like qualification or exception and (ii) pay rent on leased locations for the months of April, May, and June 2020. The First JPM Letter Agreement and the First Tiger Letter Agreement contain certain conditions and covenants, including that, in the case of the First JPM Letter Agreement, the Company is required to use the entire $10.7 million income tax refund requested under the CARES Act to repay any then outstanding borrowings under the Amended ABL Credit Agreement and providing that no loans will be made under the ABL Credit Agreement unless the Company's aggregate amount of cash and cash equivalents is less than $3.0 million. As a result of the delayed filing of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2020, on June 25, 2020, the Borrowers entered into a letter agreement (the "Second JPM Letter Agreement") in connection with its Amended ABL Credit Agreement to amend the Amended ABL Credit Agreement to grant the Borrowers a 45 day extension to deliver quarterly consolidated financial statements for the fiscal quarter ended May 2, 2020 and waive any Default (as defined in the Amended ABL Credit Agreement) arising from the failure of the Borrowers to timely deliver quarterly consolidated financial statements for the fiscal quarter ended May 2, 2020. The Company delivered its financial statements for the fiscal quarter ended May 2, 2020 to JPMorgan and Tiger Finance, LLC on July 31, 2020. Additionally, the Second JPM Letter Agreement also amended the Amended ABL Credit Agreement to lower the minimum amount of Liquidity (as defined in the Amended ABL Credit Agreement) that triggers a Dominion Period (as defined in the Amended ABL Credit Agreement) from $15.0 million to $10.0 million and remove the requirement that unrestricted cash and cash equivalents not exceed 80% of total Liquidity, in each case, for a period of 60 days after the date of the Second JPM Letter Agreement. If the Company is unable to meet its financial covenants or if there is an event of default under either the Amended ABL Credit Agreement or Term Loan Credit Agreement, the Company's lenders could instruct the administrative agent under such credit facilities to exercise available remedies including, declaring the principal of and accrued interest on all outstanding indebtedness due and payable immediately and terminating all remaining commitments and obligations under the credit facilities. Although the lenders under the Company's credit facilities may waive the defaults or forebear the exercise of remedies, they are not obligated to do so. Failure to obtain such a waiver would have a material adverse effect on the Company's liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring plan. As of August 1, 2020, the Company had $1.0 million of combined borrowing base availability under the Amended ABL Credit Agreement and the Term Loan Credit Agreement, subject to compliance with the covenants under the ABL Credit Agreement and First JPM Letter Agreement, including that no loans will be made under the ABL Credit Agreement unless the Company's aggregate amount of cash and cash equivalents is less than $3.0 million. The average effective interest rate for borrowings under the Amended ABL Credit Agreement was 3.0% in each of the thirteen and twenty-six weeks ended August 1, 2020 and was 4.2% in each of the thirteen and twenty-six weeks ended August 3, 2019. Term Loan Credit Agreement On August 13, 2019, the Loan Parties, entered into the Term Loan Credit Agreement (“Term Loan Credit Agreement”) with Tiger Finance, LLC, as administrative agent and the lenders party thereto. The Term Loan Credit Agreement provides for an aggregate term loan of $10.0 million and matures on August 13, 2022. Although the maturity of the Term Loan Credit Agreement is beyond 12 months from the balance sheet date, the Company classified the outstanding amount as current liability in the unaudited consolidated balance sheet as of August 1, 2020 due to uncertainties concerning the Company’s future liquidity and on-going covenant compliance as a result of the impact of the COVID-19 pandemic on the Company’s business. On May 1, 2020, the Company entered into the First Tiger Letter Agreement with similar terms as the First JPM Letter Agreement described in the “ Asset Based Revolving Credit Facility ” section above. Additionally, in connection with the delayed filing of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2020, on June 25, 2020, the Borrowers entered into a letter agreement in connection with its Term Loan Credit Agreement (the “Second Tiger Letter Agreement”) with similar terms to the Second JPM Letter Agreement described in the " Asset Based Revolving Credit Facility " section above. As of August 1, 2020, the Company had $1.0 million in combined borrowing base availability under the Amended ABL Credit Agreement and the Term Loan Credit Agreement, subject to compliance with the covenants under the Term Loan Credit Agreement, ABL Credit Agreement, First Tiger Letter Agreement and First JPM Letter Agreement, including that no loans will be made under the ABL Credit Agreement unless the Company’s aggregate amount of cash and cash equivalents is less than $3.0 million. For each of the thirteen and the twenty-six weeks ended August 1, 2020, the average effective interest rate for borrowings under the Term Loan Credit Agreement was 10.0%. |
Stockholder Rights Plan
Stockholder Rights Plan | 6 Months Ended |
Aug. 01, 2020 | |
Stockholder Rights Plan | |
Stockholder Rights Plan | 8 . Stockholder Rights Plan On July 31, 2019, the Board of Directors of the Company adopted a limited duration stockholder rights plan (the “Rights Plan”) with an expiration date of August 1, 2022 and an ownership trigger threshold of 15%, subject to certain exceptions. In connection with the Rights Plan, the Board of Directors authorized and declared a dividend to the Company’s stockholders of record at the close of business on August 15, 2019 of one preferred share purchase right (a “Right”) to purchase one five-thousandth (subject to adjustment) of one share of Series A Junior Participating Preferred Stock, $0.01 par value per share of the Company (the “Preferred Stock”) for each outstanding share of the Company’s common stock. On July 31, 2020, the Board of Directors of the Company adopted an amendment to the Rights Plan accelerating the expiration of the Rights from 5:00 p.m. ET, on August 1, 2022, to 5:00 p.m. ET, on August 1, 2020 as a result of the Company’s shareholders voting against the ratification of the Rights Plan during the Company’s 2020 annual meeting of shareholders, which was held on July 27, 2020. No shares of Preferred Stock were issued and outstanding at the time the Rights expired. |
Stock-based Compensation
Stock-based Compensation | 6 Months Ended |
Aug. 01, 2020 | |
Stock-based Compensation | |
Stock-based Compensation | 9 . Stock-based Compensation Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee’s requisite service period. The Company recognized stock-based compensation expense of $0.2 million and $0.3 million in the thirteen and twenty-six weeks ended August 1, 2020, respectively. Stock-based compensation expense during the thirteen weeks ended August 3, 2019 was less than $0.1 million and a net reversal of previously accrued stock-based compensation of $0.2 million during the twenty-six weeks ended August 3, 2019. Management Awards The Company granted 0.4 million and 0.3 million of restricted stock units (“RSU”) in the twenty-six weeks ended August 1, 2020 and August 3, 2019, respectively, to certain executives and key employees. Of the total units awarded in fiscal year 2020, 40% of the total units or shares awarded were in the form of performance-based (“PSU”) while the remaining 60% were in the form of time-based restricted stock units (“TSUs”). Of the total units awarded in 2019, 50% of the units awarded were in the form of PSUs while the remaining 50% were in the form TSUs. The number of PSUs that may ultimately vest will be equal to 0% to 150% of the target units or shares awarded subject to the achievement of pre-established performance goals and the employee’s continued employment through the third anniversary of the grant date. The TSUs granted in 2020 will vest in three equal installments on each anniversary of the award date while the RSUs granted in fiscal year 2019 will vest in one installment on the third anniversary of the award date. At the end of each reporting period, the Company assessed the probability of achieving the pre-established performance conditions related to then outstanding PSUs and PSAs and adjusted stock-based compensation expense based on the results of such assessment. |
Leases
Leases | 6 Months Ended |
Aug. 01, 2020 | |
Leases | |
Leases | 10. Leases The Company leases boutiques, its distribution center, office space, and certain boutique and corporate office equipment under operating leases expiring in various years through the fiscal year ending 2030. Certain of the leases provide that the Company may cancel the lease, with penalties as defined in the lease, if the Company’s boutique sales at that location fall below an established level. Certain leases provide for additional rent payments to be made when sales exceed a base amount. Certain operating leases provide for renewal options for periods from three to five years at the market rate at the time of renewal. As previously disclosed, the Company deferred its lease payments for April, May, and June of fiscal year 2020 on all of its leased locations in order to preserve its liquidity. As of August 1, 2020, the Company has substantially completed the negotiation with its landlords to secure rent abatements and / or deferrals for such months. The terms of rent abatements and / or deferrals vary by landlord; however, most rent deferrals negotiated are payable in equal monthly installments over a twelve month period beginning on January 1, 2021. The Company records the impact of these COVID relief abatements and / or deferrals when the agreement has been fully executed. In accordance with a Staff Q&A issued by the FASB in April 2020, COVID-19 related lease abatements and deferrals that do not result in substantial change in the Company’s lease obligations are accounted for as if no changes were made to the lease contracts. As of August 1, 2020, the Company’s deferred lease obligations totaled $12.7 million, which are included in operating lease liabilities in the unaudited consolidated balance sheet, and deferred real estate taxes and insurance totaled $1.9 million, which are included in accounts payable in the unaudited consolidated balance sheet. Additionally, the Company recorded lease abatements of $0.5 million received from certain landlords in the thirteen and twenty-six weeks ended August 1, 2020. While the lease deferrals do not have an impact on GAAP single lease expense, they are expected to have a positive impact on the Company’s cash flows in fiscal year 2020. Lease abatements and deferrals that result in a substantial change in the Company’s obligations due to additional terms incorporated as part of the COVID relief, including but not limited to lease term extension, were treated as a modification of the lease. While the lease deferrals do not have an impact on GAAP single lease expense, they are expected to have a positive impact on the Company’s cash flows in fiscal year 2020. The following table presents the components of the Company’s operating lease costs for the period presented. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands, except per share data) Operating lease costs $ 13,195 $ 15,322 $ 27,944 $ 30,471 Variable lease costs (1) (36) 244 231 468 $ 13,159 $ 15,566 $ 28,175 $ 30,939 (1) Includes COVID-19 related lease abatements of $0.5 million for the thirteen and twenty-six weeks ended August 1, 2020. The weighted average remaining operating lease term was 5.4 years and 6.0 years as of August 1, 2020 and August 3, 2019, respectively, and the weighted average discount rate for operating leases was 7.3% and 5.6% over the same period, respectively. Cash paid for operating leases included in the measurement of lease liabilities, including interest, totaled $19.1 million and $32.5 million for the twenty-six weeks ended August 1, 2020 and August 3, 2019, respectively. As of August 1, 2020, the maturities of lease liabilities were as follows: Maturities of lease liabilities Remainder of 2020 $ 43,172 2021 58,259 2022 50,329 2023 43,434 2024 35,833 Thereafter 60,239 Total lease payments 291,266 Less: Interest 47,781 Present value of lease liabilities $ 243,485 As of August 1, 2020, the minimum rental commitments for operating lease contracts that have not yet commenced was $3.2 million while its lease terms were 10 years. |
Contingencies
Contingencies | 6 Months Ended |
Aug. 01, 2020 | |
Contingencies | |
Contingencies | 11. Contingencies On January 27, 2017, a purported collective action lawsuit entitled Meghan Magee, et al. v. Francesca’s Holdings Corp., et al. was filed in the United States District Court for the District of New Jersey, Camden Vicinage against the Company for alleged violations of federal and state wage and hour laws. After substitution of a named plaintiff, the lawsuit is now captioned, Danielle Prulello, et al. v. Francesca’s Holding Corp., et al. On November 6, 2018, the court conditionally certified the collective action. On June 15, 2020, the court dismissed the claims of 151 plaintiffs pursuant to the Company's motion to compel these plaintiffs to arbitration. The Company believes that the allegations contained in the lawsuit are without merit and intends to vigorously defend itself against all claims asserted therein. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time and, as such, the Company has not recorded an accrual for any possible loss. The Company, from time to time, is subject to various claims and legal proceedings, including employment claims, wage and hour claims, intellectual property claims, contractual and commercial disputes and other matters that arise in the ordinary course of business. While the outcome of any such claim cannot be predicted with certainty, the Company does not believe that the outcome of these matters will have a material adverse effect on the Company’s business, results of operations or financial condition. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Aug. 01, 2020 | |
Summary of Significant Accounting Policies | |
Going Concern | Going Concern As previously disclosed, the COVID-19 pandemic has and continues to result in an overall disruption in the Company’s operations and supply chain. As of September 4, 2020, nine boutiques were still temporarily closed, most of which are located in California. The majority of reopened boutiques are operating at reduced capacity and hours in accordance with local regulations. All boutiques strictly adhere to current Centers for Disease Control and Prevention recommendations and local regulations to protect the health and safety of its sales associates and customers. Additionally, as of September 4, 2020, the Company’s ecommerce and distribution facility continue to operate at reduced capacity due to social distancing measures that have been put in place. As a result, the Company’s revenues, results of operations and cash flows continue to be materially adversely impacted, which raises substantial doubt about the Company’s ability to continue as a going concern. Management continues to take aggressive and prudent actions to drive sales and monetize existing inventory, reduce expenses, and manage cash flows. These actions include making limited payments of accounts payables, paying approximately 50% and 40% of its total lease obligations for the months of August and September of fiscal year 2020, respectively, and limiting new inventory purchases to preserve cash on hand. Additionally, the Company currently expects to continue making partial lease payments for the remainder of fiscal year 2020, subject to negotiations with landlords and cash flows. The Company also expects to receive an income tax refund of $10.7 million related to certain provisions under the Corona Aid, Relief and Economic Security Act (“CARES Act”) during fiscal year 2020. This refund is required to be used to repay any then outstanding borrowings under the Company’s Amended ABL Credit Agreement in accordance with the certain letter agreement entered into between the Company and the Amended ABL Credit Agreement lenders on May 1, 2020. See Note 6, Income Taxes and Note 7, Credit Facilities for additional information. As a result of the challenging conditions described above, the Company has engaged FTI Capital Advisors (“FTI”) to assist with management’s evaluation and pursuit of available strategic alternatives. The Company, with FTI’s assistance, is evaluating various alternatives to improve its liquidity and financial position, including but not limited to, further lease concessions and deferrals, further reductions of operating and capital expenditures, raising additional capital including seeking a refinancing of the Company’s debt, and restructuring its debt and liabilities through a private restructuring or a restructuring under the protection of applicable bankruptcy laws. However, there can be no assurance that the Company will be able improve its financial position and liquidity, complete a refinancing, raise additional capital or successfully restructure its indebtedness and liabilities. The Company’s strategic plans are not yet finalized and are subject to numerous uncertainties including negotiations with creditors and investors and conditions in the credit and capital markets. There is significant uncertainty around the disruptions related to the COVID-19 pandemic and its impact on the global economy. The Company has experienced, and could continue to experience, other impacts as a result of the COVID-19 pandemic, including, but not limited to, significant impacts on its results of operations and charges from potential adjustments to the carrying amount of its inventory and long-lived asset impairment charges. While the Company anticipates future results of operations will continue to be adversely impacted, the full extent to which the COVID-19 pandemic impacts the Company’s future results will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the severity of the COVID-19 pandemic in the United States, actions taken to contain it or treat its impact, resurgence(s) of COVID-19 that occur after the initial outbreak subsides, and how quickly and to what extent normal economic and operating conditions can resume. The Company’s unaudited consolidated financial statement as of August 1, 2020 were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations, changes in equity, and cash flows at the dates and for the periods presented. The financial information as of February 1, 2020 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended February 1, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on May 1, 2020. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the fiscal year ended February 1, 2020 included in the Company’s Annual Report on Form 10-K. Due to seasonal variations in the Company’s business, interim results are not necessarily indicative of results that may be expected for any other interim period or for a full year. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of the Company and all its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Fiscal Year | Fiscal Year The Company maintains its accounts on a 52- or 53-week year ending on the Saturday closest to January 31st. Fiscal years 2020 and 2019 each include 52 weeks of operations. The fiscal quarters ended August 1, |
Management Estimates and Assumptions | Management Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales returns, and expenses during the reporting periods. Actual results could differ materially from those estimates. |
Reclassification | Reclassification The non-cash amortization of operating lease right-of-use (“ROU”) assets of $23.3 million in the twenty-six weeks ended August 3, 2019 and the asset impairment charges of $0.2 million in the thirteen and twenty-six weeks ended August 3, 2019 have been presented separately in the unaudited consolidated statement of cash flows and unaudited consolidation statements of operations, respectively, to conform to the current period presentation. These reclassifications do not materially impact the unaudited consolidated financial statements for the prior periods presented. |
New Accounting Pronouncements | New Accounting Pronouncements Recently Adopted Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles-Goodwill and Other-Internal-Use-Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted the provisions of this guidance on February 2, 2020 and such adoption did not have a material impact on its consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The ASU intends to enhance and simplify aspects of the income tax accounting guidance in Accounting Standards Codification 740, “Income Taxes” as part of the FASB's simplification initiative. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2020 with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 changes the methodology for measuring credit losses on financial instruments and timing of when such losses are recorded. Since the original issuance of ASU 2016-13, the FASB has issued several amendments and updates to this guidance. This new guidance is effective for public companies, except for smaller reporting companies, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For smaller reporting companies, such as the Company, this new guidance will be effective for fiscal year beginning after December 15, 2022, and interim periods within those fiscal year. Early adoption is permitted. The guidance is to be adopted using the modified retrospective approach. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. |
(Loss) Earnings Per Share | (Loss) Income Per Share (Loss) income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted (loss) income per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of restricted stock awards, restricted stock units and stock option grants using the treasury stock method. The following table summarizes the potential dilution that could occur if stock options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted (loss) income per common share. |
Stock-based Compensation | Stock-based Compensation Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee’s requisite service period. The Company recognized stock-based compensation expense of $0.2 million and $0.3 million in the thirteen and twenty-six weeks ended August 1, 2020, respectively. Stock-based compensation expense during the thirteen weeks ended August 3, 2019 was less than $0.1 million and a net reversal of previously accrued stock-based compensation of $0.2 million during the twenty-six weeks ended August 3, 2019. |
Revenues (Tables)
Revenues (Tables) | 6 Months Ended |
Aug. 01, 2020 | |
Revenues | |
Schedule of disaggregated net sales into the major merchandise departments | The Company disaggregates net sales into the following major merchandise departments. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands) Apparel $ 39,080 $ 52,389 $ 61,164 $ 94,213 Jewelry 18,272 27,957 28,962 51,835 Accessories 11,424 16,211 18,075 29,851 Gifts 6,839 8,532 10,570 16,375 Others (1) 108 883 705 823 $ 75,723 $ 105,972 $ 119,476 $ 193,097 (1) Includes gift card breakage income, shipping revenue and change in return reserve. |
(Loss) Income Per Share (Tables
(Loss) Income Per Share (Tables) | 6 Months Ended |
Aug. 01, 2020 | |
(Loss) Income Per Share | |
Schedule of (Loss) Income Per Share | The following table summarizes the potential dilution that could occur if stock options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted (loss) income per common share. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands, except per share data) Numerator: Net (loss) income $ (17,160) $ 1,812 $ (32,502) $ (8,337) Denominator Weighted-average common shares outstanding - basic 2,959 2,907 2,939 2,904 Restricted stocks awards, restricted stock units and stock options — (1) 53 — (1) — (1) Weighted-average common shares outstanding - diluted 2,959 2,960 2,939 2,904 Per common share: Basic (loss) income per common share $ (5.80) $ 0.62 $ (11.06) $ (2.87) Diluted (loss) income per common share $ (5.80) $ 0.61 $ (11.06) $ (2.87) (1) Due to the Company being in a net loss position in the thirteen and twenty-six weeks ended August 1, 2020 and twenty-six weeks ended August 3, 2019, no restricted stocks and stock options were included in the computation of diluted (loss) income per common share as their effect would have been anti-dilutive. |
Credit Facilities (Tables)
Credit Facilities (Tables) | 6 Months Ended |
Aug. 01, 2020 | |
Credit Facilities | |
Schedule of company's credit facilities | The Company’s credit facilities and outstanding borrowings consisted of the following: August 1, 2020 February 1, 2020 August 3, 2019 (in thousands) Asset based revolving credit facility $ 3,000 $ — $ 10,000 Term loan 10,000 10,000 — Unamortized debt issuance costs (854) (1,064) — Total long-term debt, net 12,146 8,936 — Less: Current portion of long-term debt (12,146) (8,936) — Total long-term debt, net of current portion $ — $ — $ 10,000 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Aug. 01, 2020 | |
Leases | |
Schedule of components of operating lease costs | The following table presents the components of the Company’s operating lease costs for the period presented. Thirteen Weeks Ended Twenty-Six Weeks Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019 (in thousands, except per share data) Operating lease costs $ 13,195 $ 15,322 $ 27,944 $ 30,471 Variable lease costs (1) (36) 244 231 468 $ 13,159 $ 15,566 $ 28,175 $ 30,939 (1) Includes COVID-19 related lease abatements of $0.5 million for the thirteen and twenty-six weeks ended August 1, 2020. |
Schedule of maturity of lease liabilities | Maturities of lease liabilities Remainder of 2020 $ 43,172 2021 58,259 2022 50,329 2023 43,434 2024 35,833 Thereafter 60,239 Total lease payments 291,266 Less: Interest 47,781 Present value of lease liabilities $ 243,485 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Sep. 30, 2020 | Aug. 31, 2020 | Aug. 01, 2020USD ($)statestore | Aug. 03, 2019USD ($) | Aug. 01, 2020USD ($)statestore | Aug. 03, 2019USD ($) | Sep. 04, 2020store | |
Summary of Significant Accounting Policies [Line Items] | |||||||
Year Founded | 2007 | ||||||
Number of Boutiques in Operation | store | 700 | 700 | |||||
Number of States in which Entity Operates | state | 47 | 47 | |||||
Income taxes receivable, Net operating loss carryback, CARES Act | $ 17,300 | $ 17,300 | |||||
Operating lease right-of-use asset amortization | 21,240 | $ 23,273 | |||||
Asset impairment charges | $ 0 | $ 189 | $ 7,472 | $ 189 | |||
Fiscal Year | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Length of Fiscal Period | 364 days | 364 days | |||||
Fiscal Year | Minimum | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Length of Fiscal Period | 364 days | ||||||
Fiscal Year | Maximum | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Length of Fiscal Period | 371 days | ||||||
Fiscal Quarter | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Length of Fiscal Period | 91 days | 91 days | |||||
Year To Date | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Length of Fiscal Period | 182 days | 182 days | |||||
Subsequent events | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Number of stores closed due to COVID-19 | store | 9 | ||||||
Percent of total lease obligation paid | 40.00% | 50.00% | |||||
Accounts Receivable [Member] | |||||||
Summary of Significant Accounting Policies [Line Items] | |||||||
Income taxes receivable, Net operating loss carryback, CARES Act | $ 10,700 | $ 10,700 |
Revenues (Details)
Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | ||
Disaggregation of Revenue [Line Items] | |||||
Net sales | $ 75,723 | $ 105,972 | $ 119,476 | $ 193,097 | |
Apparel | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 39,080 | 52,389 | 61,164 | 94,213 | |
Jewelry | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 18,272 | 27,957 | 28,962 | 51,835 | |
Accessories | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 11,424 | 16,211 | 18,075 | 29,851 | |
Gifts | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | 6,839 | 8,532 | 10,570 | 16,375 | |
Others | |||||
Disaggregation of Revenue [Line Items] | |||||
Net sales | [1] | $ 108 | $ 883 | $ 705 | $ 823 |
[1] | Includes gift card breakage income, shipping revenue and change in return reserve. |
Revenues - Additional Informati
Revenues - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | Feb. 01, 2020 | |
Revenues | |||||
Liability for unredeemed gift cards | $ 3.2 | $ 4 | $ 3.2 | $ 4 | $ 4.1 |
Unredeemed gift card as of the prior year end recognized in revenues | $ 0.6 | $ 1.3 | $ 1.5 | $ 3.1 |
(Loss) Income Per Share (Detail
(Loss) Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | |||||||
Aug. 01, 2020 | May 02, 2020 | Aug. 03, 2019 | May 04, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | ||||
Numerator: | |||||||||
Net (loss) income | $ (17,160) | $ (15,342) | $ 1,812 | $ (10,149) | $ (32,502) | $ (8,337) | |||
Denominator | |||||||||
Weighted-average common shares outstanding - basic | 2,959 | 2,907 | 2,939 | 2,904 | |||||
Restricted stocks awards, restricted stock units and stock options | 0 | [1] | 53 | 0 | [1] | 0 | [1] | ||
Weighted-average common shares outstanding - diluted | 2,959 | 2,960 | 2,939 | 2,904 | |||||
Per common share: | |||||||||
Basic (loss) income per common share | $ (5.80) | $ 0.62 | $ (11.06) | $ (2.87) | |||||
Diluted (loss) income per common share | $ (5.80) | $ 0.61 | $ (11.06) | $ (2.87) | |||||
[1] | Due to the Company being in a net loss position in the thirteen and twenty-six weeks ended August 1, 2020 and twenty-six weeks ended August 3, 2019, no restricted stocks and stock options were included in the computation of diluted (loss) income per common share as their effect would have been anti-dilutive. |
(Loss) Income Per Share - Addit
(Loss) Income Per Share - Additional Information (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | |
Stock Compensation Plan [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Securities Excluded from Computation of Diluted Weighted Average Common Stock Outstanding | 0.3 | 0.1 | 0.3 | 0.1 |
Performance-based RSU | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Securities Excluded from Computation of Diluted Weighted Average Common Stock Outstanding | 0.1 | 0.1 | 0.1 | 0.1 |
Asset Impairment Charges (Detai
Asset Impairment Charges (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 01, 2020USD ($)store | Aug. 03, 2019USD ($) | Aug. 01, 2020USD ($)store | Aug. 03, 2019USD ($) | |
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Asset impairment charges | $ | $ 0 | $ 189 | $ 7,472 | $ 189 |
Number of boutiques stores | store | 700 | 700 | ||
Boutique Property and Equipment Impaired [Member] | ||||
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Write-down of property and equipment | $ | $ 700 | |||
Number of boutiques stores | store | 41 | 41 | ||
Boutique ROU Asset Impaired | ||||
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Write-down of operating lease | $ | $ 6,800 | |||
Number of boutiques stores | store | 107 | 107 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Aug. 01, 2020 | Aug. 01, 2020 | Aug. 03, 2019 | |
Effective income tax expense (benefit) rates | 30.20% | (33.50%) | |
Income taxes receivable, Net operating loss carryback, CARES Act | $ 17.3 | $ 17.3 | |
Income tax receivable | $ 1.9 | ||
Accounts Receivable [Member] | |||
Income taxes receivable, Net operating loss carryback, CARES Act | 10.7 | 10.7 | |
Other Assets [Member] | |||
Income taxes receivable, Net operating loss carryback, CARES Act | $ 6.6 | $ 6.6 |
Credit Facilities (Details)
Credit Facilities (Details) - USD ($) $ in Thousands | Aug. 01, 2020 | Feb. 01, 2020 | Aug. 03, 2019 |
Long-term Debt Details | |||
Total long-term debt, net | $ 12,146 | $ 8,936 | |
Less: Current portion of long term debt | (12,146) | (8,936) | $ 0 |
Total long-term debt, net of current portion | 0 | 0 | 10,000 |
Asset based revolving credit facility | |||
Long-term Debt Details | |||
Asset based revolving credit facility, outstanding borrowings | 3,000 | $ 10,000 | |
Term Loan | |||
Long-term Debt Details | |||
Term Loan, outstanding borrowings | 10,000 | 10,000 | |
Unamortized debt issuance costs | $ (854) | $ (1,064) |
Credit Facilities - Asset Based
Credit Facilities - Asset Based Revolving Credit Facility (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 5 Months Ended | 6 Months Ended | ||||
Aug. 01, 2020 | Aug. 01, 2020 | Aug. 01, 2020 | Aug. 03, 2019 | Jun. 25, 2020 | Aug. 01, 2020 | Aug. 03, 2019 | Aug. 13, 2019 | |
Debt Instrument [Line Items] | ||||||||
Income taxes receivable, Net operating loss carryback, CARES Act | $ 17.3 | $ 17.3 | $ 17.3 | $ 17.3 | ||||
Accounts Receivable [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Income taxes receivable, Net operating loss carryback, CARES Act | 10.7 | 10.7 | 10.7 | 10.7 | ||||
Asset based revolving credit facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 40 | 40 | 40 | 40 | $ 50 | |||
Line Of Credit Availability For Letters Of Credit | 10 | 10 | 10 | $ 10 | ||||
Maturity of Asset based revolving credit facility | The Amended ABL Credit Agreement provided for Aggregate Revolving Commitments (as defined in the Amended ABL Credit Agreement) of $40.0 million and matures on the earlier of (a) May 23, 2023 and (b) the date that is 90 days prior to any scheduled maturity of the Term Loan | |||||||
Minimum cash on hand required before borrowings are allowed under a credit agreement | 3 | |||||||
Minimum Amount of Liquidity That Triggers a Dominion Period | $ 10 | $ 15 | ||||||
Percent Of Unrestricted Cash To Total Liquidity | 80.00% | |||||||
Waiver period of unrestricted cash to total liquidity | 60 days | |||||||
Combined borrowing base availability | $ 1 | $ 1 | $ 1 | $ 1 | ||||
Average effective interest rate | 3.00% | 4.20% | 3.00% | 4.20% |
Credit Facilities - Term Loan C
Credit Facilities - Term Loan Credit Agreement (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Aug. 01, 2020 | Aug. 01, 2020 | Aug. 13, 2019 | |
Asset based revolving credit facility | |||
Debt Instrument [Line Items] | |||
Combined borrowing base availability | $ 1 | $ 1 | |
Minimum cash on hand required before borrowings are allowed under a credit agreement | $ 3 | ||
Term Loan | |||
Debt Instrument [Line Items] | |||
Aggregate amount of loan | $ 10 | ||
Average effective interest rate | 10.00% |
Stockholder Rights Plan (Detail
Stockholder Rights Plan (Details) - $ / shares | Aug. 01, 2020 | Jul. 31, 2019 |
Stockholder Rights Plan | ||
Ownership trigger threshold | 15.00% | |
Number of preferred share purchase rights granted for each outstanding share of common stock | 1 | |
Number of preferred share purchase right for each outstanding share of common stock | 0.0002 | |
Preferred Stock, par value | $ 0.01 | |
Preferred stock, shares issued | 0 | |
Preferred stock, shares outstanding | 0 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) - USD ($) $ in Thousands, shares in Millions | 3 Months Ended | 6 Months Ended | ||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | |
Stock-based Compensation Disclosures | ||||
Stock-based compensation expense | $ 200 | $ 100 | $ 295 | $ (190) |
Management [Member] | ||||
Stock-based Compensation Disclosures | ||||
Number of shares granted (shares) | 0.4 | 0.3 | ||
Performance-based RSU | Management [Member] | ||||
Stock-based Compensation Disclosures | ||||
Vesting term | 3 years | 3 years | ||
Percent of shares awarded | 40.00% | 50.00% | ||
Performance-based RSU | Management [Member] | Minimum | ||||
Stock-based Compensation Disclosures | ||||
Percent of Target Shares that May Vest | 0.00% | 0.00% | ||
Performance-based RSU | Management [Member] | Maximum | ||||
Stock-based Compensation Disclosures | ||||
Percent of Target Shares that May Vest | 150.00% | 150.00% | ||
Time-based RSU | Management [Member] | ||||
Stock-based Compensation Disclosures | ||||
Vesting term | 3 years | 3 years | ||
Percent of shares awarded | 60.00% | 50.00% |
Leases - Components of operatin
Leases - Components of operating lease costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 01, 2020 | Aug. 03, 2019 | Aug. 01, 2020 | Aug. 03, 2019 | |
Components of operating lease costs | ||||
Operating lease costs | $ 13,195 | $ 15,322 | $ 27,944 | $ 30,471 |
Variable lease cost | 244 | 231 | 468 | |
Variable lease cost, net of COVID-19 lease abatement | (36) | |||
Lease cost | $ 13,159 | $ 15,566 | $ 28,175 | $ 30,939 |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities (Details) $ in Thousands | Aug. 01, 2020USD ($) |
Maturities of lease liabilities | |
Remainder of 2020 | $ 43,172 |
2021 | 58,259 |
2022 | 50,329 |
2023 | 43,434 |
2024 | 35,833 |
Thereafter | 60,239 |
Total lease payments | 291,266 |
Less: Interest | 47,781 |
Present value of lease liabilities | $ 243,485 |
Leases - Additional Information
Leases - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Aug. 01, 2020 | Aug. 01, 2020 | Aug. 03, 2019 | |
Lessee, Operating Lease | |||
Lease Expiration Year | 2030 | ||
COVID-19 lease abatements | $ 0.5 | $ 0.5 | |
Weighted-average remaining lease term - operating leases | 5 years 4 months 24 days | 5 years 4 months 24 days | 6 years |
Weighted-average discount rate - operating leases | 7.30% | 7.30% | 5.60% |
Cash paid for operating leases included in the measurement of lease liabilities | $ 19.1 | $ 32.5 | |
Lessee, Operating Lease, Not yet Commenced | |||
Lessee Operating Lease Lease Not Yet Commenced Operating Lease Payments | $ 3.2 | $ 3.2 | |
Lessee, Operating Lease, Lease Not yet Commenced, Term of Contract | 10 years | 10 years | |
Operating lease liabilities | |||
Lessee, Operating Lease | |||
Deferred lease obligations due to COVID | $ 12.7 | $ 12.7 | |
Accounts payable | |||
Lessee, Operating Lease | |||
Deferred real estate taxes and insurance due to COVID | $ 1.9 | $ 1.9 | |
Minimum | |||
Lessee, Operating Lease | |||
Lessee, Operating Lease, Renewal Term | 3 years | 3 years | |
Maximum | |||
Lessee, Operating Lease | |||
Lessee, Operating Lease, Renewal Term | 5 years | 5 years |