Exhibit 99.1
francesca’s® Reports Third Quarter Fiscal Year 2015Financial Results
| · | Net sales increased 19% to $103.7 million |
| · | Comparable sales increased 4% |
| · | Diluted earnings per share was $0.16 |
| · | Opened 80 boutiques year-to-date |
HOUSTON, TEXAS — December 9, 2015 —Francesca’s Holdings Corporation (NASDAQ: FRAN) today reported financial results for the third quarter ended October 31, 2015.
Michael W. Barnes, Chairman, President, and CEO stated, “We are very pleased to have exceeded our third quarter sales and earnings expectations. The momentum in our business that began in August continued throughout the third quarter. We saw strength across all of our departments and throughout many categories, with apparel and accessories businesses leading the way. The sales productivity of new boutiques were the highest since 2012, which we believe is a result of the improved merchandise offering and elevated boutique level execution. In anticipation of an earlier start of the holiday season, we accelerated inventory receipts into the third quarter compared to last year. However, we are planning inventory levels at the end of the fourth quarter to be more consistent with historical levels in line with our expectations.”
Mr. Barnes noted that, “Based on recent results and our strong merchandising position across our apparel, jewelry and gift businesses, we have increased sales and comparable sales guidance for the fiscal year. We have increased the lower end of our EPS guidance for the fiscal year which now includes approximately $0.04 per diluted share for team member bonuses that were not included in our prior guidance. Overall, we continue to focus our execution on building the senior management team and executing our long term strategy toward achieving our future goals. Now that both our new Chief Merchandising Officer and our SVP of Digital and Marketing have joined the leadership team, I look forward to their contributions as we implement and execute our long term strategies which I call the “Vision 2020” plan. Thus far during fiscal 2015, we have driven meaningful improvement in our financial performance and I continue to believe in the significant long term growth opportunities ahead. I’d like to thank all our team members for their hard work and continued dedication to francesca’s®.”
THIRD QUARTER RESULTS
Net sales increased 19% to $103.7 million from $87.1 million in the comparable prior year period. This increase was driven by the 4% increase in comparable sales as well as the opening of 81 new boutiques since the comparable prior year quarter. We opened 11 boutiques during the quarter bringing our total boutique count to 619 at the end of the third quarter.
The increase in comparable sales was primarily driven by an increase in average transaction value compared to prior year. Each of our merchandise category posted double digit sales increase during the quarter, with strongest growth in apparel and accessories. DTC sales increased 12% to $3.8 million during the quarter compared to $3.4 million in the same period last year.
Gross profit, as a percentage of net sales, decreased to 46.6% compared to 47.3% in the prior year quarter. This decrease is driven by 30 basis points of lower merchandise margin due to charges related to the disposal of slow-moving merchandise and 30 basis points of increased depreciation charges associated with remodeling and updating existing boutiques equipment, furniture and fixtures as well as increasing boutique build-out costs.
Selling, general and administrative expenses (“SG&A”) increased 25% to $37.3 million compared to $29.8 million in the prior year quarter. The increase in SG&A expenses is primarily due to higher boutique and corporate payroll to support the larger boutique base as well as increased performance-based incentive bonus expenses.
Income from operations was $11.0 million, or 10.7% of net sales, compared to $11.4 million, or 13.1% of net sales, in the prior year quarter.
BALANCE SHEET SUMMARY
Total cash and cash equivalents at the end of the quarter were $42.0 million compared to $22.8 million at the end of the comparable prior year quarter.
We ended the quarter with $43.9 million of inventory compared to $35.4 million at end of the comparable prior year period. Average ending inventory per boutique increased 8% compared to prior year period due to accelerated inventory receipts in preparation for the holiday season.
During the third quarter, the Company repurchased 666,000 shares of its common stock at a cost of $8.5 million or an average of $12.83 per share.
FOURTH QUARTER AND FISCAL YEAR 2015 GUIDANCE
For the fourth quarter ending January 30, 2016, net sales are expected to be in the range of $127.0 million to $130.0 million; assuming a mid-single digit increase in comparable sales compared to the prior year comparable sales increase of 1%. The Company expects to finish the year with 616 boutiques as a result of opening 3 new boutiques and closing 6 boutiques in the fourth quarter. Diluted earnings per share are expected to be in the range of $0.31 to $0.33.
For the full year ending January 30, 2016, we expect net sales to be in the range of $432.0 million and $435.0 million; assuming a flat to slightly positive 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 $0.86 to $0.88. The number of average diluted shares for the full year assumed in guidance is expected to be 42.1 million shares. The effective tax rate is estimated to be 38.1%. We expect capital expenditures of $25.0 million to $26.0 million for fiscal year 2015.
Conference Call Information
A conference call to discuss the third quarter fiscal year 2015 results is scheduled for December 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 shortly after the conclusion of the call and remain until December 16, 2015. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 5941907.
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 Financial 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 which operates a nationwide-chain of boutiques providing customers a unique, fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 621 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 | Kate Venturina |
| 646-277-1214 | 832-494-2233 |
| kate.venturina@francescas.com / IR@francescas.com |
Francesca’s Holdings Corporation
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts and Percentages)
| Thirteen Weeks Ended | ||||||||||||||||||||||||||||
| October 31, 2015 | November 1, 2014 | Variance | ||||||||||||||||||||||||||
| In USD | As a % of Net Sales(1) | In USD | As a % of Net Sales(1) | In USD | % | Basis Points | ||||||||||||||||||||||
| Net sales | $ | 103,728 | 100.0 | % | $ | 87,110 | 100.0 | % | $ | 16,618 | 19 | % | - | |||||||||||||||
| Cost of goods sold and occupancy costs | 55,362 | 53.4 | % | 45,925 | 52.7 | % | 9,437 | 21 | % | 70 | ||||||||||||||||||
| Gross profit | 48,366 | 46.6 | % | 41,185 | 47.3 | % | 7,181 | 17 | % | (70 | ) | |||||||||||||||||
| Selling, general and administrative expenses | 37,286 | 35.9 | % | 29,810 | 34.2 | % | 7,476 | 25 | % | 170 | ||||||||||||||||||
| Income from operations | 11,080 | 10.7 | % | 11,375 | 13.1 | % | (295 | ) | (3 | )% | (240 | ) | ||||||||||||||||
| Interest expense | (122 | ) | (0.1 | )% | (117 | ) | (0.1 | )% | (5 | ) | 4 | % | - | |||||||||||||||
| Other (expense) income | 29 | 0.0 | % | 42 | 0.0 | % | (13 | ) | (31 | )% | - | |||||||||||||||||
| Income before income tax expense | 10,987 | 10.6 | % | 11,300 | 13.0 | % | (313 | ) | (5 | )% | (240 | ) | ||||||||||||||||
| Income tax expense | 4,036 | 3.9 | % | 4,030 | 4.6 | % | 6 | 0 | % | (70 | ) | |||||||||||||||||
| Net income | $ | 6,951 | 6.7 | % | $ | 7,270 | 8.3 | % | $ | (319 | ) | (4 | )% | (160 | ) | |||||||||||||
| (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 | $ | 0.16 | $ | 0.17 | ||||||||||||||||||||||||
| Weighted average diluted share count | 42,246 | 42,389 | ||||||||||||||||||||||||||
| Comparable sales change | 4% | (6)% | ||||||||||||||||||||||||||
| Thirty Nine Weeks Ended | ||||||||||||||||||||||||||||
| October 31, 2015 | November 1, 2014 | Variance | ||||||||||||||||||||||||||
| In USD | As a % of Net Sales | In USD | As a % of Net Sales | In USD | % | Basis Points | ||||||||||||||||||||||
| Net sales | $ | 304,772 | 100.0 | % | $ | 269,853 | 100.0 | % | $ | 34,919 | 13 | % | - | |||||||||||||||
| Cost of goods sold and occupancy costs | 161,205 | 52.9 | % | 141,521 | 52.4 | % | 19,684 | 14 | % | 50 | ||||||||||||||||||
| Gross profit | 143,567 | 47.1 | % | 128,332 | 47.6 | % | 15,235 | 12 | % | (50 | ) | |||||||||||||||||
| Selling, general and administrative expenses | 105,422 | 34.6 | % | 86,275 | 32.0 | % | 19,147 | 22 | % | 260 | ||||||||||||||||||
| Income from operations | 38,145 | 12.5 | % | 42,057 | 15.6 | % | (3,912 | ) | (9 | )% | (310 | ) | ||||||||||||||||
| Interest expense | (344 | ) | (0.1 | )% | (507 | ) | (0.2 | )% | 163 | (32 | )% | 10 | ||||||||||||||||
| Other income | (91 | ) | 0.0 | % | 201 | 0.1 | % | (292 | ) | (145 | )% | (10 | ) | |||||||||||||||
| Income before income tax expense | 37,710 | 12.4 | % | 41,751 | 15.5 | % | (4,041 | ) | (10 | )% | (310 | ) | ||||||||||||||||
| Income tax expense | 14,214 | 4.7 | % | 15,614 | 5.8 | % | (1,400 | ) | (9 | )% | (110 | ) | ||||||||||||||||
| Net income | $ | 23,496 | 7.7 | % | $ | 26,137 | 9.7 | % | $ | (2,641 | ) | (10 | )% | (200 | ) | |||||||||||||
| (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 | $ | 0.55 | $ | 0.62 | ||||||||||||||||||||||||
| Weighted average diluted share count | 42,365 | 42,373 | ||||||||||||||||||||||||||
| Comparable sales change | (1)% | (7)% | ||||||||||||||||||||||||||
Francesca’s Holdings Corporation
Consolidated Balance Sheets
(In thousands, except share amounts)
October 31, 2015 | January 31, 2015 | November 1, 2014 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 42,015 | $ | 39,071 | $ | 22,830 | ||||||
| Accounts receivable | 8,683 | 12,279 | 9,214 | |||||||||
| Inventories | 43,885 | 23,801 | 35,428 | |||||||||
| Deferred income taxes | 5,737 | 4,858 | 4,797 | |||||||||
| Prepaid expenses and other current assets | 6,023 | 5,890 | 5,699 | |||||||||
| Total current assets | 106,343 | 85,899 | 77,968 | |||||||||
| Property and equipment, net | 79,017 | 74,095 | 70,646 | |||||||||
| Deferred income taxes | 6,659 | 3,642 | 6,573 | |||||||||
| Other assets, net | 1,656 | 1,909 | 2,776 | |||||||||
| TOTAL ASSETS | $ | 193,675 | $ | 165,545 | $ | 157,963 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 15,933 | $ | 11,550 | $ | 13,074 | ||||||
| Accrued liabilities | 14,817 | 11,904 | 8,610 | |||||||||
| Total current liabilities | 30,750 | 23,454 | 21,684 | |||||||||
| Landlord incentives and deferred rent | 37,540 | 32,877 | 33,299 | |||||||||
| Total liabilities | 68,290 | 56,331 | 54,983 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity: | ||||||||||||
| Common stock - $.01 par value, 80.0 million shares authorized; 45.5 million shares issued at each October 31, 2015, January 31, 2015 and November 1, 2014, respectively. | 455 | 455 | 455 | |||||||||
| Additional paid-in capital | 106,722 | 105,498 | 105,235 | |||||||||
| Retained earnings | 86,900 | 63,404 | 57,433 | |||||||||
| Treasury stock, at cost – 3.8 million, 3.2 million and 3.2 million shares held at October 31, 2015, January 31, 2015 and November 1, 2014, respectively. | (68,692 | ) | (60,143 | ) | (60,143 | ) | ||||||
| Total stockholders’ equity | 125,385 | 109,214 | 102,980 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 193,675 | $ | 165,545 | $ | 157,963 | ||||||
Francesca’s Holdings Corporation
Consolidated Statements of Cash Flows
(In thousands)
| Thirty Nine Weeks Ended | ||||||||
| October 31, 2015 | November 1, 2014 | |||||||
| Cash Flows Provided By Operating Activities: | ||||||||
| Net income | $ | 23,496 | $ | 26,137 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 12,361 | 9,848 | ||||||
| Stock-based compensation expense | 2,416 | 2,488 | ||||||
| Excess tax benefit from stock-based compensation | (81 | ) | (226 | ) | ||||
| Loss on sale of assets | 360 | 191 | ||||||
| Deferred income taxes | (5,374 | ) | (4,470 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 3,677 | (4 | ) | |||||
| Inventories | (20,084 | ) | (10,814 | ) | ||||
| Prepaid expenses and other assets | (66 | ) | (240 | ) | ||||
| Accounts payable | 6,086 | 3,268 | ||||||
| Accrued liabilities | 2,913 | (1,213 | ) | |||||
| Landlord incentive and deferred rent | 4,663 | 5,851 | ||||||
| Net cash provided by operating activities | 30,367 | 30,816 | ||||||
| Cash Flows Used in Investing Activities: | ||||||||
| Purchase of property and equipment | (19,850 | ) | (16,785 | ) | ||||
| Proceeds from sale of assets | 12 | 13 | ||||||
| Net cash used in investing activities | (19,838 | ) | (16,772 | ) | ||||
| Cash Flows Used in Financing Activities: | ||||||||
| Repurchases of common stock | (7,872 | ) | (5,270 | ) | ||||
| Proceeds from the exercise of stock options | 206 | 1,332 | ||||||
| Excess tax benefit from stock-based compensation | 81 | 226 | ||||||
| Repayments of borrowings under the revolving credit facility | - | (25,000 | ) | |||||
| Net cash used in financing activities | (7,585 | ) | (28,712 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 2,944 | (14,668 | ) | |||||
| Cash and cash equivalents, beginning of year | 39,071 | 37,498 | ||||||
| Cash and cash equivalents, end of period | $ | 42,015 | $ | 22,830 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | 14,909 | $ | 17,716 | ||||
| Interest paid | $ | 142 | $ | 340 | ||||
Francesca’s Holdings Corporation
Supplemental Information
Quarterly Sales by Merchandise Category
| Thirteen Weeks Ended | Change | |||||||||||||||
| October 31, 2015 | November 1, 2014 | Dollar | % | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||||
| Apparel | $ | 54,326 | $ | 44,274 | $ | 10,052 | 23 | % | ||||||||
| Jewelry | 21,265 | 18,638 | 2,627 | 14 | % | |||||||||||
| Accessories | 17,078 | 14,220 | 2,858 | 20 | % | |||||||||||
| Gifts | 10,847 | 9,606 | 1,241 | 13 | % | |||||||||||
| Merchandise sales | 103,516 | 86,738 | 16,778 | 19 | % | |||||||||||
| Others(1) | 212 | 372 | (160 | ) | (43 | )% | ||||||||||
| $ | 103,728 | $ | 87,110 | $ | 16,618 | 19 | % | |||||||||
| (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 | )% | ||||
| Q3 | (1 | )% | 5 | % | ||||
| (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 | )% | 4 | % | ||||||
| Q4 | (6 | )% | 1 | % | ||||||||
| Fiscal year | (2 | )% | (5 | )% | ||||||||