Francesca Meets Earnings, Sales Ests

Zacks

Francesca's Holdings Corp (FRAN) reported earnings of 26 cents per share for the 2013-first-quarter, in line with the Zacks Consensus Estimate. Earnings of this specialty retailer, however, grew 23.8% year over year on the back of double-digit top-line growth. It was also at the higher end of management’s expectation of 25 cents to 26 cents.

Francesca's reported net sales of $79.0 million, in line with the Zacks Consensus Estimate. Net sales surged 29.0% year over year, driven by solid improvement in comparable boutique sales and the opening of 56 new stores. It was close to management’s expectation of $79.5 million to $80.5 million.

Jewelry and accessories boosted revenue growth during the quarter. Comparable boutique sales rose 2.0% in the quarter. Strong traffic, conversion rates and average transaction values led to the solid rise in comparable store sales during the quarter.

Gross margin shrank 70 basis points (bps) to 52.4% due to higher promotional spending resulting in lower merchandise margins. Selling, general and administrative (SG&A) expenses rose 31% to $22.8 million in the quarter. As a percentage of revenues, SG&A expenses inflated 40 bps to 28.8% in the quarter.

Other Financial Updates

Francesca exited the first quarter of fiscal 2012 with cash and cash equivalents of $33.8 million compared to $29.9 million at the prior-quarter end. Total inventories held by the company stood at $19.0 million compared to $23.3 million in the prior quarter.

Outlook

Francesca's expects net sales in the range of $94.5 million and $95.5 million in the second quarter of 2013 on the back of expected comparable sales growth of 1% to 2% and estimated openings of 21 new stores. Earnings per share are expected in the range of 35 cents to 36 cents, up 21.0% to 24.0% from the prior-year quarter.

For fiscal 2013, the company expects net sales in the range of $365.0 million to $370.0 million on the back of expected comparable sales growth of 4% to 5%. Earnings per share are expected in the range of $1.27 to $1.30, up 23.3% to 26.2% from the prior-year quarter.

Francesca's currently carries a Zacks Rank #4 (Sell). Other stocks in the consumer discretionary sector that are worth considering are Iconix Brand Group Inc. (ICON) carrying a Zacks Rank #1 (Strong Buy) and Brown Shoe Company Inc. (BWS) and Carter’s Inc. (CRI), both carrying a Zacks Rank #2 (Buy).

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