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Edited Transcript of FRAN earnings conference call or presentation 11-Dec-18 1:30pm GMT

Q3 2018 Francesca's Holdings Corp Earnings Call

HOUSTON Dec 17, 2018 (Thomson StreetEvents) -- Edited Transcript of Francesca's Holdings Corp earnings conference call or presentation Tuesday, December 11, 2018 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kelly M. Dilts

Francesca's Holdings Corporation - Executive VP & CFO

* Steven Paul Lawrence

Francesca's Holdings Corporation - President, CEO & Director

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Conference Call Participants

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* Janet Joseph Kloppenburg

JJK Research Associates, Inc. - President

* Susan Kay Anderson

B. Riley FBR, Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, please stand by. Good day, and welcome to the Francesca's Holdings Corp. Third Quarter 2018 Earnings Conference Call. Today's conference is being recorded. And now at this time, I will turn the call over to Kelly Dilts. Please go ahead, ma'am.

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Kelly M. Dilts, Francesca's Holdings Corporation - Executive VP & CFO [2]

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Thanks, Jay, and good morning, everyone. We appreciate your participation this morning in Francesca's third quarter fiscal year 2018 conference call.

Earlier this morning, we issued a press release outlining our financial and operating results for the third quarter ended November 3, 2018. Please note, the following discussion includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in today's discussion that address activities, events or developments that the company expects, believes, targets or anticipates will or may occur in future are forward-looking statements.

The company's actual results may differ materially from those projected in the forward-looking statements as a result of certain risks or other factors including those risk factors set forth in the company's Form 10-K and quarterly reports on Forms 10-Q filed with the Securities and Exchange Commission. All such statements speak only as of the date made and, except as required by law, the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

As usual, a replay of today's conference call will be posted on our corporate website. We will begin today's call with comments from our President and CEO, Steve Lawrence. Steve?

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [3]

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Thanks, Kelly. Good morning, everybody, and welcome to our third quarter 2018 earnings call. During our call today, Kelly and I will give some color around Q3 performance, along with some information around how we see the holiday season playing out for us. As we've preannounced in 11/26, sales for the third quarter are disappointing, coming in at $95 million or negative 14 comp. We had anticipated that sales would start to flatten out as we progress through the quarter, but this clearly did not happen. The sharp mid-teens decline in brick-and-mortar traffic that started midway through Q2 and persisted throughout the most of Q3 was the primary driver of our top line miss.

Over the past year, we've implemented stronger inventory and receipt load disciplines. We ended the quarter with inventories on a per-boutique basis down 6% versus last year. This has also translated into reduced clearance, which has helped us improve our merchandise margins by 130 basis points while also contributing to a mid-single-digit AUR increase.

During the third quarter, we reacted quickly to trends that we were seeing in the business and adjusted our strategies accordingly. We believe that these actions helped to reduce sales declines during November with a strong response to our Thanksgiving and Cyber Monday events. Similar to the previous years, we're experiencing a lull in brick-and-mortar traffic post-Thanksgiving while our dotcom businesses continue to grow. Since our online business still represents less than 10% of our annual revenue, the lift in dotcom sales currently is not offsetting declines in brick-and-mortar traffic.

Similar to the last couple of years, we expect to see a last-minute surge as we head into Christmas with one extra day before the holiday. However, with roughly half of our holiday business behind us and based on the sluggish brick-and-mortar traffic trends that we've seen in early December, we believe it is prudent to guide fourth quarter sales comps to be down negative 10% to negative 15%. Based on this lower sales forecast, we now believe that EPS will come in between $0.07 to a $0.14 loss for Q4. Kelly will give you some more color around our fourth quarter guidance in a minute.

As we move forward through Q4 and start looking into next year, we have 4 main focuses. First, we need to stabilize our brick-and-mortar sales. We believe we can accomplish this by further intensifying our efforts to drive our brick-and-mortar traffic locations. We know that over half our guests who decide to shop with us is there walking by our storefronts. We've gauged with an outside consulting firm to help us generate some new ways to drive more foot traffic into our boutiques. Some of this work has informed several tests that we've put in place this holiday with a focus on creating more disruptive window displays and visual sets. We will read these results and roll out the best ideas for the full chain as we move forward.

Also, we've done a lot of work around our customer follow-up in the past 3 to 4 months and now have a much better cross-channel visibility to who our best customers are. Our key focuses in marketing will be around increasing frequency of shop and spend with our existing customer base with our franREWARDS loyalty program, while creating new outreach campaigns for lapsed shoppers that have visited us less frequently over the past year.

Our second focus is to accelerate our growth in the online channel. We know from the analysis that we've done that while our total dotcom penetration is lower than our competition's, most of our online core metrics such as conversion and average order value are roughly in line with the industry averages. While there is always room to improve on these fronts, the key focus for us to drive faster dotcom growth will be by increasing traffic with an expanded marketing investment. The core part of our plans to move forward will be an increased level of marketing investment with a focus on influencers in digital and social media. We believe this increased spend should also help improve our brick-and-mortar traffic as well.

Our third major focus, which ties into the first 2, is to ensure that our merchandising efforts are resonating with our core customers. We've done a lot of work around refocusing on our core customer demographic and improving our assortments over the past year and we believe that the inventory content and levels are in a better place than where we were a year ago at this time. That being said, our results clearly tell us that we need to continue to improve our execution on this and all fronts. The clothing business remains our biggest challenge and while it is -- and it is where we're focusing most of our time and attention. We're moving fast to ramp up our separates business and have seen stronger customer responses in several categories over the past months, most notably sweaters, denim and skirts.

At the same time, we're working to stabilize the dresses category by shifting to trending items such as rompers and jumpsuits and other waist-defining silhouettes. To help accelerate targets in our clothing business, we're also using our outside consultants to help us architect stronger, test and react disciplines with a goal of speeding up our reaction times in getting better distortion and trend ideas across all customer touch points.

Finally, we're intensely focused on controlling expense and maintaining a healthy balance sheet to help provide us with flexibility as we continue to navigate our choppy sales environment. As we mentioned on our pre-release, we're going through a thorough review of our real estate portfolio and are slowing new-store growth as we look to optimize our fleet. For 2019, we anticipate relocating or opening around 10 new boutiques while closing roughly 30 to 40 underperforming stores. We will continue to close most underperforming boutiques at natural lease terminations or kick-outs. We believe that the right approach going forward is to have a strong e-commerce business that is coupled with an outstanding brick-and-mortar experience. Optimizing our fiscal footprint and eliminating underperforming boutiques will help us achieve the right mix.

While we've been pleased with the performance of remodels in 2018, we believe that it is also prudent to hit pause on them while we work through our current issues. This reduction in boutique count and remodels lead us to a reduction in selling expense as well as a dramatic reduction in CapEx. At this point, we have a clear line of sight to CapEx for next year and we're currently planning to spend around $10 million on this front versus roughly $30 million in 2018.

In conclusion, while we are continuing to fight through the challenging traffic and top line sales trends, we believe we have a unique position in the market as the only chain of boutiques with a national scale and buying power. I want to stress that this is not business as usual for us. The team is incredibly aligned and focused on the actions I've just recapped for you with a goal of improving the business quickly. We are leaving no stone unturned and are continuing to rapidly evolve our marketing efforts, our merchandising strategies, our approach to real estate and our assortment plans all with the same end goal of stabilizing traffic trends and improving the business as fast as possible.

As I mentioned, we also have several tests that we're running during the holiday, all focused on improving foot traffic through more compelling windows, store visuals and merchandising trend statements. We're close to reading these tests as we work through holiday and plan to quickly roll out the most successful ideas through the whole chain. At the same time, we remain diligent on expense controls and ensure that we maintain a healthy balance sheet to provide us with flexibility going forward.

At this point, I'd like to turn it over to Kelly to give you a more detailed breakdown of our Q3 metrics along with our guidance for Q4 and the full year. After that, we will take your questions. Kelly?

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Kelly M. Dilts, Francesca's Holdings Corporation - Executive VP & CFO [4]

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Thanks, Steve. I'll begin with a review of our third quarter 2018 financial results, followed by a discussion of our fourth quarter and revised full year 2018 guidance.

Net sales for the third quarter decreased 10% to 94 -- $95.4 million compared to $105.8 million in the same quarter last year, primarily due to a 14% decline in comparable sales. As Steve mentioned, the decrease in comparable sales was due to the mid-teen decrease in boutique traffic. E-commerce sales continue to post double-digit gains driven by both traffic and conversion that remains less than 10% of our total sales.

Looking at total average ticket, it increased by low single digits. This was due to an increase in average unit retail that was partially offset by the decrease in units per transaction driven by lower clearance penetration. Gross margin for the period was 35.3% versus 39.6% in the prior year, a decrease of 430 basis points. This decrease was driven by the deleveraging of occupancy costs as a result of lower sales as well as an increase in occupancy cost per boutique associated with higher rent as we move into better properties, depreciation associated with the increased construction cost of new boutiques and remodels, and remodel demolition costs. These changes were partially offset by a 130-basis-points improvement in merchandise margin as we were able to take markdowns to sell through our merchandise despite the lower-than-expected sales.

Last year in the third quarter, we took an inventory reserve of $2.6 million on our back-to-school product, which we did not need to take this year. SG&A increased 2% to $42.3 million from $41.4 million compared to the prior year quarter. This increase was mostly due to a $2 million increase in performance incentive compensation caused by the timing of expense reversals. Last year, we reversed our performance incentive compensation expense in the third quarter. This year, we reversed it earlier, as it was done in the second quarter. Year-to-date, these expenses are comparable. This increase was partially offset by a $1.2 million decrease in selling expenses primarily due to labor efficiencies at the boutique level.

SG&A was favorable to previous guidance mostly due to lower boutique expenses and timing of professional fees. As previously disclosed, we recognized asset impairment charges of $14.4 million during the quarter, mostly related to the write-off of boutique assets for 129 underperforming boutiques. As Steve discussed, we are planning on closing 30 to 40 boutiques next year, and our focus will be to close the impaired boutiques as a first priority. I'd like to call out that currently, our analysis indicates that closing these boutiques at kick-out or lease end is the best decision because closing them earlier would be costlier than their cumulative negative contribution margin over the term of the lease. Of the 129 impaired boutiques, 106 have a kick-out or are at lease end in the next 3 years. Additionally, we believe the closures we have identified for fiscal year 2019 will not only reduce our fixed boutique cost but, coupled with the recapture of some of the sales in the remaining boutiques, can better leverage the go-forward four-wall costs.

Our effective tax rate for the third quarter was 29.3% compared to 45% last year due to lower statutory federal corporate tax rates. Net loss for the third quarter of 2018 was $16.2 million or $0.47 diluted loss per share compared to net income of $0.2 million or $0.01 diluted earnings per share in a comparable period -- prior year quarter. Excluding the noncash asset impairment charges, adjusted net loss for the third quarter of 2018 was $6 million or $0.17 adjusted diluted loss per share.

Turning to the balance sheet. We ended the third quarter of 2018 with $10.7 million in cash compared to $19 million at the end of third quarter last year. The company had no debt at the end of the quarter and had $34.5 million availability under our asset-based revolving credit facility. We did not repurchase any shares of our stocks during the quarter, as we feel it is prudent to conservatively manage our cash, prioritizing working capital requirements and strategic investments over share repurchases.

Inventory per boutique was down 6% compared to last year excluding the $2.6 million back-to-school inventory reserve in the prior year. Capital expenditures for the year-to-date period totaled $21.9 million, which is comprised of $8.4 million for new boutiques, $8.9 million for remodels and $2 million for existing boutiques. The remaining CapEx was spent on e-commerce, IT and corporate projects, including a warehouse management system that went live in October. We believe this system will not only provide efficiencies in our e-commerce fulfillment center, but will also allow more accurate view of inventory on our website.

During the quarter, we did not open any new boutiques and closed 4, bringing our total boutique count to 738. This consists of 352 mall locations and 386 non-mall locations, of which 90 are outlets. During the fourth quarter, we have opened 1 additional boutique and plan to close 11 existing boutiques, mostly in January. That leaves us ending fiscal year 2018 with 728 boutiques, having opened 32 boutiques and having closed 25 boutiques during the year. Two of the previously expected openings will now move into fiscal year 2019. Additionally, we have refreshed 80 boutiques through the third quarter and expect to refresh one more during the fourth quarter for a total of 81 for the full year. The refreshes had continued to perform at a premium to the chain. However, as Steve noted, we are pausing on the program for fiscal year 2019 as we stabilize the business.

Turning to guidance. For the fourth quarter of 2018, we expect net sales of $118 million to $124 million, assuming a 15% to 10% decrease in comparable sales. This compares to the prior year net sales of $138.5 million. As a reminder, the prior year includes approximately $5 million in net sales for the 53rd week. Total gross margin for the quarter is expected to decrease significantly due to occupancy deleverage as well as an approximately 150 basis point decline in merchandise margins as a result of increased promotions and markdowns. Additionally, as January has traditionally been a seasonal clearance month, we expect to take advantage of the timing and accelerate certain markdowns in order to enter fiscal 2019 with clean inventory.

Fourth quarter SG&A dollars are expected to increase approximately 2% to 4% compared to last year. Some of this increase relates to a timing variance that shifted professional fees from the third quarter into the fourth quarter, as well as additional spend related to the consulting firm we've engaged. The remainder of the increase is due to increased marketing expenses as we work to drive traffic and increased software cost and corporate depreciation associated with our new warehouse management and HR system. These increases will be partially offset by a decrease in both corporate and boutique payroll costs.

The tax rate for the fourth quarter is expected to be 26%, while diluted shares are expected to be $34.8 million. This translates into a dilutive loss per share of $0.14 to $0.07 for the fourth quarter of fiscal 2018. I'd like to note, as Steve just discussed, we are conducting a number of tests to drive traffic and improve sales. Once we have a chance to read these tests, we may implement one or more of the ideas before the end of the fourth quarter. And if we do, it could result in additional expenses that are not included in our guidance.

For the full year, we now expect total sales of $427 million to $433 million based on a mid- to low teens decrease in comparable sales. Gross margin as a percent of sales is expected to decline due to occupancy deleverage as well as an approximate 150 basis points decline in merchandise margins. SG&A is expected to increase in the low-single digits.

Finally, adjusted dilutive loss per share is expected to be $0.41 to $0.34, which excludes $14.4 million or $0.29 per diluted share of asset impairment charges recognized in the third quarter of this year. Capital expenditures for the year are still expected to be $30 million, including $22 million for both the 81 refreshes and 32 new boutiques. The remainder of CapEx will be spent -- or has been spent on our new warehouse management system, loyalty programs and other technology and corporate investments that support both short-term improvement and long-term growth. Depreciation and amortization for the full year is expected to be approximately $25 million. I'd like to reiterate Steve's point that we will be reducing our capital expenditures next year. Currently, we expect CapEx to be approximately $10 million and focused on our e-commerce and IT long-term strategies.

This concludes the financial review, and we'd now like to open up the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will hear first from Janet Kloppenburg with JJK Research.

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Janet Joseph Kloppenburg, JJK Research Associates, Inc. - President [2]

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I was wondering if you could talk a little bit about the apparel business, and I know you talked about the dress category being weak. But earlier, when the problems began, you had talked about maybe being over-sorted and color palette not being right. I'm wondering if you could help me understand if you have identified the problems within the apparel business and if you have -- if you believe you have a strategy to turn that business around or if you're still in the process of refining that turnaround strategy.

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [3]

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Janet, this is Steve. I'll take the question. I mean, I think it's hard to say, with the comps that we're forecasting right now, to say that it's totally fixed and fine. I would tell you that we've been spending the past several months, we've reset the floor during that August time period and had some wins there. But definitely, we also had some misses, so we've been refining the assortment for holiday based off of that. I would tell you that we talked about being pleased with the Thanksgiving business. During that time period, we actually saw clothing stabilize and flatten out for a couple of weeks in there, and it was primarily driven by the separates business offsetting the dress business. So that's really kind of what we've been trying to do is grow the separates piece to a place where it could offset dresses. And we did achieve that for a couple weeks in there in early mid-November. And then the challenge is obviously the traffic trends have fallen off now that we've gotten post-Thanksgiving, and we expect them to ramp back up again. But if that read was true and if that's what we see going forward once we get past kind of this lull, I think we're moving in the right direction. So clearly, the sweater business, as I mentioned, has been incredibly strong for us. We're seeing a lot of growth in bottoms, in terms of skirts and denims. We're pleased with those pieces of it. Beneath the surface within dresses, we've been really shifting the mix towards, I call it, more waist-defining silhouettes, but that's jumpsuits, that's rompers, we have internally called Fit & Flare Dresses. So we feel like we're heading in the right direction. Are we at the end destination and is it totally fixed right now? I wouldn't say that it is. But we feel like we know where we're heading.

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Janet Joseph Kloppenburg, JJK Research Associates, Inc. - President [4]

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Well, Steve, what I was thinking about is more, because of lead times, I wouldn't have expected the fourth quarter to be adjusted. But I'm wondering if you think that in the first and second quarter that you can capitalize on some of the strengths or if it's going to take more time to offset the softness that's going on in the dress category.

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [5]

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So we're not in a place where we're giving guidance yet around spring. I feel like we're moving in the right direction, and a lot of the ideas that we've ramped up and activated for Q4 only get bigger candidly as we head into spring. So for example, we talked about rompers as a category, it was -- it started out around 10% to 15% of our business of dresses during that Q3 time period. It's north of 25% to 30% right now. That only gets bigger as we move to spring because we can add in categories like rompers. Rompers are short-leg, short-sleeve versions of that and we don't carry it for fall. So you see that penetration increasing. So I feel like that's the formula or we're working towards the right formula. When we see that inflection point and it flattened out, it's hard for me to predict at this point in time based off where we're at, but we feel like we're moving in the right direction.

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Janet Joseph Kloppenburg, JJK Research Associates, Inc. - President [6]

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And, Steve, do you have the flexibility in terms of the chase model to -- I know your inventories are in decent shape. But do you have the flexibility in terms of the chase model to be able to go into spring perhaps with light inventories and then work forward into product that is checking.

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [7]

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So I would say it's kind of a mixed bag right now. So we actually, this year have gone after for more spring trends in our assortment than we did a year ago. So our content of our inventory is more forward-facing from a weight and a color palette this year than it was a year ago. So a lot of the receipts that we've been delivering late in November, early December are what we would call spring trends, which is spring colorations in buy now, wear now fabrics or ideas. So a good example of that would be sweater. So it's certainly something she could wear right now, but it's more open weave and a lighter color palette and something that she would wear in the January-February-March time period. So we have a better mix of that in the floor today than we did a year ago. That being said, there are a couple of factors, one being Chinese New Year, which is 11 days earlier on the fiscal calendar and I think it's about 3 weeks earlier on the shifted calendar for us. So that has pushed us and a lot of people in place. We're getting orders a little earlier than we had in years past to make sure that we get the goods on the floor. We generally maintain a fair amount of open-to-buy and ability to react. So I think we have the ability, particularly as you get later in the spring with open receipts to react with what we're seeing in the business. So I feel like we have flexibility. But certainly Chinese New Year is adding a little bit of an earlier placement to this year than we had in years past.

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Janet Joseph Kloppenburg, JJK Research Associates, Inc. - President [8]

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Okay. And just lastly, Kelly, I think you said you're going to close 40 stores next year. I'm just wondering if you could give us a snapshot of what your lease expirations -- the number of lease expirations you have coming up in '19 and in '20.

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Kelly M. Dilts, Francesca's Holdings Corporation - Executive VP & CFO [9]

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Yes. So I'll give you '19. We have probably about 150 that are either at kick-out or lease end in '19. And right now, we've identified 30 to 40 closures out of those.

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Operator [10]

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(Operator Instructions) We'll now move to Susan Anderson with B. Riley FBR.

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Susan Kay Anderson, B. Riley FBR, Inc., Research Division - Analyst [11]

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I guess just a follow-up on Janet's question and I guess kind of honing in on traffic. I guess how much of the issues with the sales do you believe is product versus traffic? And also maybe if you could give some more color on what you're doing to improve the traffic into the stores.

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [12]

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So I mean, when we look at what's driving the business right now or not, it ties back to traffic. The traffic is a nuanced thing, right? So if we're presenting compelling window displays that we're luring her in, business will be a lot better. So it's made us go back and then really challenge those and say, okay, are we putting our best foot forward there from a product perspective, from a trend perspective? So that's where we had alluded to in the call, that we've hired an outside consulting firm to help us with that and to really come up with some disruptive ideas from a window perspective. So we're trying a couple of different ideas. They fall into a couple of different buckets. One would be just changing kind of the visual architecture of the windows and adding more animation, more graphics, more different ideas there to try to catch people's eyes as they walk by. Second idea is more of a trend distortion. So taking the trends that we own in a big way and really maxing them out and showing them in a very disruptive way in a window or in the front tables and fixtures. That would be a second one. And the third one is more of a rip-off of what we're doing in refreshes, where we're painting the exterior and trying to change the exterior of the store. So we've got 3 or 4 different ideas there that we're working on, as we talked about in the call. Depending upon what seems to bear the best fruit, that would be the one we're going to react to and roll out more aggressively through the chain to help us with that. So I think traffic is our biggest problem. That being said, as I alluded in my call, it doesn't mean that we think we're perfect on every front. Clearly, if we were perfect in merchandising, business would be better so we're going to continue to work hard on that front and try to get better and better there. But right now, traffic continues to be our biggest challenge.

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Susan Kay Anderson, B. Riley FBR, Inc., Research Division - Analyst [13]

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Okay. And then are you seeing the same underperformance in the outlets as you're seeing in the mall stores? And maybe also if you could talk about the online performance by product category. And are you seeing any differences online versus in the stores?

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [14]

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So we -- I'm not going to tell you we're seeing much of a difference in outlet. We have seen a slightly better trend in the off-mall versus the mall during Q3. So that -- when we look at off-mall, that's comprised of outlets as well as off-mall locations, full-line stores. So we've seen a slight trend or it's not dramatic but it's a little better, so definitely there. And then terms of dotcom, the thing we see that's continued to happen there within the quarter that we saw, candidly, for the past 5 quarters, which is a bit perplexing is continued solid double-digit growth, right? So we're seeing dotcom grow. It's the same assortment, for the most part, that's in brick-and-mortar stores. So that's always something we're kind of challenging ourselves on and saying, well, if it's selling online, why doesn't it sell as well in brick-and-mortar, which leads us back into the traffic issue. But yes, we've seen that same trend continue in Q3, much like we saw the previous 4 quarters.

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Susan Kay Anderson, B. Riley FBR, Inc., Research Division - Analyst [15]

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Got it. And then just on the real estate strategy, I know it's early days, but any thoughts around how many stores you think you need to have going forward, especially with online growing double digits and the stores declining. How should we think about what your store base should look like in the next 3 to 5 years?

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [16]

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Yes. I don't know if we're ready to give that right now. As both Kelly and I alluded to, we're going through a pretty thorough review of real estate. And that's looking at the stores that are currently impaired and looking at what the prospects of those is long term, that's looking at kind of our footprint on a market-by-market basis and trying to figure out what the ideal footprint looks like. So we're not ready to share that at this point, but we were close enough to 2019 to give you guys the data point to kind of zero in on, which is why we wanted to provide that today.

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Operator [17]

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And, ladies and gentlemen, this will conclude our question-and-answer session. I'll turn the call back over to Mr. Steve Lawrence for any additional or closing remarks.

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Steven Paul Lawrence, Francesca's Holdings Corporation - President, CEO & Director [18]

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Thanks. I want to conclude the day by first thanking the Francesca's team for all their hard work and efforts during the holiday season. I'd also like to thank our investors and their support and patience as we work to improve the business and get things moving in the right direction. While the past year has not been easy, we believe that the work we're putting in will pay off and start resonating with the consumer. Ideally, this will translate into an inflection point in sales during 2019. We look forward to giving you an update in Q4 and our full year guidance for 2019 during our next earnings call. Thanks.

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Operator [19]

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With that, ladies and gentlemen, this will conclude your call for today. We do thank you for your participation and you may now disconnect.