Apparel maker Francesca's raises forecast on strong margins

Wed Dec 5, 2012 7:51am EST

Dec 5 (Reuters) - Francesca's Holdings Corp's third-quarter results surpassed Wall Street estimates as its higher-margin products found favor with shoppers, prompting the retailer to raise its full-year outlook.

The company attributed its strong margins to its "broad and shallow" strategy of stocking limited quantities of a broad selection of individual styles, enabling it to respond quickly to changes in demand.

Short lead times of vendors also allows Francesca's to introduce new merchandise at its boutiques as often as five times a week.

The company, which specializes in affordable clothing for women in the 18 to 35 age group, now expects full-year adjusted earnings of $1.00 to $1.01 per share, up from its previous outlook of 96 cents to 98 cents per share.

Analysts on average are expecting earnings of 98 cents, according to Thomson Reuters I/B/E/S.

The company focused on selling fashion jewelry, accessories and selected home decor when it was founded. However, over the years it diversified into apparel, which has now become its largest category.

Third-quarter earnings rose to $10.8 million, or 24 cents per share, from $4.7 million, or 11 cents per share, a year earlier.

Revenue rose 44 percent to $72.0 million, helped by a 17 percent increase in comparable boutique sales.

Analysts expected the company to earn 22 cents per share on revenue of $71.2 million.

Francesca's shares, which have gained more than half their value this year, closed at $26.81 on the Nasdaq on Tuesday.

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