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UPDATE 1-Retailer Francesca's expects slump in comparable sales
September 4, 2013 / 3:36 PM / 4 years ago

UPDATE 1-Retailer Francesca's expects slump in comparable sales

* Sees 3rd-qtr comparable store sales down 2-5 pct

* Sees 3rd-qtr earnings/share of $0.19-$0.21 vs est $0.30

* Sees 3rd-qtr revenue of $78 mln-$80 mln vs est $89.7 mln

* Shares fall as much as 26 pct (Adds comments by CEO, analyst, full-year outlook, result details, background; updates share move)

By Maria Ajit Thomas

Sept 4 (Reuters) - Women’s apparel and accessories company Francesca’s Holdings Corp forecast a decline in comparable store sales, joining a host of retailers hurt by cautious consumer spending.

Francesca’s shares slid nearly 26 percent to $17.80, their lowest in more than a year and a half, on the Nasdaq on Wednesday morning.

Customers in the United States have curbed discretionary spending, as they battle higher taxes and steeper gasoline prices, choosing to buy cars and houses instead of dresses and shoes.

“...Traffic trends slowed and remained challenging throughout July, which has also continued into August,” Francesca’s Chief Executive Neill Davis said on a post-earnings call with analysts.

Comparable sales transactions - a proxy for traffic - fell nearly 4 percent in the second quarter, Davis said. Comparable sales declined 1 percent.

“They seem to be alluding to the fact that maybe spending is becoming more cautious and therefore consumers are purchasing less on impulse on gag gifts and those little gadgets and instead focusing on occasion-driven purchases,” Wedbush Securities analyst Betty Chen told Reuters.

Francesca‘s, whose clothing, jewelry and gift items are targeted towards women between the ages of 18 and 35, said it expects comparable sales to decline by 2-5 percent in the third quarter.

It forecast a profit of 19-21 cents per share on sales of $78 million-$80 million for the three months ending Nov. 2.

Analysts on average were expecting a profit of 30 cents per share on revenue of $89.7 million in the current quarter, according to Thomson Reuters I/B/E/S.

Francesca’s may be trying to figure out apparel trends that could appeal to more buyers, said Wedbush analyst Chen. “Also maybe some of the product categories will require repositioning, like gifting.”

Gifts, which account for nearly a tenth of Francesca’s sales, declined 1 percent in the second quarter to $7.9 million. The business includes items such as candles, home accessories and wall art.

Francesca’s said it expects comparable sales to remain unchanged or fall up to 2 percent in the year ending Feb. 1, 2014 and cut its full-year revenue forecast to $343 million-$349.5 million from $365 million-$370 million.

It also slashed its adjusted profit outlook to $1.10-$1.16 per share from $1.27-$1.30. Analysts were expecting a profit of $1.29 per share on revenue of $368.7 million.

Net income rose to $14.6 million, or 33 cents per share, in the quarter ended Aug. 3 from $12.7 million, or 28 cents per share, a year earlier. Net sales rose 17 percent to $89.6 million. Analysts had expected a profit of 35 cents per share on revenue of $94.5 million.

Francesca’s shares were down nearly 26 percent at $17.88 in heavy morning trade. Nearly 11.7 million shares had changed hands by 11:19 a.m. ET, 10 times the stock’s 10-day moving average. (Reporting By Maria Ajit Thomas in Bangalore; Editing by Joyjeet Das)

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