Momentum Stock: Francesca’s Holdings Corp. (NASDAQ:FRAN)

Francesca’s Holdings Corporation (NASDAQ:FRAN) reported earnings for the three months ended April 2016 on June 09, 2016. The company earned $0.18 per share on revenue of $106.11M. Analysts had been modeling earning per share of $0.17 with $106.76M in revenue.

Francesca’s Holdings Corporation (NASDAQ:FRAN) reported financial results for the first quarter ended April 30, 2016.

  • Net sales increased 12% to $106.1 million
  • Comparable sales increased 2%, including an ecommerce comparable sales increase of 38%
  • Diluted earnings per share was $0.18

FIRST QUARTER RESULTS

Net sales increased 12% to $106.1 million from $95.0 million in the comparable prior year period.  This increase was due to a 2% increase in comparable sales driven by an increase in the number of transactions both at the boutiques and on-line as well as the opening of 48 net new boutiques since the comparable prior year period.  We opened 22 new boutiques and closed one underperforming boutique during the quarter bringing our total boutique count to 637 as of April 30, 2016.  Ecommerce comparable sales increased 38% to $5.2 million driven by increased website traffic and conversion rates.

Gross profit, as a percentage of net sales, decreased to 46.3% from 47.3% in the prior year quarter.  This decrease is attributable to 60 basis points decrease in merchandise margin and 30 basis points deleveraging of occupancy costs.  The decrease in merchandise margin was due to increased clearance activity and sales mix changes during the quarter compared to the same period last year.

Selling, general and administrative expenses (“SG&A”) increased 14% to $37.7 million from $33.0 million in the prior year quarter. The increase in SG&A expenses is primarily due to increased corporate and boutique payroll expense to support the larger boutique base and strategic initiatives.  Additionally, stock-based compensation expense increased compared to last year in connection with the performance-based restricted stock awarded to executives and certain key employees in March 2016 aligning incentive compensation with the Vision 2020 plan.  Professional fees were also higher in support of various strategic and operational initiatives.

Income from operations was $11.5 million, or 10.8% of net sales, compared to $11.9 million, or 12.5% of net sales, in the prior year quarter.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the quarter were $35.4 million compared to $46.1 million at the end of the comparable prior year quarter.

We ended the quarter with $34.8 million of inventory on hand compared to $31.4 million at the comparable prior year period.  Average ending inventory per boutique increased by 2% versus the comparable prior year period.

During the first quarter, we repurchased approximately 925,000 shares of our common stock at a cost of $16.8 million.  Subsequent to the end of the quarter through May 31, 2016, we repurchased an additional 728,000 shares of our common stock at a cost of $9.5 million.

Francesca’s Holdings Corporation earnings per share showed an increasing trend of 19.6% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 97%.Analysts project EPS growth over the next 5 years at 10%. It has EPS annual growth over the past 5 fiscal years of 17% when sales grew 26.6. It reported 11.7% sales growth, and 5.4% EPS growth in the last quarter.

The stock is trading at $10.81, up 10.87% from 52-week low of $9.75. The stock trades down -45.68% from its peak of $19.9 and % below the consensus price target of $13.56. Its volume clocked up at 0.68 million shares which is lower than the average volume of 1.45 million shares. Its market capitalization currently stands at $431.28M.

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