Francesca's Holdings Corporation
) has outperformed the Zacks Consensus Estimate over the last four
quarters by an average earnings surprise of 12.2%. Most recently,
this retail boutiques operator reported a positive earnings
surprise of 9.1% in its third quarter, which also included a raised
outlook for the fiscal year. The stock has also amassed a
year-to-date return of 56.5%.
Meanwhile, the past 30 days have seen 12 of 14 earnings estimates
revised higher for the current fiscal year, which helped FRAN to
become a Zacks #1 Rank (Strong Buy).
Profit Surges, Guidance Up
Francesca's Holdings reported fiscal third-quarter earnings of 24
cents per share on December 5, beating the Zacks Consensus Estimate
by a couple of cents and more than doubling last year's 11 cents.
Net sales of $72 million topped the Zacks Consensus Estimate of $71
million and jumped 44% from $50 million a year ago. Comparable
boutique sales improved 16.7%.
Operating income jumped 120.4% to $17.7 million. Operating margin
expanded 855 basis points to 24.6%, reflecting selling, general and
administrative expense leverage as well as gross margin improvement
of 96 basis points to 52.6%.
Buoyed by the robust performance, Francesca's projected fourth
quarter net sales between $82.5 million and $83.5 million.
Comparable boutique sales are expected to increase in the
mid-single digits. Earnings per share are expected at 27 cents to
28 cents in the fourth quarter.
For fiscal 2012, Francesca's now expects net sales between $292.2
million and $293.2 million with earnings per share of $1.00 to
$1.01. Earlier, management had guided sales between $290 million
and $292 million, and earnings per share of 96 cents to 98 cents.
Management now forecasts a low-double-digit increase in comparable
boutique sales and plans to open 76 new boutiques and an outlet
boutique during the fiscal year.
Soaring Earnings Momentum
The Zacks Consensus Estimate for the current fiscal year rose 3.1%
to $1.01 per share in the past 30 days, as 12 out of 14 estimates
were revised higher. The current estimate implies year-over-year
growth of 83.1%.
For next fiscal year, ten of 14 estimates were revised higher over
the same timeframe, lifting the Zacks Consensus Estimate by 4.2% to
$1.25 per share. The current estimate suggests year-over-year
growth of 23.6%.
Francesca's currently trades at a forward P/E of 26.17x, reflecting
a 72.1% premium to the peer group average of 15.21x. Also, on a
price-to-book basis, shares trade at 20.64x, a substantial premium
to the peer group average of 0.99x. Again, its price-to-sales ratio
of 4.26 is at a premium to the peer group average of 0.70. Given
the company's compelling fundamentals, the premium valuation is
justified and is well supported by its long-term estimated EPS
growth rate of 27.5%, which fares far better than the peer group
average of 15.2%.
With respect to return on equity (ROE), the stock looks very
attractive. It has a trailing 12-month ROE of 113.9%, which is
substantially above its peer group average of 12.2%. This implies
that the company reinvests its earnings more efficiently than its
A Look at Chart
The 12-month EPS chart below indicates that the stock price has now
started to correlate with the increasing trend in estimates.
Currently, the stock price is in the range of $26.00-$28.00, and
the consensus estimates for fiscal 2012 and fiscal 2013 are
steadily moving upward. The year-to-date return for the stock is
56.5% compared with the S&P 500's return of 13%.
Francesca's Holdings Corporation operates a chain of retail
boutiques under the Francesca's collections brand in the United
States. It's a holding company and operates through its subsidiary
Francesca's Collections Inc. The company targets female customers
and offers a diverse and uniquely balanced mix of high-quality,
trend-right apparel, jewelry, accessories and gifts at attractive
prices. Francesca's Holdings, which competes with Urban Outfitters
) and ANN Inc. (
), currently has a market cap of $1.16 billion.
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