Francesca's Holdings Corporation
) have shot up 78.7% year-to-date and are now hovering close to the
52-week high of $37.09 attained on September 4. Earlier this month,
the retail boutiques operator posted solid second-quarter fiscal
2012 results, wherein earnings per share improved 86.7% year over
year to clinch a 16.7% positive earnings surprise.
Over the last 30 days, all 10 estimates for the current fiscal year
were revised higher, underscoring its Zacks #1 Rank (Strong Buy).
An effective merchandising strategy, strong results and an upbeat
outlook provide the foundation for the long-term earnings growth
projection of 27.5%.
Profit Surges, Guidance Up
Francesca's Holdings reported second-quarter fiscal 2012 earnings
of 28 cents per share on September 4, surpassing the Zacks
Consensus Estimate of 24 cents and jumping from last year's 15
cents. The company has now topped the Zacks Consensus Estimate for
three consecutive quarters with an average surprise of 13.2%.
Net sales of $76.4 million topped the Zacks Consensus Estimate of
$71 million and spiked 49.1% from $51.2 million a year ago.
Comparable boutique sales increased 20.7%.
Operating income grew 65.7% to $20.9 million, whereas operating
margin expanded 274 basis points to 27.4%, reflecting selling,
general and administrative expense leverage as well as gross margin
improvement of 205 basis points to 54.8%.
Buoyed by a robust performance, Francesca's projected third quarter
net sales between $70.5 million and $71.5 million. Comparable
boutique sales are expected to increase in the low-double-digit
range for the company, which plans to open 2 new boutiques.
Earnings per share are expected at 21 cents to 22 cents in the
For fiscal 2012, Francesca's now envisions net sales between $290
million and $292 million with earnings per share at 96 cents to 98
cents. Earlier, management had guided sales between $280 million
and $283 million, and earnings per share in the range of 89 cents
to 91 cents. Management forecasts a low-double-digit comparable
boutique sales increase and plans to open 76 new boutiques and an
outlet boutique during the fiscal year.
Earnings Momentum Soars
The Zacks Consensus Estimate for fiscal 2012 rose 7.8% to 97 cents
per share in the past 30 days, as all 10 estimates were revised
higher. The current estimate implies year-over-year growth of
76.9%, and is at the mid-point of the guidance range.
For fiscal 2013, nine of 11 estimates were revised higher over the
same timeframe, lifting the Zacks Consensus Estimate by 6.3% to
$1.18 per share. The current estimate suggests year-over-year
growth of 21.7%.
Francesca's currently trades at a forward P/E of 30.94x, reflecting
a 94.5% premium to the peer group average of 15.91x. Also, on a
price-to-book basis, shares trade at 30.86x, a substantial premium
to the peer group average of 0.92x. With respect to return on
equity (ROE), the stock looks very attractive. It has a trailing
12-month ROE of 145.4%, which is substantially above its peer group
average of 15.6%. This implies that the company reinvests its
earnings more efficiently than its peer group.
A Look at the 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 $30.00-$32.00, and
the consensus estimates for fiscal 2012 and fiscal 2013 are
steadily moving upward. The year-to-date return for the stock is
78.7% compared with the S&P 500's return of 14.1%.
Founded in 1999 and headquartered in Houston, Texas, Francesca's
Holdings Corporation operates a chain of retail boutiques under the
francesca's collections brand in the United States. It is 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 Inc. (
) and ANN Inc. (
), currently has a market cap of $1.32 billion.
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