Impressive third quarter results, positive earnings surprises
in the last 4 quarters with an average beat of 12.2% and upward
rising estimates helped
Francesca's Holdings Corporation
) to attain a Zacks #1 Rank (Strong Buy) on December 7, 2012.
Moreover, shares of this operator of a chain of retail
boutiques have generated a solid year-to-date return of 48.3%,
offering an attractive investment opportunity.
The Rank Drivers
Better-than-expected third quarter earnings, earnings momentum
and an upbeat outlook - are the primary rank drivers for this
Francesca's Holdings reported third-quarter earnings of 24
cents a share surpassing the Zacks Consensus Estimate by a couple
of cents or 9.1% and more than doubled from the prior-year
quarter earnings of 11 cents. Net sales came in at $72 million,
up 44% year over year and exceeded the Zacks Consensus Estimate
of $71 million. Comparable boutique sales improved
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%.
The company now expects fourth quarter net sales between $82.5
million - $83.5 million, while comparable boutique sales are
expected to increase in the mid-single digits. Earnings per share
are expected to be in the range of 27 cents - 28 cents.
For fiscal 2012, Francesca's expects net sales between $292.2
million - $293.2 million with earnings per share of $1.00 to
$1.01. Earlier, management had guided sales between $290 million
- $292 million, and earnings per share of 96 cents - 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.
Rising Estimate Revisions
The Zacks Consensus Estimate for fiscal 2012 increased 3.1% to
$1.01 per share in the past 30 days, as 12 out of 14 estimates
were revised higher. The current projection implies an estimated
year-over-year growth of 83.1%.
Moreover, the estimate revision trends remain approximately
the same for fiscal 2013 as 10 out of 14 estimates were revised
in the upward direction, thus 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 25.4x,
reflecting a 67.1% premium to the peer group average of 15.2x.
Also, on a price-to-book basis, the shares trade at 20.1x, a
substantial premium to the peer group average of 1.0x. Given the
company's strong fundamentals, the premium valuation is
justified, and well reflected through long-term earnings growth
projection of 27.5%. Moreover, with respect to return on equity
(ROE), the stock looks attractive. It has a trailing 12-month ROE
of 113.9%, which is significantly above its peer group average of
12.2%. This implies that the company reinvests its earnings more
efficiently than its peer group.
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
), has a market cap of $1.10 billion.
ANN INC (ANN): Free Stock Analysis Report
FRANCESCAS HLDG (FRAN): Free Stock Analysis
URBAN OUTFITTER (URBN): Free Stock Analysis
To read this article on Zacks.com click here.