A solid year-to-date return of 82.8%, strong second-quarter
fiscal 2012 results and rising estimates aided
Francesca's Holdings Corporation
) to attain a Zacks #1 Rank (Strong Buy) on September 6, 2012.
This operator of a chain of retail boutiques has outperformed the
Zacks Consensus Estimate for the third consecutive quarter.
Looking at the earnings surprise history of the last three
quarters, the company has topped the Zacks Consensus Estimates by
an average of 13.2%.
The Rank Drivers
A combination of an effective merchandising strategy, strong
results and an upbeat outlook are the rank drivers for this
Francesca's Holdings reported second-quarter fiscal 2012
earnings of 28 cents per share on September 4 that surpassed the
Zacks Consensus Estimate of 24 cents by 16.7%, and year-ago
earnings of 15 cents by 86.7%.
Net sales of $76.4 million recorded a modest upside from the
Zacks Consensus Estimate of $71 million and spiked 49.1% from
$51.2 million a year ago on the back of a 20.7% increase in
comparable boutique sales. 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
Buoyed by a robust performance, Francesca's projected its
third quarter net sales in the range of $70.5 million to $71.5
million. Comparable boutique sales are expected to increase in
the low-double-digit range and the company plans to open 2 new
boutiques. Earnings per share are expected between 21 cents and
22 cents in the third quarter.
For fiscal 2012, Francesca's now envisions net sales between
$290 million and $292 million and earnings per share in the band
of 96 cents to 98 cents. Management forecasts low-double-digit
comparable boutique sales to increase and plans to open 76 new
boutiques and an outlet boutique during the fiscal year. Earlier,
management had guided sales between $280 million and $283
million, and earnings per share in the range of 89 cents to 91
cents. Looking ahead, the company believes that there still
exists room to increase its boutique count to 900 from 357
locations in 44 states as of July 28, 2012.
Soaring Earnings Momentum
The Zacks Consensus Estimate for fiscal 2012 rose 8.9% to 98
cents per share in the past 60 days, implying a year-over-year
growth of 77.6%, and in sync with the upper-end of the guidance
For fiscal 2013, the Zacks Consensus Estimate jumped 7.2% to
$1.19 per share, suggesting a year-over-year growth of 21.8%.
Francesca's currently trades at a forward P/E of 31.53x,
reflecting an 87.9% premium to the peer group average of 16.78x.
Also, on a price-to-book basis, the shares trade at 31.56x, a
substantial premium to the peer group average of 0.91x. Given the
company's strong fundamentals, the premium valuation is
justified, and is well reflected through long-term earnings
growth projection of 27.5%. 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
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
Urban Outfitters Inc.
), has a market cap of $1.35 billion.
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FRANCESCAS HLDG (FRAN): Free Stock Analysis
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