Retail boutique company
Francesca's Holdings Corporation
) reported robust fiscal first- quarter 2012 earnings per share of
20 cents, beating the Zacks Consensus Estimate by 11.1%. Quarterly
earnings exactly doubled last year's 10 cents per share. Since the
release of the results, the shares of the company have surged
Quarter in Detail
Net sales spiked 48.6% year over year to $61.3 million, while it
recorded a modest upside from the Zacks Consensus Estimate of $60
million. Sales improvement was largely driven by a 15.5% increase
in comparable boutique sales in the first quarter of 2012, against
a 14.7% rise in the year-ago quarter.
During the quarter, the company's gross margin was up 70 basis
points to 53.1% from 52.4% in the year-ago period, mainly due to
leveraging occupancy costs. Operating income grew 74.1% to $14.7
million, whereas operating margin expanded 350 basis points to
23.9% on account of selling, general and administrative expense
leverage as well as gross margin expansion.
Francesca's ended the first quarter with cash and cash
equivalents of $8.2 million. Inventories rose 32.5% year over year
to $17.9 million at quarter end driven by a rise in the boutique
base to 327 compared with 249 in the year-ago quarter. The company
displayed effective inventory management in the quarter with sales
growth of 48.6% exceeding inventory growth of 32.5%.
In the reported quarter, the company used a portion of its cash
flows to reduce borrowings under its revolving credit facility by
$10.0 million to $12.0 million. Moreover, the company repaid
another $3.0 million toward its borrowings at the start of the
second quarter bringing borrowings down to $9.0 million. As of
April 28, 2012, the company had a total of $53.0 million available
under its revolving credit facility.
Buoyed by a strong fiscal first-quarter performance, Francesca's
guided its second-quarter net sales in the range of $69.0 - $71.0
million. Comparable boutique sales are expected to increase in the
low-double-digit range, as it plans to open 29 new boutiques.
Earnings per share are expected to be in the range of 22 cents - 23
cents in the second quarter.
For the full year, Francesca's guided sales between $280 million
and $283 million, adjusted earnings per share at 89 cents to 91
cents, and comparable boutique sales in the high single digits. The
company plans to open about 75 new boutiques and an outlet boutique
through the end of fiscal 2012.
Looking ahead, the company expects to take its current boutique
base from 327 locations in 43 states as of April 28, 2012 to about
900 boutiques in the United States over time.
Houston, Texas-based Francesca's is benefiting from a
differentiated boutique set up, assorted and sophisticated
merchandise offerings, a positive earnings surprise trend and a
strong outlook. Francesca's differentiated business model has
helped it to outperform from the beginning of 2012. The success of
the company's boutique format lies in its highly effective broad
and shallow merchandising strategy that enables it to cater to the
changing customer preferences.
Francesca's competes with the likes of
Urban Outfitters Inc.
). Currently, the company has a Zacks #1 Rank that indicates a
short term "Strong Buy" rating.
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FRANCESCAS HLDG (FRAN): Free Stock Analysis
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