Francesca’s Holdings Corp. beat its own guidance for the first quarter causing the stock to jump in early trading, but the retailer did give lowered guidance.
Net income for the quarter fell to $7 million, or 18 cents a diluted share, down from $7.2 million, or 17 cents, a year ago. The FactSet estimate was for 17 cents per share as per the company’s previous guidance. The stock is rising over 2 percent to $10.74.
Net sales for the three months ending April 30 increased 12 percent to $106.1 million from $95.0 million a year earlier. The FactSet estimate was for $107 million. Comparable sales increased 2 percent driven by an increase in transactions as the company opened 48 new boutiques over the past year. E-commerce sales increased 38 percent to $5.2 million.
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“We continue to see weakness in the overall retail environment particularly in apparel with declines in traffic and heightened promotions,” said Richard Kunes, interim chairman, president and chief executive officer. “Our second quarter and updated full-year guidance reflects this recent trend and our assumption that the environment will not further deteriorate in the back half of the year.”
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The second-quarter guidance is for net sales to be between $106-$110 million and diluted earnings per share are expected to be in the range of 16-19 cents. It includes a 4 cent impact as a result of the reversal of previously accrued stock-based compensation expense related to the forfeiture of unvested awards granted to the previous chief executive officer Michael Barnes who resigned in May.
Francesca’s lowered the fiscal year 2017 revenue forecast to a range between $460-$480 million, down from the previous range of $474-$494 million, which is also lower than the Capital IQ estimate of $484 million. The earnings-per-share guidance for the same period dropped from a range of 93 cents to $1.03 to 86-96 cents. The Capital IQ estimate is for 93 cents.
Gross profits decreased to 46.3 percent from 47.3 percent in the prior year. The decrease was the result of increased clearance activity and sales mix changes.
While many retailers are trimming their physical store count, Francesca’s remains in expansion mode. The company plans to open 15-20 new boutiques in the second quarter and close one to five. For the full fiscal year, Francesca’s plans to open 50-60 boutiques and close 5-10 underperforming stores.