Francesca’s profit drops 21%, 85 new stores planned

Houston — Francesca’s Holdings Corp. on Tuesday reported a 21% drop in profit during the first quarter of fiscal 2014, to $8.6 million from $10.9 million. Harsh winter weather and higher expenses related to its boutique business contributed to the decline in net income. The company also reduced its annual outlook.

Francesca’s plans to open 85 new stores during fiscal 2014, including 16 in the second quarter.

Net sales rose 8% to $85.4 million from $79 million, spurred by the opening of 62 new stores. Same-store sales decreased 7%. Francesca’s plans to aggressively reduce slow-moving inventory during the fiscal year, which caused it to reduce its guidance for the second quarter and full year.

For the second quarter, net sales are expected to be between $98 million and $103 million assuming a mid to low single digit decrease in same-store sales, including the direct-to-consumer business. For the full year, net sales are now expected to be in the range of $387 million to $399 million assuming a low single digit decrease to flat change in same-store sales, including the direct-to-consumer business

"Total sales growth of 8% to $85.4 million was driven by the strength of our new and non-comparable boutique sales and direct-to-consumer initiatives, contributing to incremental year over year growth of 16%,” said Neill P. Davis, president and CEO of Francesca’s. “Our new boutiques continue to open strong and are meeting our expectations of payback periods of less than one year. Declining sales within our comparable boutiques partially offset these gains and were a reflection of decreases in boutique transactions, which has limited the effectiveness of our merchandise clearance strategies through existing channels."



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