FINANCE

Francesca’s Q2 income and sales fall short; lowers full-year outlook

BY Marianne Wilson

Houston — Francesca’s Holdings Corp. on Tuesday reported second quarter net income of $10.3 million, down from $14.6 million in the year-earlier period. Earnings and sales both fell short of estimates. The retailer also lowered its earnings outlook for the year.

Net sales rose 9% to $97.3 million, driven largely by new openings. Total apparel sales increased 14%, accessories sales increased 14%, and gift sales increased 25%. The gains were offset by a 12% decrease in jewelry sales,

Same-store sales fell 7%.

"We expect the improving sales trend that started at the end of the second quarter to continue through the third quarter as jewelry sales continue to strengthen, and our customers increasingly respond to our seasonal gift and apparel assortments," Neill P. Davis, CEO, stated. “Our balance sheet remains strong giving us the ability to continue to open new boutiques which are meeting our expectations of paybacks under one year while investing in the infrastructure to support our growth. Our business model remains strong and we have a significant opportunity to continue to drive improvements in sales and profits.”

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SUPPLY CHAIN

Retail imports remain above average as port talks continue

BY Marianne Wilson

Washington, D.C. — Retailers concerned by the lack of a West Coast longshoremen’s contract will continue to bring merchandise into the country at above-average levels this month but volume will drop from the record set in August, according to the monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates.


“The negotiations have made progress and retailers have been stocking up, but there’s still cargo that needs to arrive before the holiday season kicks off,” NRF VP for supply chain and customs policy Jonathan Gold said. “Retailers are making sure that consumer demand during the holidays will be met.”

Import volume at U.S. ports covered by the Global Port Tracker report is expected to total 1.47 million containers this month, down from the all-time monthly record of 1.53 million set in August as retailers imported merchandise early in case of any disruption on the docks. September has averaged 1.42 million containers over the past five years.

The contract between the Pacific Maritime Association and the International Longshore and Warehouse Union expired on July 1, prompting concerns about potential disruptions that could affect back-to-school or holiday merchandise. A tentative agreement on health benefits was announced last month, but the two sides are continuing to negotiate on other issues. Dockworkers remain on the job.

U.S. ports followed by Global Port Tracker handled 1.5 million Twenty-Foot Equivalent Units in July, the latest month for which after-the-fact numbers are available. That was up 1.1% from June and 3.7% from July 2013. One TEU is one 20-ft. cargo container or its equivalent.



August was estimated at 1.53 million TEU, up 2.9% from the same month last year, and September is forecast at 1.47 million TEU, up 2.4% from last year. October is forecast at 1.51 million TEU, up 5.5%; November at 1.39 million TEU, up 3.8%; and December at 1.37 million TEU, up 4.1%. Those numbers would bring 2014 to a total of 17.1 million TEU, an increase of 5.3% over 2013’s 16.2 million. Imports in 2012 totaled 15.8 million.

Cargo volume does not correlate directly with sales but is a barometer of retailers’ expectations. Hackett Associates Founder Ben Hackett said cargo levels have bounced back since the lows seen during the 2009 recession, but that the recovery has not been as steady as those after previous recessions.

Global Port Tracker, which is produced for NRF by the consulting firm Hackett Associates, covers the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston, Savannah, Port Everglades and Miami on the East Coast, and Houston on the Gulf Coast.

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FINANCE

Report: Analyst firm Wedbush sees ‘imminent’ RadioShack bankruptcy

BY Dan Berthiaume

Fort Worth, Texas – Analyst firm Wedbush Securities is reportedly advising clients that a bankruptcy is “imminent” at RadioShack. According to Barron’s, Wedbush has lowered its target price for RadioShack to $0, citing concerns including inability to secure lender approval for 1,100 proposed store closings and general weakness in the consumer electronics sector.

Wedbush analyst Michael Pachter expects RadioShack to report a net loss of $0.66 per share when it releases second quarter earnings on Sept. 11, almost twice the consensus estimate of a $0.36 per share loss. Pachter is also predicting RadioShack will report net sales of $762 million, below consensus estimates of $893 million.

“In May, RadioShack announced that it was unable to successfully negotiate consent from its lenders under the 2018 Credit Agreement and Term Loan to close up to 1,100 stores,” Pachter said in an advisory note. “The terms offered by lenders were not acceptable to the company. RadioShack’s operational decisions are now being vetted by creditors and equity investors are no longer relevant to management decisions — the creditors cleary are in control of the ship and, in our view, the ship is sinking. The credit agreement allows the closure of 200 stores per year or 600 over the life of the agreement. We believe a bankruptcy reorganization is imminent…

We believe brick-and-mortar electronics retailers will see persistent structural decline as Internet sales continue to take share. Best Buy experienced comp declines of 2.7% for Q2:15. Domestic Q2 sales were down 2% overall, and store level sales were down roughly 4% without the contribution of over $100 million incremental online sales. Notwithstanding significant investments in price competitiveness, we see continuing evidence of traffic deterioration and lower productivity for Best Buy’s retail footprint. RadioShack has less financial flexibility to invest in price competitiveness, and its primary business is as a consumer electronics “convenience store.”

RadioShack did not comment on the report.

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