Francesca's Holdings Q2 misses; store renovation program continues

Francesca’s Holdings Corp. reported second-quarter earnings and sales that missed expectations and provided a disappointing outlook amid "weak traffic trends.”

The jewelry and accessories retailer reported net income of $454,000, or 1 cent a share, for the quarter ended Aug. 4, down from $7.3 million, or 20 cents a share, in the year-ago period. Analysts were expecting 5 cents a share.

Sales declined 6% to $113.0 million, missing estimates of $120.8 million, Same-store sales fell 13%, greater than expected.

“Second quarter sales results were disappointing mostly due to weak traffic trends,” said Steve Lawrence, president and CEO, Francesca’s. “While we have made significant progress in our merchandising strategy, inventory discipline and store renovations, we know there is additional work to be done to win back our core customer. We did see some positives in the business, including improving conversion, very strong ecommerce sales growth, and a significant reduction in clearance inventory."

Francesca’s ended the quarter with 742 locations. It expects to update 80 to 85 stores this year, along with opening 34 locations and closing 24 boutiques, and refreshing 80 to 85 boutiques in fiscal year 2018.

“I strongly believe that the steps we are taking in resetting our merchandising strategy, investing in our omnichannel and reformatting our stores to better showcase our product, were the right decisions for the business,” said Lawrence. “In addition, we are taking action to drive improved traffic trends through a number of marketing initiatives. That said, as we see the progress in our business coming at a more measured pace, we are reducing our annual guidance.”

For the third quarter, the company expects net sales of $105 million to $110 million, below analysts’ forecasts of $116.5 million, and same-store sales to decline 3% to 8%, compared with expectations of a 4.3% rise.