Francesca's Profit Falls, Cuts FY Outlook; Stock Down 13% - Update

(RTTNews) - Women's apparel retailer Francesca's Holdings Corp. (FRAN), Tuesday reported a decline in first-quarter profit, hurt by higher boutique expenses and weak gross margins.

Sales for the quarter climbed 8 percent from a year ago but missed Wall Street estimates as harsh winter impacted sales in February, with a drop in same store sales.

Moving ahead, Francesca's provided some soft guidance for the current quarter and slashed its expectations for the full year. The company continues to struggle amid some tough market conditions to clear inventory on its apparel and jewelry categories.

Following the announcement, shares of Francesca's plunged over 13 percent in morning trade on the Nasdaq.

CEO Neill Davis said that while the company's new boutiques performed well, it was partly offset by lower sales within its comparable boutiques, thereby leading to some inventory pile up.

Houston, Texas-based Francesca's posted first-quarter net earnings of $8.6 million or $0.20 per share, compared with $10.9 million or $0.24 per share last year.

On average, 19 analysts polled by Thomson Reuters expected earnings of $0.22 per share for the quarter. Analysts' estimates typically exclude one-time items.

The quarter was impacted by expenses that climbed 19 percent year-over-year to about $28 million, as the company expended toward boutique and corporate payroll. Gross margin dropped to 49 percent from 52.4 percent, due mainly to lower merchandise margin.

Sales for the first quarter rose to $85.4 million from $79 million last year, but missed analysts' expectations of $88 million.

On a comparable store basis, sales were down 7 percent.

Francesca's opened 62 new boutiques during the quarter, bringing the total boutique count to 513 at the end of the period.

For the second quarter, Francesca's project earnings in the range of $0.24 to $0.29 per share and sales of $98 million to $103 million. Analysts currently expect earnings of $0.36 per share on sales of $103.9 million for the quarter.

For fiscal year ending January 2015, the company now expect earnings of $1.05 to $1.17 per share and sales of $387 million to $399 million. Francesca's had earlier projected earnings of $1.16 to $1.31 to per share and sales of $391 million to $409 million.

Analysts currently expect earnings of $1.21 per share on sales of $397.9 million for the year.

The company's stock is trading at $13.25, down $2.03 or 13.29%, on a volume of 4.8 million shares.