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francesca’s® Reports Second Quarter Fiscal Year 2020 Financial Results and
Announces Exploration of Strategic Alternatives
HOUSTON, TEXAS — September 15, 2020 — Francesca’s Holdings Corporation (Nasdaq: FRAN) today reports financial results for the second quarter ended August 1, 2020 and announced exploration of strategic initiatives.
Second Quarter Highlights:
|•||Net sales decreased 29% to $75.7 million|
|•||Comparable sales decreased 5% (1)|
|•||Diluted loss per share was $5.80 compared to diluted earnings per share of $0.61 in the same period last year|
|•||Continued to take aggressive and prudent actions to reduce expense and manage cash flows|
|•||Reduced clearance inventory by 45% compared to the same period last year|
|(1)||Comparable sales for the thirteen weeks ended August 1, 2020 excludes boutique sales during the weeks in which a boutique was temporarily closed for four or more days of a week due to the COVID-19 pandemic and includes ecommerce sales for the full thirteen weeks ended August 1, 2020.|
Mr. Andrew Clarke, President and CEO, stated, “During the second quarter, we continued to take measures to optimize sales and monetize inventory through our ecommerce channel as well as our reopened boutiques. As we substantially reduced aged inventory in our boutiques as they reopened, we saw a strong response to new merchandise that reflects her current mindset of casual comfort as well as our assortment of fashion outfitting. We remain encouraged by the growth we are seeing in new customers and have initiated tests in new categories, including lounge wear and face masks, as we see the opportunity to benefit from the market disruption. As we continue to navigate through the pandemic, we remain focused on managing costs and liquidity, including the further reduction of non-critical spending and continued negotiations with vendors and landlords on payment terms. We will build on our progress as we continue to leverage our demand driven sourcing model, enhance our omni-channel capabilities and evolve our marketing strategies to optimize engagement with existing customers while broadening our reach to new customers. While we have taken important steps to advance these initiatives and control what we can control, we are operating within what continues to be an unprecedented and extremely challenging environment. As such, we believe it is in the best interest of our stockholders to explore a variety of potential strategic alternatives. During this review, we will continue to move forward operating the business while maintaining disciplined inventory and cost management.”
SECOND QUARTER RESULTS
Net sales decreased 29% to $75.7 million from $106.0 million in the comparable prior year quarter primarily due to a decrease in traffic and the temporary closure of a majority of the Company’s boutiques as a result of the COVID-19 pandemic. As of September 4, 2020, nine of the Company’s boutiques remained closed, most of which are located in California. This decrease was partially offset by an increase in ecommerce sales due to an increase in conversion rate partially offset by lower average unit retail as a result of aggressive markdowns and promotions. The Company opened one new boutique and permanently closed four boutiques during the second quarter, bringing the total boutique count to 700 at the end of the quarter.
Gross profit, as a percent of sales, was 17.5% as compared to 38.2% in the prior year quarter. This unfavorable variance was driven by a decrease in merchandise margin as a result of aggressive markdowns and promotions in order to clear aged merchandise and to drive traffic to boutiques and the ecommerce website. Additionally, occupancy cost deleveraged due to lower sales but was partially offset by lower lease and depreciation expenses as a result of prior period impairment charges which caused a decrease in the remaining book value of boutique long-lived assets. Additionally, the Company’s lease expense decreased $1.2 million primarily due to early termination of certain leases triggered by kick out provisions and COVID-19 related rent abatements received from certain landlords.
Selling, general and administrative expenses decreased 33% to $26.0 million from $38.9 million in the prior year quarter. This decrease was primarily due to a $9.6 million decrease in boutique and corporate payroll costs primarily as a result of minimum employee coverage at the boutiques as well as a temporary furlough of substantially all of the Company’s employees during a portion of the quarter, and a $1.7 million decrease in boutique and corporate bonus expenses. Additionally, merchant processing fees decreased $0.5 million due to lower sales, corporate travel expenses decreased $0.4 million as only essential travel occurred as a result of the COVID-19 pandemic, and software and computer services and corporate depreciation expenses each decreased by $0.3 million.
The following information was filed by Francesca's Holdings Corp (FRAN) on Tuesday, September 15, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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