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Francesca's (FRAN) Shares Rise as Q4 Earnings Beat Estimates

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Shares of Francesca's Holdings Corp. FRAN gained almost 1% on Mar 22, a day after the company reported earnings of 39 cents per share in the fourth quarter of fiscal 2016. Earnings surpassed the Zacks Consensus Estimate by 5.4%. Further, earnings gained 11% year over year driven by higher sales. Results exceeded management’s guided range of 35–37 cents.

Revenues & Margins

The specialty retailer of shoes and apparel reported net sales of $146.3 million, beating the Zacks Consensus Estimate marginally by 0.5%. It touched the higher end of management's expectation of $144.0–$146.0 million. Sales increased 9% year over year on the back of increased sales from 55 net new boutiques since the prior-year period. Further, sales were aided by a 42% increase in eCommerce sales driven by increased website traffic and conversion rate.

However, comps, including direct-to-consumer sales, remained flat as higher average transaction value was offset by decrease in transactions. The company had reported 11% gain in comps a year ago.

Within merchandise, net sales in the apparel segment gained 13.5%, jewelry segment advanced 15% and accessories increased 2.4% while gifts declined 2.9% during the quarter.

Gross margin shrank 170 basis points (bps) to 46.4% year over year due to the company’s strategic move to take inventory markdowns in a bid to enter fiscal year 2017 with clean inventories. Operating margin shrank 190 bps to 16.1% due to higher selling, general and administrative expenses compared with the previous year.

Fiscal Results

Fiscal 2016 earnings of $1.09 per share were in line with the Zacks Consensus Estimate. However, earnings gained 20% year over year backed by higher sales.

The company reported net sales of $487.2 million, beating the Zacks Consensus Estimate by 2%. Sales increased 11% year over year.

Francesca's Holdings Corporation Price, Consensus and EPS Surprise


Francesca's Holdings Corporation Price, Consensus and EPS Surprise | Francesca's Holdings Corporation Quote

Other Financial Details

Francesca’s ended the quarter with cash and cash equivalent of $53.2 million compared to $50 million in the prior quarter. The company did not have any long term debt during the quarter.

First-Quarter Fiscal 2017 Outlook

Net sales are expected in the range of $111–$114 million. The guidance assumes low single-digit decline to flat range in comparable sales. Moreover, the company plans to open 15 boutiques and close four existing boutiques in the first quarter. Earnings per share are expected in the range of 12–16 cents.

The company forecasts an improvement in sales trends toward the end of the second quarter during the back-to-school season.

Fiscal 2017 Outlook

Francesca's maintained the fiscal 2017 outlook and continues to expect net sales in the range of $527–$543 million. Further, it expects comps to remain flat to low-single digit increase compared with the prior-year increase of 2%. Earnings per share are expected in the range of $1.11–$1.21, which compares favorably with $1.09 reported in fiscal 2016.

Francesca's currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader consumer discretionary sector include:

Hasbro Inc. HAS has an earnings growth rate of 13.6% in the trailing four quarters.

While DeVry Education Group Inc. (DV - Free Report) has an expected earnings growth of 9.2%, GoPro Inc. GPRO has an expected earnings growth of 15%.

All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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