FBR Capital Downgrades Francesca's Holdings (FRAN) to Underperform
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FBR Capital downgraded Francesca's Holdings (NASDAQ: FRAN) from Market Perform to Underperform and maintains a price target of $14.00.
Analyst Susan Anderson commented, "We are downgrading FRAN to Underperform from Market Perform as it is now up +79% from its lows and trades at 15.6x FY2 PE (one of the highest in our coverage). We have recently seen higher promos/clearance at FRAN, particularly in apparel, which could indicate a slowdown in sales from mid September, when we believe FRAN was comping +MSD. FRAN's +MSD guide was based on continued better traffic trends in the remainder of September/into October, which we believe did not happen based on a drop off in mall traffic mid September. Additionally, at a +MSD comp, the two-year stack for FRAN significantly accelerates from 2Q (–4% to +MSD), and apparel would have to see a significant acceleration given much tougher 3Q compares (–4.7% in 2Q versus +7.6% in 3Q), which does not appear evident based on apparel promos in 3Q. Finally, FRAN is up against the toughest 4Q SSS compare (+11% in 4Q versus +4% in 3Q) in our coverage and therefore does not have the easy compare tailwind other retailers have in 4Q. We lower our estimates slightly (see body for changes) and leave our PT at $14, which is potentially a ~20% downside from current levels."
Shares of Francesca's Holdings closed at $17.43 yesterday.
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