FBR Capital Downgrades Francesca's Holdings (FRAN) to Underperform

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."

For an analyst ratings summary and ratings history on Francesca's Holdings click here. For more ratings news on Francesca's Holdings click here.

Shares of Francesca's Holdings closed at $17.43 yesterday.

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