Form 8-K Francesca's Holdings For: Jun 10

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June 10, 2015 4:21 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 10, 2015

FRANCESCA’S HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-35239	20-8874704
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

8760 Clay Road Houston, Texas	77080
(Address of principal executive offices)	(Zip Code)

(713) 864-1358

Registrant’s telephone number including area code:

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.

Results of Operations and Financial Condition.

On June 10, 2015, Francesca’s Holdings Corporation (the “Company”) issued a press release announcing its consolidated financial results for the fiscal first quarter ended May 2, 2015. A copy of the press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01.

Financial Statements and Exhibits.

99.1	Press Release issued by Francesca’s Holdings Corporation on June 10, 2015.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FRANCESCA’S HOLDINGS CORPORATION


Date: June 10, 2015	By:	/s/ Kal Malik
		Kal Malik
		Chief Administrative Officer

EXHIBIT INDEX

Exhibit No.		Description

99.1		Press Release issued by Francesca’s Holdings Corporation on June 10, 2015.

Exhibit 99.1

June 10, 2015

francesca’s^® Reports First Quarter Fiscal Year 2015 Financial Results

●

Net sales increased 11% to $95.0 million

●

Comparable sales decreased 2%

●

Diluted earnings per share was $0.17

●

Opened 50 boutiques during the quarter

HOUSTON, June 10, 2015 (GLOBE NEWSWIRE) -- Francesca's Holdings Corporation (Nasdaq : FRAN) today reported financial results for the first quarter ended May 2, 2015.

Michael W. Barnes, Chairman, President, and CEO stated, "We delivered on our top and bottom line objectives during the first quarter. Merchandise margins rose slightly above last year's rate and ending inventory per boutique was down 5% compared to last year. We had continued strong performance in our non-apparel departments and our new boutiques are opening above last year's sales levels. While we did see some bright spots in apparel, particularly in dresses around the Easter holiday, we believe that it will take time to achieve positive comparable results in this business."

Mr. Barnes noted that, "Looking ahead, we are maintaining our prior financial guidance for fiscal year 2015. Improving comparable sales is our number one priority. We continue to be focused on maintaining the right levels and composition of inventory and taking a disciplined approach to managing promotional activity and merchandise margins. I continue to be enthusiastic about the long-term prospects of francesca's and want to thank our associates for their hard work and dedication."

FIRST QUARTER RESULTS

Net sales increased 11% to $95.0 million from $85.4 million in the comparable prior year period. This increase was driven by 76 new boutiques opened since the comparable prior year quarter. We opened 50 boutiques during the quarter bringing our total boutique count to 589 at the end of the first quarter.

Our comparable sales decreased 2% due to lower boutique transaction count as compared to last year but was partially offset by a 19% increase in DTC sales. The increase in DTC sales was driven by increased traffic and conversion rates.

Gross profit, as a percentage of net sales, decreased to 47.3% from 49.0% in the prior year quarter. This decrease is attributable to 180 basis points of deleveraging of occupancy costs partially offset by 10 basis points improvement in merchandise margin. Our merchandise margin improved due to lesser promotions and markdowns compared to last year but was partially offset by disposal of certain slow-moving inventory.

Selling, general and administrative expenses ("SG&A") increased 19% to $33.0 million from $27.8 million in the prior year quarter. The increase in SG&A expenses is primarily due to higher boutique and corporate payroll expenses to support the larger boutique base.

Income from operations was $11.9 million, or 12.5% of net sales, compared to $14.0 million, or 16.4% of net sales, in the prior year quarter.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the quarter were $46.1 million compared to $25.4 million at the end of the comparable prior year quarter.

We ended the quarter with $31.4 million of inventory on hand compared to $28.8 million at the comparable prior year period. Average ending inventory per boutique decreased by 5% versus the comparable prior year period.

SECOND QUARTER AND FISCAL YEAR 2015 GUIDANCE

For the second quarter ending August 1, 2015, net sales are expected to be in the range of $104.0 million to $107.0 million; assuming a mid to low single digit decrease in comparable sales compared to the prior year comparable sales decrease of 7%. The Company plans to open 20 new boutiques during the second quarter. Diluted earnings per share are expected to be in the range of $0.20 to $0.23.

For the full year ending January 30, 2016, we are maintaining our previous financial guidance. We expect net sales to be in the range of $412.0 million and $424.0 million; assuming a flat to low single digit decrease in comparable sales compared to a prior year comparable sales decrease of 5%. The Company expects to open approximately 80 to 85 boutiques in fiscal year 2015 compared to 88 new boutiques opened in fiscal year 2014. Diluted earnings per share are expected to be in the range of $0.81 to $0.90. The number of average diluted shares for the full year assumed in guidance is expected to be 42.4 million shares.

The effective tax rate is estimated to be 38.1%.

Capital expenditures for fiscal year 2015 are expected to be in the range of $30.0 million to $32.0 million.

Conference Call Information

A conference call to discuss the first quarter fiscal year 2015 results is scheduled for June 10, 2015, at 8:30 a.m. ET. A live web cast of the conference call will be available in the investor relations section of our website, www.francescas.com. A replay of the call will be available after the conclusion of the call and remain available until June 17, 2015. To access the telephone replay, listeners should dial 1-877-870-5176. The access code for the replay is 9068887. A replay of the web cast will also be available shortly after the conclusion of the call and will remain on the website for ninety days.

Forward-Looking Statements

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements reflect our current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected. These risks and uncertainties include, but are not limited to, the following: the risk that we cannot anticipate, identify and respond quickly to changing fashion trends and customer preferences; our ability to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise through our direct-to-consumer business; our ability to successfully open and operate new boutiques each year; and our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth. For additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in our Annual Report on Form 10-K for the year ended January 31, 2015 filed with the Securities and Exchange Commission on March 27, 2015 and any risk factors contained in subsequent quarterly and annual reports we file with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement.

About Francesca's Holdings Corporation

francesca's® is a growing specialty retailer with retail locations designed and merchandised to feel like unique, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca's® operates 597 boutiques in 47 states and the District of Columbia and also serves its customers through francescas.com. For additional information on francesca's®, please visit www.francescas.com.

Francesca’s Holdings Corporation

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts and Percentages)

	Thirteen Weeks Ended
	May 2, 2015						May 3, 2014						Variance
	In USD			As a % of Net Sales⁽¹⁾			In USD			As a % of Net Sales⁽¹⁾			In USD			%			Basis Points
Net sales	$	95,011			100.0	%	$	85,424			100.0	%	$	9,587			11	%		-
Cost of goods sold and occupancy costs		50,118			52.7	%		43,592			51.0	%		6,526			15	%		170
Gross profit		44,893			47.3	%		41,832			49.0	%		3,061			7	%		(170	)
Selling, general and administrative expenses		33,003			34.7	%		27,812			32.6	%		5,191			19	%		210
Income from operations		11,890			12.5	%		14,020			16.4	%		(2,130	)		(15	)%		(390	)
Interest expense		(110	)		(0.1	)%		(221	)		(0.3	)%		111			50	%		20
Other income		(66	)		(0.1	)%		103			0.1	%		(169	)		(164	)%		(20	)
Income before income tax expense		11,714			12.3	%		13,902			16.3	%		(2,188	)		(16	)%		(400	)
Income tax expense		4,473			4.7	%		5,342			6.3	%		(869	)		(16	)%		(160	)
Net income	$	7,241			7.6	%	$	8,560			10.0	%	$	(1,319	)		(15	)%		(240	)
(1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.

Diluted earnings per share	$	0.17					$	0.20
Weighted average diluted share count		42,418						42,362

Comparable sales change		(2)%						(7)%

Francesca’s Holdings Corporation

Consolidated Balance Sheets

(In thousands, except share amounts)

	May 2, 2015			January 31, 2015			May 3, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	46,119		$	39,071		$	25,413
Accounts receivable		11,858			12,279			10,822
Inventories		31,395			23,801			28,779
Deferred income taxes		5,288			4,858			4,643
Prepaid expenses and other current assets		5,547			5,890			6,179

Total current assets		100,207			85,899			75,836
Property and equipment, net		77,114			74,095			69,799
Deferred income taxes		3,623			3,642			3,113
Other assets, net		1,731			1,909			1,724

TOTAL ASSETS	$	182,675		$	165,545		$	150,472

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,280		$	11,550		$	9,758
Accrued liabilities		13,699			11,904			9,640
Total current liabilities		29,979			23,454			19,398
Landlord incentives and deferred rent		36,739			32,877			32,333
Long-term debt		-			-			15,000
Total liabilities		66,718			56,331			66,731

Commitments and contingencies

Stockholders’ equity:
Common stock - $.01 par value, 80.0 million shares authorized; 45.5 million, 45.5 million and 45.4 million shares issued at May 2, 2015, January 31, 2015 and May 3, 2014, respectively.		455			455			454
Additional paid-in capital		105,000			105,498			103,574
Retained earnings		70,645			63,404			39,856
Treasury stock, at cost - 3.2 million shares held at each of May 2, 2015, January 31, 2015 and May 3, 2014.		(60,143	)		(60,143	)		(60,143	)
Total stockholders’ equity		115,957			109,214			83,741

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	182,675		$	165,545		$	150,472

Francesca’s Holdings Corporation

Consolidated Statements of Cash Flows

(In thousands)

	Thirteen Weeks Ended
	May 2, 2015			May 3, 2014
Cash Flows From Operating Activities:
Net income	$	7,241		$	8,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,822			3,043
Stock-based compensation expense		793			832
Excess tax benefit from stock-based compensation		(64	)		(581	)
Loss on sale of assets		128			17
Deferred income taxes		(1,875	)		(855	)
Changes in operating assets and liabilities:
Accounts receivable		485			(1,256	)
Inventories		(7,594	)		(4,164	)
Prepaid expenses and other assets		460			453
Accounts payable		6,543			(1,039	)
Accrued liabilities		1,795			(185	)
Landlord incentive and deferred rent		3,862			4,885
Net cash provided by operating activities		15,596			9,710

Cash Flows Used in Investing Activities:
Purchase of property and equipment		(8,721	)		(8,078	)
Net cash used in investing activities		(8,721	)		(8,078	)

Cash Flows Provided by (Used in) Financing Activities:
Proceeds from the exercise of stock options		109			972
Excess tax benefit from stock-based compensation		64			581
Repayments of borrowings under the revolving credit facility		-			(10,000	)
Repurchases of common stock		-			(5,270	)
Net cash provided by (used in) financing activities		173			(13,717	)

Net increase (decrease) in cash and cash equivalents		7,048			(12,085	)
Cash and cash equivalents, beginning of year		39,071			37,498
Cash and cash equivalents, end of period	$	46,119		$	25,413

Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	$	1,763		$	459
Interest paid	$	47		$	181

Francesca’s Holdings Corporation

Supplemental Information

Quarterly Sales by Merchandise Category

	Thirteen Weeks Ended						Variance
	May 2, 2015			May 3, 2014			In Dollars			%
	(in thousands, except percentages)
Apparel	$	48,170		$	44,764		$	3,406			8	%
Jewelry		21,972			18,321			3,651			20	%
Accessories		15,379			14,144			1,235			9	%
Gifts		9,837			8,399			1,438			17	%
Merchandise Sales		95,358			85,628			9,730			11	%
Others⁽¹⁾		(347	)		(204	)		(143	)		(70	)%
Net sales	$	95,011		$	85,424		$	9,587			11	%

⁽¹⁾

Includes gift card breakage income, shipping and change in return reserve.

Quarterly Comparable Transactions Results for Fiscal Year 2015

	Transactions⁽¹⁾		Average Transaction Value⁽²⁾

Q1		(5)%		3%

(1)

The number of comparable transactions (including merchandise and gift card purchases, returns and gift card redemptions) processed through our point-of-sale system for which a receipt was issued.

(2)

Average transaction value is calculated by dividing total comparable sales by the number of comparable transactions during the period.

Quarterly Comparable Sales