Stifel Remains Sidelined on Francesca's (FRAN) Following Q1 Results, Outlook

Stifel reiterates its Holding rating on Francesca's Holdings (Nasdaq: FRAN) following Q1 results and guidance issued earlier.

Analyst Richard Jaffe noted that Q1 EPS for Francesca's came in at $.20, which was to the lower-end of guidance ($.20 to $.24) and about 2 cents below the Street consensus. Comp store sales including direct decreased 7 percent, slightly below our estimated decline of 6 percent, versus +2 percent LY. Sales were at the low end of company guidance due to unappealing assortments in jewelery and dresses as well as inclement weather in February which resulted in 360 full and partial day boutique closures (negatively impacted comp by 200 bps). In addition, due to the weak sales volume the company plans to dispose of slow moving inventory in 2Q which will negatively impact EPS by $0.04-$0.05.

While we remain positive on FRAN’s long-term prospects for growth given its visible square footage expansion, e-commerce roll-out and possible further leverage on operating expense, at the current share price, with inflated inventory levels and weak store traffic, we are comfortable waiting to see how the quarter plays out. We believe that the reward potential is limited near term, and risk, given the current fashion, merchandising, and retail consumer challenges, remains significant, Jaffe said.

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

Francesca\'s Holdings closed at $15.28 yesterday.

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