Francesca’s nosedives into fourth-quarter loss
today May 4, 2019
Troubled women’s apparel and accessories retailer Francesca’s Holding Corporation announced a net loss of $21.3 million (representing a loss of $0.61 per diluted share) in the fourth quarter of 2018 on Friday, as it suffered the effects of falling sales and a series of one-off charges. In the prior-year period, Francesca’s had reported net income of $3.7 million, or $0.10 per diluted share.
In the fourth quarter ended February 2, 2019, the company posted a 14% decline in net sales, which decreased to $119.3 million, compared to $138.5 million in Q4 2017. Comparable sales were also down 14%.
The Houston, Texas-based company’s fourth-quarter results were also negatively impacted by a non-cash charge of $17.1 million related to the establishment of a tax valuation allowance, as well as non-cash asset impairment charges amounting to $5.6 million.
Despite these unencouraging results, Francesca’s interim CEO Michael Prendergast was optimistic. “While sales for the fourth quarter were in-line with our expectations, adjusted diluted loss per share was better than anticipated reflecting some of the early work that has been done around expense management,” he commented in a press release.
Full-year net sales at Francesca’s decreased 9% to $428.1 million, down from $471.7 million in the previous year, reflecting a 14% decrease in comparable sales, as well as the loss of around $5.0 million earnt in sales in fiscal 2017’s extra 53rd week.
The company’s annual net loss came to $40.9 million, or $1.18 per diluted share, a far cry from the $15.6 million in net income ($0.43 per diluted per share) reported in 2017.
Over the course of fiscal 2018, Francesca’s opened 32 new boutiques and closed 26, finishing the year with a total of 727 retail locations.
In a call with investors on Friday, the retailer revealed that it will be closing at least 20 of its stores in 2019 and will be putting remodelling efforts on hold until it can stabilize its financial situation.
In the company’s results press release, Prendergast also evoked a range of other measures that Francesca’s will be undertaking in 2019 in the hopes of turning its business around.
The executive, who stepped into his role in February following the departure of Steve Lawrence, highlighted transitioning the retailer’s merchandising process into a demand-based fast-fashion model and simplifying its promotional strategy as priorities in fiscal 2019, while also alluding to the implementation of further cost-cutting measures.
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