Shares of Francesca’s Holdings Corp. (NASDAQ: FRAN) leaped nearly 10% in pre-market trading after the boutique chain reported better-than-expected fiscal third quarter earnings thanks to stronger demand for its high-margin products. The Company also raised its outlook on full-year earnings.
Francesca, which focuses on reasonably priced clothing for women aged between 18 and 35, said that its “broad-and-shallow” strategy, which is a combination of stocking broad range of styles suiting individual tastes but with limited quantities, helped the company to drive up the profits as it was prompt in responding to changes in demand.
Besides short lead times of vendors allowed Francesca to bring new merchandises in the shelves as often as five times a week.
For the fiscal third quarter, the Company reported earnings of $10.8 million, or 24 cents per share, up from $4.7 million, or 11 cents per share, in the year earlier quarter.
Revenue during the period climbed 44 percent to $72.0 million.
Analysts polled by Thomson Reuters had most recently forecasted earnings of 22 cents a share on revenue of $71.2 million.
Comparable-store-sales, a key gauge on retailer’s performance, rose 16.7 percent in the fiscal third quarter, compared to a growth of 6.5 percent in same-store-sales in the year earlier period. The Company added 76 new boutique stores since the end of third quarter of last year.
Total inventories at the end of the quarter increased by $7.0 million to $23.5 million, a 42% increase over the same period of last year while Inventory per boutique rose 12%.
The Company now expects full-year adjusted earnings of $1.00 to $1.01 a share, up from its earlier projection of 96 cents to 98 cents a share.
Analysts polled by Thomson Reuters, on average, are expecting earnings of 98 cents a share.
Commenting over the results, John De Meritt, CEO, commented, “We delivered another quarter of strong results, demonstrating the appeal of our business model of a differentiated merchandise strategy in a boutique environment. Our scalable, high margin merchandising model combined with productive new boutique economics provides a runway for boutique growth and gives us confidence in Francesca’s long-term growth potential.”
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