Francesca's Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Francesca's Holdings Corporation (FRAN)

Q2 2012 Earnings Call

September 4, 2012 4:30 p.m. ET

Executives

Jean Fontana - Investor Relations, ICR, Inc.

John De Meritt - President and Chief Executive Officer

Theresa Backes - Chief Operating Officer

Neill Davis - President

Cindy Thomassee - Interim Chief Financial Officer

Analysts

Howard Tubin - RBC Capital Markets

Simon Segal - JP Morgan

Amanda Seguin - Jefferies

Edward Yruma - Keybanc Capital Markets

Richard Jaffe - Stifel Nicolaus

Betty Chen - Wedbush Securities

Janet Kloppenburg - JJK Research

Mark Montagna - Avondale Partners

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Francesca’s Collections Corporate Second Quarter Fiscal 2012 Earnings Conference. As a reminder today's call is being recorded. At this time all participants are in a listen-only mode. Following today's presentation we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Jean Fontana, Investor Relations with ICR. Please go ahead.

Jean Fontana

Thank you. Good afternoon, everyone. Thank you for joining us this afternoon for Francesca’s Collections second quarter fiscal 2012 results conference call. On the call today are John De Meritt, Chief Executive Officer; Neill Davis, President; Cindy Thomassee, Interim Financial Officer; and Theresa Backes, Chief Operating Officer.

Before we begin, I would like to remind you that certain statements in this conference call constitute forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's 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 were expected. For a discussion of 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 the risk factors in our Annual Report filed with the SEC.

We undertake no obligation to publicly update or revise any forward-looking statements. This information may also be accessed by visiting www.francescascollections.com, under the section entitles investor relations.

With that I will turn the call over to John De Meritt.

John De Meritt

Thank you, Jean, and thank you all for joining us today. Before I discuss our Q2 results, I would like to comment on the leadership transition. After spending more than a decade helping grow the company, I decided that the time is right for me to hand over the reins so that I can focus on other interests. As outlined in the release, Neill will be appointed CEO and Theresa will be appointed President effective January 2013.

I have enjoyed building a great company and it was important for me to lead the organization to appoint where I felt comfortable transitioning the leadership to others. I had a number of goals that I felt needed to be accomplished for that to happen and I feel confident that those goals have been achieved. First, I wanted to recruit a highly qualified senior management team and I feel that I have done so. I have had the pleasure of working beside Neill and Theresa over the past five years and know that they along with the balance of the team are more than capable of continuing to lead Francesca’s success.

Second, I wanted to build a strong balance sheet. During the third quarter we plan to pay off the remaining $2 million balance on our revolving credit facility and the company will be debt free. So I feel that I have accomplished that goal as well. Third, I wanted to build an infrastructure that could support the company's growth plan. Putting in place the processes and controls to be a public company, the new corporate office and distribution center, the rollout of the JDA platform and the launch of the ecommerce site provides the company a solid foundation.

Lastly, I wanted to deliver significant value to our investor base. Since going public the company has delivered very strong result and from the guidance we are providing today, you can see that we expect those results to continue. I am very proud of these accomplishments and have enjoyed the past six years tremendously. Since we are about to begin next year’s budgeting cycle, I thought that allowing Theresa and Neill to lead that process it was important. I am confident that this leadership transition is another step, another right step in continuing to execute on our well defined strategy of growing our boutique base, driving same store sales, and improving our infrastructure to support that growth.

Before I turn to the second quarter, Neill would like to comment on the transition as well.

Neill Davis

Thanks, John, and good afternoon everyone. I have worked with John over the last five years as a member of the company's board of directors and I do share his vision for Francesca’s. Francesca’s has a very strong connection with its target customer and is able to adjust changing market conditions very effectively. I believe that exploiting our core competitive competencies that are inherent in our merchandizing and real estate strategies, as well as selectively further leveraging the Francesca’s brand, will drive our strategy in the near-term.

Building on our domestic presence is our higher priority. Moving from today's base of 357 boutiques to a market potential of 900. I also believe there are tremendous market share to be gained in the digital sales channel. Our volume of visits in the digits channel, while approximately less than 2% penetrated today, is growing at a three year compounded annual growth rate of 60%. Achieving penetration rates in excess of 10% are in my forward view.

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