NEW YORK (TheStreet) - Francesca's Holdings (FRAN) is suffering from the same ailments as other mall-based retailers catering to the teen space, namely that of declining store traffic, a slow execution of e-commerce initiatives and merchandise that customers that can find elsewhere, and at a lower cost.
On Tuesday, shares of the accessories retailer slumped 4.2% to $13.38 following disappointing quarterly results and a sluggish outlook for the remainder of 2014. Despite Francesca's second-quarter net sales rising 9% to $97.3 million, the figure was short of consensus estimates of $99.79 million, as comparable sales decreased 7%. The company reported net income of $10.3 million, or 24 cents a share, down from $14.6 million, or 33 cents a share, in the year-earlier quarter. Earnings also fell short of expectations calling for EPS of 26 cents.
Francesca's management forecast that "a mid- to low-single digit decrease in comparable sales" for the third quarter and the same decline in comps for the full year. Third-quarter earnings per share were forecast between 17 cents and 22 cents a share, below expectations of 24 cents a share. For the full year, Francesca's expects an EPS range between 88 cents and 98 cents a share compared to estimates of $1.03 a share, according to Thomson Reuters.
As shares fell, volume traded on Francesca's shares was more than triple the average daily trading volume of 1 million shares. Here's what analysts said about Francesca's.
Randal Konik, Jefferies (Buy; $19 PT)
In 2Q, FRAN saw tough sales and a miss to earnings, compounded by a poor outlook for 2H. However, we see green shoots beginning to appear as non-jewelry categories improve and jewelry trends are better post 2Q. With what looks like the kitchen sink thrown at the go-forward guidance, we believe shares are now ripe to buy. We are taking down our PT modestly from $21 to $19. Maintain Buy.