Dive Brief:
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Francesca’s on Tuesday reported fourth quarter net sales rose 9% to $146.3 million and diluted earnings were 39 cents per share, an 11% increase over the year-ago period, topping analyst expectations from Zacks Investment Research for for earnings of 37 cents per share on net sales of $145.7 million. Same-store sales were flat compared to the same period last year, as the increase in average transaction value offset the decrease in transactions.
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For its full fiscal 2016 year, the apparel and accessories retailer said net sales increased 11% to $487.2 million year over year, thanks to a 2% increase in same-store sales and the addition of 55 net new boutiques. E-commerce sales rose 42% last year, driven by increased website traffic and conversion rate.
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For this fiscal year ahead, the retailer expects net sales to range between $527 million and $543 million and a flat to low-single digit increase in same-store sales, compared to the prior year increase of 2%. The company expects to open 60 to 65 boutiques and to close 10 to 15 boutiques in fiscal year 2017, on par with last year. Diluted earnings for the year are expected to be in the range of $1.11 per share to $1.21 per share compared to the prior year of $1.09 per share.
Dive Insight:
At a time when apparel retailers are blaming falling mall traffic as they file for bankruptcy and shutter stores, Francesca’s stands out as one planning more stores and carefully strategizing the products it sells online.
"We worked hard to improve our inventory management and ended the year with total inventories down 24% versus the prior year,” CEO Steve Lawrence said in a statement. “This decrease was driven by disciplined receipt flows during the quarter coupled with both markdowns and mark-out-of-stock charges taken at year-end to ensure a clean transition into 2017. Looking ahead, we remain intently focused on invigorating the merchandise assortment, improving inventory management to ensure we maintain a consistent flow of new receipts, optimizing our real estate portfolio, creating an exceptional and personalized guest experience, and growing our ecommerce business. We will also continue to make strategic investments to ensure we have the infrastructure in place to achieve our long term growth objectives.''
For a number of reasons, despite its flat same-store sales and the discounting it fell to over the holidays, Francesca’s will remain one of the winners in the fashion space, according to GlobalData Retail analyst Håkon Helgesen. Even those forced discounts that hurt the retailer’s same-store sales and its margins had their upside in helping clean out inventory, he said. “[T]he results are impressive when set against a retail market where both overall demand and customer traffic were soft over the final quarter,” Helgesen said in a note emailed to Retail Dive.
The retailer's performance is due to a number of factors, he said, including an almost fast-fashion approach (not quite as fast or nimble as Zara, but sped up), a nimbler approach to procurement that has protected some pricing and some margins, and a merchandising approach that encourages cross-selling accessories and handbags with apparel.
Francesca’s is also handling its e-commerce with improvements to its websites, especially on mobile, and a “prudent approach to the assortment it showcases online,” Helgesen said. “Rather than simply replicating what is available in stores, it has determined what collections and pieces sell well online and has showcased these very effectively,” he said. “It has also used online to extend the range available in stores. This both ensures that stores do not become overly cluttered and that there is sufficient difference between online and stores to ensure many customers visit and shop both.”