UPDATE: June 17, 2019: Francesca's Chairman Richard Kunes will step down from the board effective Jan. 31, 2020, according to a company filing Thursday with the Securities and Exchange Commission. He's scaling back his board assignments and his "resignation is not due to any disagreement with the Company on any matter relating to the Company's operations, policies or practices," according to the document. After reporting a sales slide and store closure plans, the company, which is in danger of being delisted, was trading at 44 cents per share at the time of publishing.
Struggling apparel-boutique retailer Francesca's plans to shutter at least 30 stores in coming months, Chief Financial Officer Kelly Dilts told analysts on Thursday morning.
The company closed eight during a first quarter that saw revenue and profits continue their downward slide, though it did open three and will open one this year that "has already been built out," according to Dilts. That brings its fleet at the beginning of the current quarter to 722 locations, found mostly in malls.
Net sales in the quarter fell 13% to $87.1 million as comps also dropped 13%, mostly thanks to declines in traffic and conversion rates, according to a company press release. Loss from operations widened to $9.7 million from $4.5 million in the prior-year quarter.
Interim CEO Michael Prendergast put a positive spin on things Thursday morning, saying that the company's results met its own expectations, and that changes to its merchandising have already begun to pay off.
"Based on the success of our newer product, we have decided to accelerate markdowns on slower selling legacy product with the goal of selling it through by the end of the second quarter," he said in a statement. "As the composition of our inventory continues to improve with a higher percentage of new product, we believe we can drive meaningful improvement in comparable sales in the second half of the year."
But the company's sale trajectory and financial picture are leading to what for many troubled retailers is an inevitable conclusion: that its footprint is simply too large.
It's been a theme in the first half of the year, as store closures already have surpassed the total for the entirety of 2018. The tally of store announcements in the U.S. has reached 7,215 for closures, dwarfing the 2,784 of openings, according to a May 31 report from Coresight Research emailed to Retail Dive. That not only overtakes 2018's count for the whole year, but also presents quite a different proportion: per Coresight, last year, 5,864 stores closed in the U.S. while 3,239 opened.
The trend is accomplishing what many observers have said is an overdue correction of an over-built retail sector. Malls appear to have grasped that, too, and are gravitating to a more mixed-use model as they seek new tenants. But in the meantime, individual retailers like Francesca's are likely to suffer sales losses as they shrink their fleets.