Francesca's on Tuesday reported that third quarter net sales were relatively flat year over year at $95.5 million.
Although comparable sales were hurt by stores closed since last year, they rose 1%, thanks to higher conversion rate and a boost in average units sold per transaction, according to a company press release.
Gross profit as a percentage of net sales expanded by 400 basis points to 39.3% from 35.3% in the prior-year quarter, thanks mostly to higher margins but also to lower occupancy costs, the company said. Loss from operations narrowed to $4.2 million from $23.1 million a year ago, as net loss shrank to $5.1 million from $16.2 million last year.
Francesca's Interim CEO Michael Prendergast on Tuesday described a retailer in the throes of a turnaround, with changes to merchandising, marketing, store count, supply chain and e-commerce. Still, shares were down sharply as top-line sales missed expectations.
The retailer did manage to push its store comps into positive territory, which, as Prendergast noted in an earnings call on Tuesday, is a far cry from last quarter's 5% decline, not to mention all the other declines in that metric for the last 10 quarters.
"While we took higher markdowns to move slow selling merchandise, we saw sales trends strengthen in the quarter as we bought into new trends represented by our strong sellers," he said, per a Seeking Alpha transcript. "We were encouraged by new product sales and believe it validates our go-forward strategy."
It's been a tumultuous year for Francesca's, which runs small stores it calls "boutiques." This past spring the retailer seemed to be on a downward spiral, and then went on to contend with issues beyond sales declines, including executive turnover, a looming stock market de-listing and a possible hostile takeover. But the company addressed them one by one, buoying its share price through a reverse stock split, replacing its CFO and adopting a poison pill.
Perhaps with its fortunes on the upswing, the company is ready to change horses in the chief executive post as well. The board has initiated a formal search for a permanent chief executive officer with the help of an executive search firm, according to Tuesday's release. Prendergast is staying on during that process and beyond, "through a reasonable transition period" once a CEO is found.
Beyond the board room, right-sizing the footprint has been key to the turnaround, and that continued during the third quarter. One new store opened and five underperforming locations closed during the period, for a total of 714 at quarter's end. At least another three will shutter by the end of the year, CFO Cindy Thomassee said on the call. The company now runs 343 mall stores and 371 outside of malls, including 91 outlets, she said.