AP NEWS

francesca’s® Reports Second Quarter Fiscal Year 2018 Financial Results

September 11, 2018

-- Net sales decreased 6% to $113 million and comparable sales decreased 13% -- Diluted earnings per share was $0.01 -- Company revises full year sales and EPS guidance

HOUSTON, Sept. 11, 2018 (GLOBE NEWSWIRE) -- Francesca’s Holdings Corporation (Nasdaq: FRAN) today reported financial results for the second quarter ended August 4, 2018.

Steve Lawrence, President and CEO, stated, “Second quarter sales results were disappointing mostly due to weak traffic trends. While we have made significant progress in our merchandising strategy, inventory discipline and store renovations, we know there is additional work to be done to win back our core customer. We did see some positives in the business, including improving conversion, very strong ecommerce sales growth, and a significant reduction in clearance inventory.”

Mr. Lawrence continued, “While we did not see the positive inflection in our results that we had hoped for, I strongly believe that the steps we are taking in resetting our merchandising strategy, investing in our omni-channel and reformatting our stores to better showcase our product, were the right decisions for the business. In addition, we are taking action to drive improved traffic trends through a number of marketing initiatives. That said, as we see the progress in our business coming at a more measured pace, we are reducing our annual guidance. I am proud of the team’s hard work and dedication and look forward to building upon our efforts to get our business back on track to deliver sustainable long-term sales and profitability growth.”

SECOND QUARTER RESULTS

Net sales decreased 6% to $113.0 million from $119.7 million in the second quarter of fiscal 2017 due to a 13% decrease in comparable sales. This follows a 3% decrease in comparable sales for the prior year quarter. The decline in comparable sales was primarily due to the decline in boutique traffic and conversion rate, although conversion sequentially improved from month-to-month during the quarter. These decreases were partially offset by sales from 50 net new boutiques added since the same period last year. The Company opened four new boutiques and closed six boutiques during the quarter, bringing the total boutique count to 742 at the end of the quarter.

Gross profit, as a percent of net sales, decreased to 39.0% from 46.3% in the comparable prior year quarter. This unfavorable variance was due to the decrease in merchandise margin and higher occupancy costs. Merchandise margin decreased versus last year due to higher markdowns and marked-out-of-stock charges as a result of our in-season clearance strategy and in order to transition the boutiques to our new merchandising direction. Occupancy costs increased versus last year primarily due to the increased number of boutiques, higher rent and related expenses driven by increased penetration of boutiques in high traffic centers, and higher depreciation as a result of increased new boutique and remodel costs. Additionally, occupancy costs deleveraged significantly versus last year as a result of lower sales.

Selling, general and administrative expenses decreased 1% to $43.3 million in the thirteen weeks ended August 4, 2018 from $43.6 million in the thirteen weeks ended July 29, 2017. This decrease was due to lower short- and long-term performance-based incentive expenses as a result of lower expected payouts partially offset by an increase in corporate payroll and marketing expenses.

Income from operations was $0.8 million, or 0.7% of net sales, compared to income from operations of $11.8 million, or 9.9% of net sales, in the comparable prior year quarter.

The Company’s effective tax rate for the quarter was 44.6% compared to 38.7% in the comparable prior year quarter. The increase in the Company’s effective tax rate was due to additional expense recognized related to the vesting of certain stock-based awards partially offset by the lower corporate tax rate under the Tax Cuts and Jobs Act enacted in December 2017.

Net income for the second quarter was $0.5 million, or $0.01 diluted earnings per share, compared to net income of $7.3 million, or $0.20 diluted earnings per share, in the comparable prior year quarter.

BALANCE SHEET SUMMARY

Total cash and cash equivalents at the end of the quarter were $23.4 million compared to $33.3 million at the end of the comparable prior year quarter, with no debt outstanding. Inventory on hand totaled $31.9 million at the end of the second quarter compared to $34.0 million at the end of the comparable prior year quarter. Average ending inventory per boutique decreased 13% versus the comparable prior year period as the Company continues to diligently control inventory through enhanced inventory management processes.

THIRD QUARTER AND REVISED FISCAL YEAR 2018 GUIDANCE

For the third quarter ending November 3, 2018, net sales are expected to be in the range of $105 million to $110 million, assuming a comparable sales decrease of 3% to 8% compared to the prior year decrease of 18%. The Company plans to open one new boutique and close three existing boutiques during the third quarter. The Company expects a diluted loss per share of $0.03 to a diluted earnings per share of $0.02.

For the fiscal year ending February 2, 2019, net sales are now expected to be in the range of $453 million to $463 million; assuming a comparable sales decrease of 8% to 10% compared to the prior year decrease of 11% in comparable sales. Diluted earnings per share are expected to be in the range of $0.15 to $0.25 compared to prior year diluted earnings per share of $0.43. This also compares to prior year adjusted diluted earnings per share of $0.52, which excludes the $3.3 million, or $0.09 per diluted share, charge related to the remeasurement of the Company’s deferred tax assets.

Capital expenditures for fiscal year 2018 are still expected to be approximately $30 million. The Company now expects to open 34 boutiques, close 24 boutiques and refresh 80 to 85 boutiques in fiscal year 2018.

Conference Call Information

A conference call to discuss the second quarter fiscal year 2018 results is scheduled for September 11, 2018, at 8:30 a.m. ET. A live webcast of the conference call will be available in the investor relations section of the Company’s website, www.francescas.com. A replay of the call will be available after the conclusion of the call and remain available until September 18, 2018. To access the telephone replay, listeners should dial 1-844-512-2921. The access code for the replay is 3108228. A replay of the web cast will also be available shortly after the conclusion of the call and will remain on the website for ninety days.

Forward-Looking Statements

Certain statements in this release are “forward-looking statements” made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements reflect our 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 we expected. These risks and uncertainties include, but are not limited to, the following: the risk that we cannot anticipate, identify and respond quickly to changing fashion trends and customer preferences or changes in consumer environment, including changing expectations of service and experience in boutiques and online, and evolve our business model; our ability to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise through our ecommerce website; our ability to successfully open, refresh and operate new boutiques each year; our ability to efficiently source, distribute additional merchandise quantities necessary to support our growth; and the impact of potential tariff increases or new tariffs. For additional information regarding 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 “Risk Factors” in our Annual Report on Form 10-K for the year ended February 3, 2018 filed with the Securities and Exchange Commission (“SEC”) on March 28, 2018 and any risk factors contained in subsequent quarterly and annual reports we file with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement.

Non-GAAP Information

This press release includes non-GAAP adjusted diluted earnings per share, a non-GAAP financial measure. The Company believes this non-GAAP financial measure not only provides our management with comparable financial data for internal financial analysis but also provides meaningful supplemental information to investors. Specifically, this non-GAAP financial measure allows investors to better understand the performance of the business and facilitate a meaningful evaluation of our fiscal year 2017 diluted earnings per share on a comparable basis with our expected fiscal year 2018 results. This non-GAAP measure should be considered a supplement to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

About Francesca’s Holdings Corporation

francesca’s® is a growing specialty retailer which operates a nationwide-chain of boutiques providing customers a unique, fun and personalized shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. Today francesca’s® operates approximately 742 boutiques in 47 states and the District of Columbia and also serves its customers through francescas.com. For additional information on francesca’s® , please visit www.francescas.com.

CONTACT: ICR, Inc. Company Jean Fontana Kelly Dilts 832-494-2236 646-277-1214 Kate Venturina 832-494-2233 IR@francescas.com

Francesca’s Holdings CorporationConsolidated Statements of Operations(In Thousands, Except Per Share Amounts, Percentages and Basis Points)

Thirteen Weeks Ended ------------------------------------------ August 4, 2018 July 29, 2017 Variance -------------------- -------------------- -------------------------- As a % As a % In USD of Net In USD of Net In USD % Basis Sales Sales Points (1) (1) ----------- ------- ----------- ------- ---------- ------ ------ Net sales $ 113,025 100.0 % $ 119,707 100.0 % $ (6,682 ) (6 )% - Cost of goods sold and occupancy costs 68,918 61.0 % 64,312 53.7 % 4,606 7 % 730 --------- - ----- - --------- - ----- - -------- - --- -- ---- - Gross profit 44,107 39.0 % 55,395 46.3 % (11,288 ) (20 )% (730 ) Selling, general and administrative 43,277 38.3 % 43,556 36.4 % (279 ) (1 )% 190 expenses --------- - ----- - --------- - ----- - -------- - --- -- ---- - Income from operations 830 0.7 % 11,839 9.9 % (11,009 ) (93 )% (920 ) Interest expense (112 ) (0.1) % (110 ) (0.1) % (2 ) 2 % - Other income 102 0. 1 % 119 0.1 % (17 ) (14 )% - --------- - ----- - --------- - ----- - -------- - --- -- ---- - Income before income tax expense 820 0.7 % 11,848 9.9 % (11,028 ) (93 )% (920 ) Income tax expense 366 0.3 % 4,585 3.8 % (4,219 ) (92 )% (350 ) --------- - ----- - --------- - ----- - -------- - --- -- ---- - Net income $ 454 0.4 % $ 7,263 6.1 % $ (6,809 ) (94 )% (570 ) - ------- - ----- - - ------- - ----- - - ------ - --- -- ---- - (1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. Diluted earnings per share $ 0.01 $ 0.20 Weighted average diluted share count 35,020 36,472 Comparable sales change (13)% (3)% ------------------ --------------------

Twenty-Six Weeks Ended -------------------------------------------- August 4, 2018 July 29, 2017 Variance --------------------- --------------------- ------------------------------ As a % As a % Basis In USD of Net In USD of Net In USD % Points Sales(1) Sales(1) ----------- -------- ----------- -------- ----------- ------- -------- Net sales $ 213,430 100.0 % $ 227,396 100.0 % $ (13,966 ) (6 )% - Cost of goods sold and occupancy 130,960 61.4 % 123,317 54.2 % 7,643 6 % 710 costs --------- - ----- -- --------- - ----- -- --------- - ---- -- ------ - Gross profit 82,470 38.6 % 104,079 45.8 % (21,609 ) (21 )% (710 ) Selling, general and 86,160 40.4 % 84,934 37.4 % 1,226 1 % 300 administrative expenses --------- - ----- -- --------- - ----- -- --------- - ---- -- ------ - Loss (income) from operations (3,690 ) (1.7 )% 19,145 8.4 % (22,835 ) (119 )% (1,010 ) Interest expense (229 ) (0.1 )% (223 ) (0.1 )% (6 ) (3 )% - Other income 252 0.1 % 190 0.1 % 62 33 % - --------- - ----- -- --------- - ----- -- --------- - ---- -- ------ - (Loss) income before income tax (3,667 ) (1.7 )% 19,112 8.4 % (22,779 ) (119 )% (1,010 ) (benefit) expense Income tax (benefit) expense (236 ) (0.1 )% 7,516 3.3 % (7,752 ) (103 )% (340 ) --------- - ----- -- --------- - ----- -- --------- - ---- -- ------ - Net (loss) income $ (3,431 ) (1.6 )% $ 11,596 5.1 % $ (15,027 ) (130 )% (670 ) - ------- - ----- -- - ------- - ----- -- - ------- - ---- -- ------ - (1) Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding. Diluted (loss) earnings per share $ (0.10 ) $ 0.32 Weighted average diluted share 34,807 36,811 count Comparable sales change (15)% (4)% --------------------- ---------------------

Francesca’s Holdings CorporationConsolidated Balance Sheets(In thousands, except share and per share amounts)

August 4, February 3, July 29, 2018 2018 2017 ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 23,354 $ 31,331 $ 33,298 Accounts receivable 19,764 16,642 18,416 Inventories 31,902 26,816 34,036 Prepaid expenses and other current assets 10,549 9,714 9,433 - -------- - - -------- - - -------- - Total current assets 85,569 84,503 95,183 Property and equipment, net 89,858 87,702 83,956 Deferred income taxes 7,233 9,413 16,009 Other assets, net 4,912 3,622 3,138 - -------- - - -------- - - -------- - TOTAL ASSETS $ 187,572 $ 185,240 $ 198,286 - -------- - - -------- - - -------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 29,406 $ 17,801 $ 26,971 Accrued liabilities 11,926 14,654 17,748 - -------- - - -------- - - -------- - Total current liabilities 41,332 32,455 44,719 Landlord incentives and deferred rent 35,904 38,337 38,125 - -------- - - -------- - - -------- - Total liabilities 77,236 70,792 82,844 - -------- - - -------- - - -------- - Commitments and contingencies Stockholders’ equity: Common stock - $0.01 par value, 80.0 million shares authorized; 47.3 million, 46.3 million and 46.4 million shares issued at August 4, 473 463 464 2018, February 3, 2018 and July 29, 2017, respectively. Additional paid-in capital 112,136 111,439 111,405 Retained earnings 157,748 159,045 155,080 Treasury stock, at cost – 11.1 million, 10.3 million and 9.7 million shares at August 4, 2018, February 3, 2018 and July 29, 2017, (160,021 ) (156,499 ) (151,507 ) respectively. - -------- - - -------- - - -------- - Total stockholders’ equity 110,336 114,448 115,442 - -------- - - -------- - - -------- - TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 187,572 $ 185,240 $ 198,286 - -------- - - -------- - - -------- -

Francesca’s Holdings CorporationConsolidated Statements of Cash Flows(In thousands)

Twenty-Six Weeks Ended ------------------------ August 4, July 29, 2018 2017 ----------- ----------- Cash Flows Provided by Operating Activities: Net (loss) income $ (3,431 ) $ 11,596 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 12,105 10,310 Stock-based compensation expense 733 2,422 Loss on disposal of assets 350 233 Deferred income taxes 1,473 (497 ) Impairment charges 148 100 Changes in operating assets and liabilities: Accounts receivable (3,122 ) (12,538 ) Inventories (5,086 ) (10,078 ) Prepaid expenses and other assets (2,411 ) (1,978 ) Accounts payable 12,590 16,864 Accrued liabilities 20 (8,013 ) Landlord incentives and deferred rent (2,433 ) 33 - ------- - - ------- - Net cash provided by operating activities 10,936 8,454 - ------- - - ------- - Cash Flows Used in Investing Activities: Purchases of property and equipment (14,436 ) (12,890 ) - ------- - - ------- - Net cash used in investing activities (14,436 ) (12,890 ) - ------- - - ------- - Cash Flows Used in Financing Activities: Repurchases of common stock (3,980 ) (15,326 ) Taxes paid related to net settlement of equity awards (26 ) (142 ) Payment of debt issuance costs (471 ) - - - Net cash used in financing activities (4,477 ) (15,468 ) - ------- - - ------- - Net decrease in cash and cash equivalents (7,977 ) (19,904 ) Cash and cash equivalents, beginning of year 31,331 53,202 - ------- - - ------- - Cash and cash equivalents, end of period $ 23,354 $ 33,298 - ------- - - ------- - Supplemental Disclosures of Cash Flow Information: Cash paid for income taxes $ 226 $ 23,742 Interest paid $ 77 $ 97

Francesca’s Holdings CorporationSupplemental Information

Quarterly Sales by Merchandise Category

Thirteen Weeks Ended ------------------------------------ August 4, 2018 July 29, 2017 Variance ---------------- ------------------ ----------------- As a % As a % In USD of In USD of In USD % Sales Sales ------- ------- - ------- ------- -------- ------ (in thousands, except percentages) Apparel 56,807 50.3 % $ 65,396 54.6 % $ (8,589 ) (13 )% Jewelry 26,984 23.9 % 25,560 21.4 % 1,424 6 % Accessories 17,181 15.2 % 14,735 12.3 % 2,446 17 % Gifts 11,337 10.0 % 12,836 10.7 % (1,499 ) (12 )% ------- ----- - - ------- ----- - - ------ --- -- Merchandise sales 112,309 99.4 % 118,527 99.0 % (6,218 ) (5 )% Others(1) 716 0.6 % 1,180 1.0 % (464 ) (39 )% ------- ----- - - ------- ----- - - ------ --- -- Net sales 113,025 100.0 % $ 119,707 100.0 % $ (6,682 ) (6 )% ------- ----- - - ------- ----- - - ------ --- -- (1)Includes gift card breakage income, shipping and change in return reserve.

Quarterly Comparable Sales

FY FY FY 2018 2017 2016 ------ ------ --- Q1 (16 )% (5 )% 2 % Q2 (13 )% (3 )% 0 % Q3 (18 )% 7 % Q4 (15 )% 0 % Fiscal year (11 )% 2 %

Boutique Count

Twenty Fiscal Twenty -Six Year -Six Weeks Ended Weeks Ended Februa Ended August ry 3, July 4, 2018 29, 2018 2017 ----- ----- ----- Number of boutiques open at the beginning of period period 721 671 671 Boutiques opened 31 60 28 Boutiques closed (10 ) (10 ) (7 ) --- - --- - --- - Number of boutiques open at the end of period 742 721 692 --- - --- - --- -

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