Francesca’s to close at least 20 stores this year as sales plummet
Francesca’s said it would close at least 20 stores this year after the Houston company on Friday reported a loss of $40.9 million for its most recent fiscal year.
The women’s apparel, accessories and gifts retailer reported net sales of $428.1 million during its fiscal year ended Feb. 2, down 9 percent from a year earlier. Same-store sales fell 14 percent, following an 11 percent decline the prior year.
Interim Chief Executive Michael Prendergast attributed Francesca’s poor performance in recent years to “suboptimal execution and lack of focus” on buying strategy, bloated corporate overhead and lack of discipline over store leases.
“Merchandising, buying and planning teams operated a more complicated process that slowed their reaction time to read and react to product trends in the market,” Prendergast said during a conference call with investors and analysts Friday morning. “In short, the company was not operating efficiently as a demand-based, fast-fashion model.”
Francesca’s has struggled to attract shoppers in recent years as young women in their 20s and 30s have increasingly flocked to online retailers and independent boutiques, which have been able to more quickly capitalize on fast-changing fashion trends.
Francesca’s leadership is now considering several financial alternatives to boost shareholder value, including a potential sale of the company. The retailer said on Jan. 31 that it had hired Rothschild & Co, a French investment bank and financial services company, to evaluate its options, but said it has no set timeline for its decision.
Prendergast on Friday declined to comment on the company’s review of financial alternatives until a specific transaction or other alternative is approved by the board. Francesca’s executives did not take any questions during the earnings call Friday.
Meantime, Francesca’s is burning through cash. The company said it had $13 million of cash on hand as of May 2, down from approximately $20.1 million as of Feb. 2, at the end of its fourth quarter. The company has $10 million of outstanding debt, and has access to $14.6 million in revolving credit.
Prendergast, a New York private equity performance improvement executive with 20 years of retail industry experience, was announced Francesca’s interim CEO in January after former Chief Executive Steve Lawrence resigned to take the chief merchandising officer job with Houston-based Academy Sports + Outdoors. The interim chief exeutive said Francesca’s has taken steps to cut costs by closing underperforming stores, laying off staff and implementing expense controls such as having staff complete after-hour tasks during regular store hours when traffic is slower.
Francesca’s, which announced plans in December to close up to 40 stores in 2019, on Friday said it would close at least 20 underperforming stores this year, mostly at natural lease endings.
In fiscal 2018, Francesca’s opened 32 stores, closed 26 stores and remodeled 81. The company, which plans to open just four stores in 2019, has 727 boutique stores nationwide averaging about 1,450 square feet each.
The company said last month it laid off an undisclosed number of corporate office staff and field managers in late February, which along with expense controls are expected to save the company $15 million this year.
“We plan to continue to look for further efficiencies in selling, general and administrative costs in remainder of 2019,” Prendergast said.
Prendergast on Friday outlined a new turnaround plan to bring the struggling retailer back to profitability and positive cash flow. Francesca’s, which was founded in 1999 on a concept of offering trendy fashion at low prices in a fun boutique shop, has made it easier for its merchandising team and buyers to jump on fast-changing fashion trends as part of its “New and Now” initiative launched last month.
Francesca’s also is allocating at least half of its seasonal merchandising budget to chase current fashion trends. For example, earlier this year, Francesca’s bought 30,000 units of a popular product and delivered it to stores within two weeks, resulting in a 50 percent sell-through during the first week, Prendergast said. He did not specify any details about the product, but said Francesca’s will stock its stores with a broad and shallow mix of fast fashion, seasonal and core apparel and accessories pieces.
“We believe this business model is well positioned in the current environment as consumers demand a diverse trend right fashion assortment, constant newness and exciting shopping experience and compelling value,” he said.