Francesca’s closing stores
The Houston-based apparel chain plans to shut down 40 underperforming locations next year, blaming lagging sales and lack of foot traffic.
Francesca’s plans to close as many as 40 underperforming stores next year after the Houston retailer on Tuesday issued yet another disappointing earnings report.
The women’s apparel and accessories chain lost $16.2 million during the third quarter that ended Nov. 3, compared with earning a $200,000 profit during the same period last year.
The company reported $95.4 million in sales during the quarter, down 10 percent from last year. Same-store sales fell 14 percent, primarily due to a sharp drop in foot traffic to stores.
“Sales for the third quarter were disappointing,” CEO Steve Lawrence said during a conference call with analysts Tuesday. “We anticipated that sales would start to flatten out as we progressed through the quarter, but clearly this did not happen.”
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. Although the Thanksgiving shopping weekend provided a temporary boost, foot traffic to Francesca’s stores has fallen by around 15 percent over the past six months.
The company’s e-commerce business has been growing by double digits over the past year, but still represents less than 10 percent of the company’s annual revenue.
“The lift in dot-com sales currently is not offsetting declines in brick-and-mortar traffic,” Lawrence said.
Francesca’s is now reviewing its 738 stores nationally and has identified 129 underperforming boutiques, most of which have leases that will expire in the next three years.
The retailer plans to close 30 to 40 underperforming stores next year and will open just 10 new locations. For comparison, Francesca’s this year closed 25 stores and opened 32 new locations.
“We believe that the right approach going forward is to have a strong e-commerce business that is coupled with an outstanding brick-and-mortar experience,” Lawrence said. “Optimizing our physical footprint and eliminat-
ing underperforming boutiques will help us achieve the right mix.”
Francesca’s will also temporarily stop remodeling its existing stores. The company this year spent $30 million to remodel 81 locations.
“While we have been pleased with the performance of remodels in 2018, we believe that it is also prudent to hit pause on them while we work through our current issues,” Lawrence said.
Francesca’s instead hired an outside consulting firm to help the retailer rethink its window and store displays, adding more animations and graphics and a fresh coat of exterior paint to attract customers who have not shopped at its stores over the past year.
The retailer this year switched out its dresses in favor of trendy rompers and jumpsuits as well as sweaters, jeans and skirts. It also rolled out a Fran Rewards loyalty program to bring customers back into its stores and is investing in social media influencers to drum up interest in the brand.
“Traffic is our biggest problem,” Lawrence said. “We need to stabilize our brick-and-mortar sales.”
Francesca’s expects a surge in last-minute Christmas shopping, but with half of the holiday season over, the retailer forecasts samestore sales will fall by as much as 15 percent in the fourth quarter. The retailer anticipates it will end its fiscal year in February with sales of $433 million, down from $471.7 million reported last year.
Francesca’s has $10.7 million of cash and $40.4 million of inventory on hand at the end of the third quarter. The company has no outstanding debt.
Francesca’s stock fell 16.7 percent on Tuesday to $1.50 per share.