A NEW ATTITUDE
Francesca’s, stung by shifting tastes and pandemic, adjusts on the fly
Turnaround specialist Andrew Clarke knew when he took control of Francesca’s last March it would take a good amount of elbow grease to polish value from the company’s tarnished exterior. Then the pandemic came along.
The new chief executive relocated to Houston from New York, where he’d been running Loft By Ann Taylor, and started at the ailing women’s apparel retailer just 10 days before the pandemic locked the country down, keeping people home and stripping Francesca’s of its lifeblood — mall shoppers. To survive, the company had to transform.
“We realized very quickly that we were going to have to play offense,” Clarke said in an interview. “We were going to have to pivot and try new things.”
The pandemic hit as Francesca’s had already been struggling to attract shoppers as women in their 20s and 30s increasingly flocked to online retailers and brick-and-mortar competitors. The brand lacked clarity and a niche in the market.
To adjust to the new environment, Francesca’s under Clarke took a variety of new tacks, from quickly introducing a new casualwear line to appeal to couchbound customers during the pandemic to a new pet accessory line for its increasingly pet-focused shoppers. Amid its struggles, the company filed for Chapter 11 bankruptcy protection in December and was eventually
sold to a private equity firm.
Making Francesca’s successful again is the goal, but much work remains, Clarke said.
Venky Shankar, research director for Texas A&M’s Center for Retailing Studies, called the task “monumental.”
“There’s a huge hole that they have to climb out of,” Shankar said.
The hole was deep even before the pandemic started hammering retail. Francesca’s closed 21 stores in 2019 after reporting a $40.9 million loss for the fiscal year ended Feb. 2, 2019. Former Interim Chief Executive Michael Prendergast attributed Francesca’s poor performance to “suboptimal execution and lack of focus.”
Last May, it reported a $20 million loss for the year ended Feb. 1, 2020.
Then, as with so many other retailers, the pandemic took its toll. In its last public earnings release before Francesca’s was taken private, it reported a $17.2 million loss for the quarter ended Aug. 1, 2020, compared to a $1.8 million profit during the year earlier. Sales during the quarter dove 29 percent to $75.7 million from $106 million in the second quarter the year before.
The pandemic hampered both its in-store business and its ecommerce capabilities as social distancing measures reigned. To guide it through a review of “strategic alternatives,” Francesca’s retained FTI Capital Advisors, an investment bank catering to middlemarket companies.
Clarke described the process as humbling and exhausting. Bankruptcy became the only option, even as revenue started picking back up during the holiday season.
“I don’t recommend Chapter 11 to anybody,” he said. “But we look back at that period and think of ourselves as very fortunate now because we managed to preserve 3,200 jobs, preserved 460 stores and we are right now reopening some locations that had previously closed.”
The company announced in December it was filing for Chapter 11 bankruptcy protection and sought to sell its assets. Investment firms TerraMar Capital and Tiger Capital, based in Los Angeles and New York, bought Francesca’s brand and assets for $18 million a month later.
Time for turnaround
Clarke came to Houston with experience in elevating flagging brands. He most recently worked for Ascena Retail Group, first leading a turnaround for tween clothing brand Justice and then as president of Loft. He was Kmart’s president of apparel for three years before that.
Once in place at Francesca’s, he directed his leadership team to focus on figuring out what its target market was, and “trying to understand where we had missed the mark.”
But first, the pandemic required immediate attention. Clarke said the initial priorities had to be to preserve cash and hunker down; the company closed stores, furloughed employees, reduced corporate salaries, deferred rent payments and suspended capital expenditures.
He quickly found that hunkering down would not be enough to keep Francesca’s alive. The company would need to extend the reach of its brand and change its product assortment.
Following the numbers
“Those take months in normal times,” he said.
“We were literally having those discussions on a daily basis.”
The pandemic kept people home, suppressing demand for the kinds of partywear and accessories that were Francesca’s bread and butter and driving up demand for loungewear and activewear. “Those product categories were not a Francesca’s staple,” Clarke said.
In response, the company launched a casual line in a period of weeks.
Clarke takes a datadriven approach to steering the company, and he noticed “the data has been telling us that we appeal to a younger customer.” To capture more of that market, Francesca’s launched Franki, a clothing line for young teens who want to dress like their older sister or their mom. “Franki is the younger sister of Francesca,” he said. “That’s how we think about the brand.”
The data also suggested many Francesca’s customers became dog owners during the pandemic, so the company launched an online-only line of pet accessories that will ramp up toward the holiday shopping season.
“The product that we sell has changed dramatically,” he said.
To address its lagging online business, Clarke said Francesca’s is outfitting its headquarters to better handle e-commerce fulfillment capabilities and last month, ahead of the backto-school shopping season, launched a more userfriendly e-commerce platform.
“We’re at the beginning of the journey as far as that is concerned,” he said.
Still, the changes have yielded results, he said.
“Even before Chapter 11 … we were starting to see the business come back to prepandemic levels,” he said. “And that progress has continued.”
Strong revenues led the company to keep more stores open than originally outlined; Francesca’s private equity owner, investment firm TerraMar, had originally only committed to keeping 275 boutiques open, down from 700 last August. That number is now 460 and rising as Francesca’s is in the process of reopening several previously shuttered stores as well as some new ones.
Beyond survival
Brand development is another piece of the puzzle moving forward, Clarke said, which is why Francesca’s is launching the “free to be you” marketing campaign, meant to show off the company’s new commitment to diversity and individuality.
“We want to stand for something,” he said. “We want to create that emotional connection.”
Francesca’s historically hasn’t been very diverse, Clarke said, and he aims to change that through hiring initiatives and a zero-tolerance approach to discrimination in the workplace.
“As a gay man, I absolutely made it my mission that, as an employer, we needed to show up and reflect the diversity of our customer base,” Clarke said.” To be successful as a retailer it’s the right thing to do.”
The company is also taking on new initiatives aimed at giving back to the community, including one called franFinds, a design competition for emerging designers. Winners of the competition get support from Francesca’s in developing their products and selling them inside its boutiques.
Embroidery startup owner Ivonne Marquez of Houston is one such hopeful. She and her 10-year-old daughter Paula pitched their plan to offer monogramming in Francesca’s stores last month as part of the competition. The idea for her embroidery business came after she was laid off last year from her job as an executive assistant.
‘Know what it feels like’
Francesca’s hasn’t announced any winners, yet, but Clarke said he was impressed with Marquez’s presentation. The pandemic has been hard on retailers of all sizes, he said, and that’s what this latest initiative is about. Retailers helping retailers.
“We’ve been on hard times,” he said. “We know what it feels like.”