Stock plunges as CEO departs
Francesca’s stock has dropped by 30 percent since it announced the departure of its CEO on Tuesday and warned investors of a softer-than-expected beginning to its current fiscal year.
Shares of the Houstonbased women’s apparel and accessories retailer closed Wednesday at $10.40, down from $14.91 on Monday.
Outgoing CEO Michael Barnes had been tasked from the start of his tenure in December 2014 with crafting a new vision for Francesca’s, which saw sales growth stall after a rapid expansion to more than 500 boutiques in 15 years. Barnes worked to reduce overstocked inventory, update the fashions it offered consumers and begin a long-range plan that included remodeling store interiors.
He also presided over several executive-level shake-ups. Last summer, two board members resigned, and a new person was added. In the following months, the chief merchandising officer, who is responsible for the assortments and inventory the boutiques offer consumers, resigned and was later
replaced. Barnes also brought in a vice president of e-commerce to drive online business. The chief financial officer resigned and was later replaced.
Those changes were all in place by the fourth quarter of the fiscal year.
Francesca’s net earnings for the year rose 19 percent, and fourth-quarter online sales grew 38 percent, the company reported in March. Analysts at the time hailed the company’s new internal makeup as one that would help it catch up to its retail peers.
“We believe Francesca’s now has the leadership place to support the next leg (of) growth, helping drive improved processes and tighter execution than in the past,” Jefferies Group analysts wrote.
On Tuesday, Francesca’s announced that Barnes had left for unspecified “personal reasons” and that Richard Kunes, a board member since February 2013, would be interim CEO during the search for a successor.
“During his tenure, Mike built a strong leadership team of highly accomplished and talented executives,” Kunes said in a statement. “The board has the utmost confidence in the management team to execute the business plans for fiscal year 2016 and the initial strategies of Vision 2020, the company’s longrange plan.”
Francesca’s today has 626 stores. Company officials have said they plan 50 to 60 more in 2016.
Expansion can be tricky given the headwinds apparel retailers face, said Howard Davidowitz, chairman of national retail consulting and investment banking firm Davidowitz & Associates in New York City.
Apparel and accessories sales are tied to discretionary income, and many major apparel retailers have been grappling with sales declines. That could be what is hinting at lower first-quarter earnings than expected for Francesca’s, Davidowitz said.
Official quarterly results will be released in early June.