Francesca’s says it cut office staff, managers
Francesca’s on Thursday said it laid off an undisclosed number of corporate office staff and store managers in late February.
The struggling Houston retailer disclosed the layoffs late Thursday afternoon. It also announced plans to delay the release of its fourth quarter and fiscal 2018 earnings report until May 3 as it reviews previously announced “strategic and financial alternatives,” which include a potential sale of the company.
“The company cannot timely complete its year-end closing procedures without unreasonable effort or expense while simultaneously undergoing its previously announced review of strategic and financial alternatives,” Francesca’s said in a statement.
The women’s apparel and ac
cessories chain announced this year that its board of directors is considering several options to maximize shareholder value, including selling the company, securing additional financing or refinancing its debt. The company 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.
In the meantime, Francesca’s is burning through its cash. The company said it has about $14.2 million in cash on hand as of
April 6, down from nearly $20.1 million Feb. 2, at the end of its fourth quarter. But the company has access to $15 million of revolving credit, expects to receive a federal tax refund of $8.4 million before May and said it has identified about $15 million in additional cost savings within its operations, in addition to the layoffs.
Francesca’s interim CEO, Michael Prendergast, said the company is implementing a turnaround plan to improve sales and turn a profit. Prendergast, a senior director in the private equity performance improvement division of New York-based professional services firm Alvarez &
Marsal, was announced in late January as interim chief executive after former CEO Steve Lawrence resigned to join Academy Sports + Outdoors as the Houston athletic retailer’s new chief merchandising officer.
Francesca’s on Thursday said its fourth quarter sales fell an estimated 14 percent from the same period last year, portending another subpar earnings report. Net sales fell an estimated 14 percent to $119.3 million, down from $138.5 million during the fourth quarter last year, according to preliminary results released Thursday.
The company attributed the sales decline primarily to lower
foot traffic during the holiday season. Store traffic fell by the “low teens,” the company said.
Francesca’s said that to improve sales and turn a profit, it has simplified its promotional strategy, enhanced its store displays and shifted its merchandise to fast-fashion, which will hit stores in early June.
Francesca’s, which has more than 700 stores nationwide, in December announced plans to close up to 40 underperforming stores in 2019. The company on Thursday said that with its network of hundreds of stores, there are “many opportunities to reduce the cost structure and increase boutique productivity.”
“We are well underway with the implementation of a comprehensive turnaround plan to drive improved sales and margin performance through enhanced merchandise offerings and buying processes as well as aligning our expense structure to the current sales levels,” Prendergast said in a statement. “We believe these actions will return the company to positive sales, cash flow and operating income performance over the longer term. We look forward to providing more detail on our progress on the fourth quarter conference call.”