Francesca's exploring options; raises doubt about ‘ability to continue’

Marianne Wilson
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Francesca's Holdings Corp. issued a “going concern’’ warning as it swung to a second-quarter loss amid a 29% decrease in sales.

"The COVID-19 pandemic has and continues to result in an overall disruption in the company's operations and supply chain," the company said in a statement. "As a result, the company's revenues, results of operations and cash flows continue to be materially adversely impacted which raises substantial doubt about the company's ability to continue as going concern." 

Francesca’s, which operates 700 stores, has engaged FTI Capital Advisors to help it evaluate various alternatives to improve its liquidity and financial position. Some of the options include further lease concessions and deferrals, further reductions of operating and capital expenditures, raising additional capital, seeking a refinancing of the company’s debt, and restructuring its debt and liabilities through a private restructuring or a restructuring under the protection of applicable bankruptcy laws.

“During this review, we will continue to move forward operating the business while maintaining disciplined inventory and cost management," stated CEO Andrew Clarke.

The company had a net loss of $17.2 million, or $5.80 a share, in the quarter ended Aug. 1, compared to net income of $1.8 million, or $0.61 a share, in the year-earlier period. 

Sales fell 29% to $75.7 million, as stores were closed during the pandemic.

The company ended the quarter with $20.2 million in cash and $12.1 million of borrowings.