Mixed bag for Francesca’s Holdings’ second quarter

The opening of 79 new stores drove overall second quarter sales growth at Francesca’s Holdings, but same store sales declined, profits were less than forecast and the company lowered its expectations for the full year.

Despite the slight decrease in same-store sales, the company grew its net income 15% to $14.6 million, from $12.7 million, while net sales rose 17% to $89.6 million.

Same-store sales, including direct-to-consumer sales, decreased 1%, as compared to a 21% increase in the prior-year quarter. Same-store transactions decreased 4%, offset by a 3% increase in average transaction size. Direct-to-consumer sales increased 92% versus the prior year quarter driven by increases in site traffic, conversion rates, and average transaction values. Excluding direct-to-consumer sales, same-store sales decreased 3% compared to the prior year quarter.

Performance was strongest in jewelry, outpacing increases in accessories and apparel, and a decline in gifts.

"While we posted high teens increases in second quarter and year to date sales and earnings, our second quarter sales performance was softer than we anticipated,” said Neill P. Davis, CEO of Francesca’s. “We were able to maintain strong profitability with operating income margins only modestly below the prior year levels. Our performance in the quarter reflects the anniversary of very strong rates of growth in the prior year; lower levels of customer traffic most evident in the later part of the second quarter and the lack of a dominant apparel fashion trend."

Looking ahead, Francesca’s expects to open 11 new stores during the third quarter of this year and a total of 87 new stores during fiscal 2013. During the third quarter, the retailer expects net sales between $78 million and $80 million and net sales between $343 million and $349.5 million during the fiscal year. Same-store sales are expected to decline in the third quarter and range from declining the flat during the fiscal year.