Zacks Investment Research downgraded Francesca's Holdings Corporation (FRAN) to a Zacks Rank #5 (Strong Sell) on Dec 9 as estimates were largely revised downwards after the retail boutiques chain the announced a sluggish outlook for the fourth quarter.
Why the Downgrade?
Despite announcing modest third quarter resulton Dec 6, 2013, Francesca’s provided a dismal outlook for the fourth quarter and full year 2013 following sluggish comps coupled with a slow start to the holiday season
On Dec 6, 2013, Francesca’sreported third-quarter earnings per share of 20 cents, in line with the Zacks Consensus Estimate. Earnings, however, fell 16.6% year over year due to soft comps and weak margins.Net sales went up 11% year over year and beat the Zacks Consensus Estimate marginally.
Francesca’s has been experiencing lower comps for the past several quarters. Absence of strong trends in fashion tops, jewelry offerings and the gift assortment has been responsible for the soft comps and management expects the declining traffic trends trend to continue during the fourth quarter of fiscal 2013.Comps are expected to decline in the range of 3% to 8%, much weaker than10% increase in the fourth quarter of last year.
Keeping this in view, Francesca’s lowered the earnings and sales outlook for fiscal 2013. The company now expects net sales in the range of $338.2 million to $343.2 million for fiscal 2013, compared with the prior range of $343.0 million to $349.5 million. Francesca’s also slashed its earnings outlook and now expects earnings per share in the range of $1.03 to $1.07 compared with the prior range of $1.10 to $1.16.
The Zacks Consensus Estimate for 2013 decreased 5.4% to $1.06 per share over the last 7 days. For fourth-quarter 2013, all the estimates were revised downward over the same time period, lowering the Zacks Consensus Estimate by 17.6% to 28 cents per share.
Some better-ranked stocks in the shoes & relative apparel sector are Sequential Brands (SQBG), Iconix Brand Group Inc. (ICON) and Anta Sports Product Ltd (ANPDF). All these stocks carry a Zacks Rank #2 (Buy).
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