Francesca's Holdings Corporation reported net income of $8.6 million or $0.20 diluted earnings per share for the first quarter of 2014, compared to net income of $10.9 million or $0.24 diluted earnings per share for the first quarter of 2013.
-First quarter net sales increased 8% to $85.4 million
-First quarter comparable sales decreased 7%
-First quarter diluted earnings per share were $0.20
-Opened a record 62 new boutiques during the quarter
First Quarter Results
Net sales for the thirteen weeks were $85.4 million, compared to net sales of $79.0 million in the prior year quarter. The increase in first quarter sales was driven by 62 new boutiques opened during the quarter; bringing the total boutique count to 513 at quarter end.
Total apparel merchandise sales increased by 12% with increases in fashion tops and separates offsetting weakness in the dress category. Total non-apparel merchandise sales increased 5% with notable weakness in jewelry offset by increases in accessories and gift.
Our boutique sales were impacted by severe winter weather conditions during February causing over 360 full and partial day boutique closings throughout a large number of Southern, Northeast, and Central geographic regions, particularly in the Gulf Coast, Mid-Atlantic, Northeast, and New England areas. We estimate the impact of February closures to be approximately 200 bps of comparable sales during the quarter. Comparable sales, which include direct-to-consumer sales, decreased 7% versus the prior year quarter. The decrease in comparable sales was driven by a 7% decrease in transactions partially offset by an increase in direct-to-consumer sales of 84% versus the prior year quarter.
Gross profit, as a percentage of net sales, decreased to 49.0% compared to 52.4% in the prior year quarter. This decrease was due to 160 basis points of deleveraging of fixed occupancy costs and 180 basis points of lower merchandise margin. The decrease in merchandise margins was primarily due to elevated levels of markdowns and clearance sales compared to the prior year quarter.
Selling, general and administrative expenses increased 19% to $27.8 million from $23.4 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll expenses to support the larger boutique base and direct-to-consumer sales growth.
Income from operations was $14.0 million or 16.4% of net sales compared to income from operations of $18.0 million or 22.8% of net sales in the prior year quarter.