Earnings slip at Houston-based Francesca's

Earnings for Francesca's Holdings Corp., dipped in the second quarter as existing stores rang up fewer sales.

Company officials said Wednesday that they are off to a strong start for the third quarter, and they have scaled back the pace building new boutiques to focus on same-store sales, the chain's online presence and long-term profit strategies.

The company finished the quarter with diluted earnings per share of 22 cents, down 8.3 percent over the same period a year ago.

A flurry of new boutique openings drove a net sales increase during the second quarter, meeting the company's expectations.

Francesca's opened 19 new boutiques during the second quarter, for a total of 69 for the year. Net sales increased 9 percent to $106 million compared with one year ago.

Jewelry was the best-performing department, with sales increasing 14 percent, followed by the gifts department, up 12 percent.

Apparel sales rose 8 percent. Chairman, president and CEO Michael W. Barnes said he has mentioned previously that apparel changes would take several quarters to produce results.

"We are beginning to see that turn now," he said during a Wednesday conference call.

Accessories sales were flat, though a good assortment is helping that category into the third quarter, Barnes said.

But comparable sales at established stores dipped 4 percent due to fewer transactions. Direct-to-consumer, or online, sales totaled $3.6 million, flat compared with last year, with the company doing far fewer sales and promotions than a year ago, Barnes said.

The Houston-based women's clothing and accessories retailer opened its first store in 1999. Since then, the company has expanded to 612 boutiques in 47 states and the District of Columbia.

Company officials said earlier this year that they plan to continue expanding and working to cut down excess inventory.

In the second quarter, inventory per boutique declined 4 percent.

The company's management has undergone shifts in recent months. In July, two members of its board of directors resigned and another person was appointed to the board.

In August, the chief merchandising officer announced her resignation from a key position tasked with purchasing the boutiques' merchandise and keeping up with market trends.

Barnes was complimentary of Francesca's teams during Wednesday's conference call, saying they have and continue to develop a good assortment of merchandise and drawing good response from shoppers.

The company has retained an executive search firm for a new merchandising chief and looking to fill a created post for a senior vice president to lead digital, marketing and branding initiatives, Barnes said.

The company also has scaled back its growth pace. While 900 boutiques still is realistic looking long-term, the near-term target range is to open 50 to 60 more boutiques in fiscal year 2016.

"This will give the company ... a chance to be more focused on driving comparable sales," Barnes said.

Francesca's expects to have opened 83 new boutiques by the end of this fiscal year, compared with 88 opened in fiscal 2014.

The company continues studying existing real estate, including potentially closing a small number of stores during the next year and continuing a remodeling program.

Thirteen were remodeled in the second quarter to a "lighter, brighter color scheme" that gives the effect of less-crowded stores, Barnes said. Though too soon to tell if the changes are leading to sustained growth, customers are giving positive feedback, he said.

Francesca's also narrowed its guidance for the rest of the year. By the end of the fiscal year on Jan. 30, the company assumes there will be a "low single-digit decrease" in same-store sales, a total of 83 new stores and diluted earnings per share between 83 cents and 88 cents.