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Francesca’s Stock Plummets as the Retailer Brings in Financial Advisors to Help Battered Business

Shares for Francesca’s Holdings Corp. plunged double-digits at Tuesday’s market close after the retailer posted dismal second-quarter financial results and revealed that it had brought in financial advisors to help its battered business.

The apparel and accessories retailer announced today that it lost $17.2 million in profits, or $5.80 per share, in the three months ended Aug. 1, compared to a profit of $1.8 million, or 61 cents per share, during the same period last year. Revenues declined 29% to $75.7 million, while its comps fell 5%.

As of 4:00 p.m. ET, its stock was down 22% to $3.94.

Over the past few months, Francesca’s said it has taken “aggressive and prudent actions” to reduce expense and manage its cash flow amid the coronavirus pandemic, which forced the shutdown of its brick-and-mortar fleet across the country. The company furloughed “substantially all of [its] corporate and boutique employees” in mid-April as part of broader efforts to improve liquidity. It had also reduced the base salaries of its senior leadership team, as well as suspended all capital expenditures.

“While we have taken important steps to advance these initiatives and control what we can control, we are operating within what continues to be an unprecedented and extremely challenging environment,” president and CEO Andrew Clarke said in a statement. “As such, we believe it is in the best interest of our stockholders to explore a variety of potential strategic alternatives. During this review, we will continue to move forward operating the business while maintaining disciplined inventory and cost management.”

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In tandem with the release of its second-quarter financial results, Francesca’s reiterated that its operations have been “materially adversely impacted by the global health crisis, which raises substantial doubt about the company’s ability to continue as a going concern.” As a result, the Houston-based chain revealed that it had hired investment banking firm FTI Capital Advisors to help its business as it pursues options that include lease concessions and deferrals, refinancing its debt and restructuring under Chapter 11 bankruptcy protection.

“There can be no assurance that the company will be able to improve its financial position and liquidity, complete a refinancing, raise additional capital or successfully restructure its indebtedness and liabilities,” the retailer added. “The company’s strategic plans are not yet finalized and are subject to numerous uncertainties including negotiations with creditors and investors and conditions in the credit and capital markets.”

As of Sept. 4, Francesca’s cash and equivalents totaled $18.2 million. It had $12.2 million of borrowings outstanding, with $3 million available under its asset-based lending and term loan credit agreements. At the time, nine of the company’s boutiques remained closed — most of which were located in California. (It has about 700 stores across 48 states.)

“As we continue to navigate through the pandemic, we remain focused on managing costs and liquidity, including the further reduction of non-critical spending and continued negotiations with vendors and landlords on payment terms,” Clarke added. “We will build on our progress as we continue to leverage our demand driven sourcing model, enhance our omni-channel capabilities and evolve our marketing strategies to optimize engagement with existing customers while broadening our reach to new customers.”

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