Francesca's Holdings Corporation reported financial results for the fourth quarter and fiscal year ended January 31, 2015. Q4 net sales increased 17% to $107.6 million from $92.1 million in the prior year quarter.
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This increase was driven by 88 new boutiques opened since the prior year quarter and a 1% increase in comparable sales. Direct-to-consumer sales increased 42% versus the prior year quarter primarily due to increased traffic.
Gross profit, as a percentage of net sales, decreased to 45.7% from 50.6% in the prior year quarter.
This unfavorable variance included a 430 basis points decrease in merchandise margin due to the disposal of certain slow-moving merchandise at a net cost of $1.8 million (170 basis points point as a percentage of net sales), increased markdowns and promotional activities as well as a merchandise mix change to the lower margin categories in the current year quarter as compared to the prior year quarter.
The remaining change is attributable to deleveraging of fixed occupancy costs.
Adjusted selling, general and administrative expenses(1) ("SG&A") increased 23% to $33.9 million from $27.7 million in the prior year quarter. The increase in adjusted SG&A is primarily due to higher boutique and corporate payroll expenses to support the larger boutique base and sales growth.
Adjusted income from operations was $15.4 million, or 14.3% of net sales, compared to $18.9 million, or 20.5% of net sales, in the prior year quarter.
Company's effective tax rate for the fourth quarter was 43.1% resulting from a true-up of prior year state income taxes. Excluding this adjustment, company's effective tax rate for the quarter was 38.1%.
Adjusted net income for the fourth quarter totaled $8.8 million, or $0.21 adjusted diluted earnings per share, compared to $11.4 million, or $0.27 adjusted diluted earnings per share, in the comparable prior year period.
Full year results
Net sales increased 11% to $377.5 million in fiscal year 2014 compared to $340.3 million in fiscal year 2013. This year-over-year increase in sales is driven by 88 new boutiques opened since the prior year end partially offset by a 5% decrease in comparable sales.
Direct-to-consumer sales increased 64% versus the prior year due to increased traffic.
Francesca's opened 88 boutiques during the year bringing company's boutique count to 539 as of year-end. ■