Francesca's Holdings Corporation reported financial results for the third quarter ended October 29, 2016.
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Net sales increased 15% to $119.5 million from $103.7 million in the comparable prior year quarter.
This was due to a 7% increase in comparable sales primarily driven by an increase in the number of transactions both at boutiques and on-line as well as the addition of 50 net new boutiques since the prior year quarter.
The company opened 18 boutiques and closed one boutique during the quarter, bringing the total boutique count to 669 at the end of the quarter. Ecommerce comparable sales increased 47% to $5.7 million driven by increased website traffic and conversion rate.
Gross profit, as a percent of net sales, increased to 48.2% from 46.6% in the prior year quarter. This increase was attributable to 40 basis points of higher merchandise margin and 120 basis points of occupancy costs leverage.
The increase in merchandise margin was mostly due to favorable mix change and lower markdowns compared to the prior year quarter.
Selling, general and administrative expenses increased 12% to $41.9 million from $37.3 million in the prior year quarter. This increase was primarily due to higher boutique and corporate payroll, professional fees, software costs and depreciation compared to the prior year quarter.
The increase in boutique payroll was due to the larger boutique base while the remaining increases were due to investments in strategic initiatives, including technology and infrastructure.
Income from operations was $15.8 million, or 13.2% of net sales, compared to $11.1 million, or 10.7% of net sales, in the prior year quarter.
Diluted earnings per share was $0.26 for the quarter, a 63% increase over prior year's third quarter diluted earnings per share of $0.16.
Diluted earnings per share was also higher than the company's guidance of $0.16 to $0.19 due to the impact of higher sales and a better than expected gross margin rate as well as an approximately $0.03 per share favorable impact related to a shift in timing primarily of marketing and point-of-sale implementation expenses which the company now expects to incur in the fourth quarter. ■