After disclosing a going-concern warning in a regulatory filing this week, women’s specialty chain Francesca’s Holdings Corp. on Thursday outlined where its business stands in the wake of the pandemic.
Francesca’s temporarily closed 703 boutiques in March as the virus started to spread stateside, and though 593 of its stores have reopened, the company said, “there continues to be an overall disruption in the company’s supply chain and operations and [Francesca’s] e-commerce and distribution facility remain to be operating at reduced capacity.”
Because of COVID-19, Francesca’s said revenues and cash flows continue to be “materially adversely impacted,” which continues to raise substantial doubt about the company’s ability to continue as a going concern. As it navigates this challenged period, the company said it’s taking “aggressive and prudent actions to reduce expenses to preserve cash on hand.” Francesca’s permanently closed eight boutiques during the first quarter.
As of last week, the company’s cash position is $21 million, helped by efforts to monetize existing inventory, aggressively reducing costs and deferring payments for rent, inventory and other accounts payable. Tuesday’s regulatory filing said Francesca’s is still in talks with landlords regarding rent payments.
In an early look at preliminary first quarter financial results, the company said net sales for the three-month period ended May 2, 2020 fell 49.8 percent to $43.8 million, down from $87.1 million in the year-ago quarter. Francesca’s also disclosed that it has $15 million in long-term debt connected with the maturities of its credit facilities. Although the due dates are beyond 12 months of the end date on its quarterly balance sheet, the disclosure was made as a current liability due to liquidity issues and on-going covenant compliance.
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“While we continue to navigate through this difficult period, we are highly encouraged to see bright spots in our business driven by the new strategies that we have been testing and scaling,” said Francesca’s president and CEO Andrew Clarke. “Looking ahead, we are optimistic about our future as we execute our differentiated business model. Our boutiques provide a broad end-use assortment that is curated and merchandised for outfitting while at the same time offer a treasure hunt experience to our customers.”
The plan for Francesca’s future, he said, is a focus on enhancing its omnichannel capabilities, mostly in re-platforming its site to support greater scale. That’s the type of project that requires investment in technology, and given liquidity concerns and the company’s own stated uncertainties regarding future impact from COVID-19, there’s no guarantee Francesca’s can accomplish the goal under its current financial framework.