Francesca’s Earnings: Why FRAN Stock Is Down 7% on Thursday

Francesca’s (NASDAQ:FRAN) released preliminary earnings results for its fiscal first quarter of 2020, and they have FRAN stock lower on Thursday. In the release, the company reported a 50% drop in revenue during the period to $43.75 million. The retailer also reported the reopening of nearly 600 stores as of June 12 due to the novel coronavirus pandemic.

FRAN Stock Falls 6% on Q1 Preliminary Results, Bankruptcy Fears

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Andrew Clarke, president and CEO of Francesca’s, had this to say regarding the FRAN stock preliminary results:

“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. We are very pleased with the continued strong momentum in our ecommerce business and heartened by the sales results in the boutiques we have reopened. Since the outbreak of COVID-19, we have taken measures to improve liquidity by driving sales and monetizing existing inventory, aggressively reducing costs, and managing cash flows, which, together with deferring rent and vendor payments, enabled us to increase our cash position to approximately $21.0 million as of June 12, 2020.”

However, while the preliminary figures were not great, another reason for the drop in FRAN stock is likely due to the company’s SEC filing from Tuesday.

In this, the company laid out risk factors of the pandemic on the business and its operations to investors. These included how the company’s locations and foot traffic — like many other businesses — would continue to be adversely affected if shoppers continue to stay home. In fact, Francesca’s states in the filing that:

“If individuals decide to continue to stay at home and away from malls and other shopping locations when our boutiques reopen, including due to continued and prolonged periods of government mandated remote work or sheltering in place or due to a resurgence of COVID-19 after the initial infection has subsided, it would further adversely affect traffic in our boutiques and, therefore, our operating results and financial condition will or may be adversely impacted.”

Moreover, the company also said that its liquidity has been negatively affected by its underwhelming operating figures due to the coronavirus. That said, Francesca’s claimed that if it cannot generate the capital necessary to keep its business going and growing, then it “may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.”

Overall, the company is delaying is first-quarter results. And in turn, it expects to file them within 45 days from June 16.

This stream of news since Tuesday has FRAN stock down nearly 18%. And as of Thursday morning, shares were down 7%.

Nick Clarkson is a web editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

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