Why Francesca's Shares Flew

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of women's clothing retailer Francesca's Holdings (Nasdaq: FRAN  ) soared 20% on Friday after its quarterly results and guidance topped Wall Street expectations.

So what: Francesca's shares have slumped in recent months on worries over slowing growth, but a solid first quarter -- EPS of $0.20 versus the consensus of $0.17 -- coupled with a positive current-quarter outlook naturally eases some of those concerns. Same-store sales even jumped 15.5% while gross margin increased to 53.1% from 52.4% in the year-ago period, suggesting that management has plenty of operating momentum working in its favor.

Now what: Management now sees second-quarter EPS of $0.22 to $0.23 on sales of $69 million to $71 million, versus Wall Street's view of $0.22 and $68.6 million. "Our fiscal year 2012 is off to a strong start as we continue to execute on our differentiated business model," president and CEO John De Meritt said. "Looking ahead, we plan to continue our strong growth by consistently offering our customers great merchandise at an outstanding value, growing our boutique base and investing in the infrastructure needed to support our growth plans." With the stock now trading at a lofty P/E of 50, however, much of that growth might already be baked into the price.

Interested in more info on Francesca's? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On June 08, 2012, at 4:09 PM, TSIF wrote:

    Looks well baked to in to me and then some. I believe some of the 5 million shares traded today was fueled by the 33% short interest. A P/E of 50 and a P/B of 57 exhibits a rate of growth that I can't find.

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