Why Francesca's Holdings Shares Plummeted

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 Francesca's Holdings (Nasdaq: FRAN  ) sank as much as 18% today after CEO and co-founder John De Meritt announced plans to retire from the company.

So what: Oddly enough, the announcement came as part of a stellar earnings report that included a whopping 20.7% jump in same-store sales and beat estimates on both top and bottom lines. De Meritt will be stepping down at the end of the year to pursue "personal endeavors," and investors seemed concerned that new management may not be able to maintain the same levels of growth for this high-priced stock.

Now what: The sharp drop in the stock price seems like an overreaction. In what was a difficult quarter for many other retailers, Francesca's strong results show that it should have a bright future ahead. Incoming CEO Neill Davis has served on the board since 2007 and brings 15 years of retail experience with Men's Wearhouse to the table. As we've seen with companies from Apple to Costco, strong brands tend to experience few problems when it comes to leadership changes.

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Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of Costco Wholesale and Apple. Motley Fool newsletter services have recommended buying shares of Costco Wholesale and Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
 


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