Why Francesca's Holdings Popped and Then Dropped

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  ) opened as much as 11% higher before giving most of those gains as the boutique retailer raised its forecast and reported impressive same-store sales growth in its quarterly report.

So what: Earnings per share grew 71% from a year ago to $0.24, beating estimates of $0.22, while revenues grew 44% on an increase in comps of 16.7%. CEO John De Merritt said the quarter "demonstrated the appeal of our business model of a differentiated merchandise strategy in a boutique environment." The jewelry and clothing seller also raised its fiscal 2012 forecast from a range of $0.96 to $0.98 to a range of $1.00 to $1.01.

Now what: The pullback in the stock was probably more a reflection of Francesca's high valuation, now near 30, and concerns about the fiscal cliff than any problems with the actual report. With skyrocketing same-store sales and 76 new stores open in the past year, increasing the store base by about 25%, there seems to be plenty of room for expansion for Francesca's. Analysts are projecting just a 20% jump in EPS next year. That could be an easy bar for the boutique chain to hop over.

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Related Tickers

8/20/2014 3:59 PM
FRAN $13.79 Up +0.17 +1.25%
Francesca's Holdin… CAPS Rating: ***

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