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 accessories and clothing store chain Francesca's Holdings Corp (NASDAQ: FRAN ) sank 10% today after its quarterly results and outlook disappointed Wall Street.
So what: The stock has plunged in recent months on signs of weakening demand, and today's third-quarter results -- earnings fell 20% -- coupled with downbeat guidance only reinforce those concerns. While revenue during the quarter increased 10.6%, same-store sales fell 3% and gross margin declined 190 basis points, suggesting that the company's competitive position is weakening rather rapidly.
Now what: Management now sees fourth-quarter earnings per share of $0.25-$0.29 on revenue of $90 million-$95 million, well below Wall Street's estimate of $0.34 and $98.3 million. "We are focused on managing through the tough retail environment, and committed to operating our distinctive business with a long-term vision," CEO Neill Davis reassured investors. "Our planning for the Spring 2014 season is well under way and I believe the fashion themes represented in our offerings will resonate with our customers, particularly in categories lacking newness in prior seasons." With the stock off about 50% from its 52-week highs and trading at a forward P/E of roughly 10, now might even be an opportune time to start looking into Francesca's longer-term prospects.
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