Retailer Francesca’s issues ‘going concern’ warning as sales tumble

Apparel retailer Francesca’s said Tuesday its ability to continue as a going concern is in doubt after the retailer reported a quarterly sales decline of 29{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, citing major supply chain constraints. 

Its shares tumbled more than 26{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in premarket trading. 

“We are operating within what continues to be an unprecedented and extremely challenging environment,” CEO and President Andrew Clarke said in a statement. 

He said the retailer is currently exploring a variety of strategic alternatives, and it has brought on FTI Capital Advisors to help it look for ways improve its liquidity and financial position.

Francesca’s said some of the options it’s exploring include lease concessions, further cuts of operating and capital expenditures, raising additional capital, and restructuring its debt and liabilities through a private restructuring or a restructuring under the protection of applicable bankruptcy laws. 

The Houston-based company reported a second-quarter loss of $17.2 million, or $5.80 per share, compared with a profit of $1.8 million, or 61 cents a share, a year earlier. 

Its net sales for the period ended Aug. 1 tumbled 29{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} to $75.7 million from $106 million a year earlier. 

Francesca’s is not currently offering an outlook for the remainder of the year, due to the uncertainty around the Covid-19 crisis. 

Should the retailer ultimately be pushed into bankruptcy, it would join a number of other companies that have been down the same path this year. That list includes J.Crew, Brooks Brothers, Lucky Brand, Loft parent Ascena Retail Group and J.C. Penney. 

Francesca’s shares are down more than 51{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} this year. The company has a market cap of $15.4 million.