Apparel retailer Francesca's issues 'going concern' warning as sales tumble

Key Points
  • Francesca's CEO and President Andrew Clarke said the retailer is  exploring a variety of strategic alternatives, including filing for bankruptcy protection. 
  • "We are operating within what continues to be an unprecedented and extremely challenging environment," he said.
Signage for Francesca's Collections, a subsidiary of Francesca's Holdings Corp., is displayed outside of a store in Shrewsbury, New Jersey.
Emile Warnsteker | Bloomberg | Getty Images

Apparel retailer Francesca's said Tuesday its ability to continue as a going concern is in doubt after it reported a quarterly sales decline of 29%, citing major supply-chain constraints. 

Its shares cratered 27% in Tuesday morning 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 exploring a variety of strategic alternatives and 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 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. 

Net sales for the period ended Aug. 1 tumbled 29% to $75.7 million from $106 million a year earlier. 

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

Should the retailer be pushed into a bankruptcy filing, it would join many others, including J.Crew, Brooks Brothers, Lucky Brand, Loft parent Ascena Retail Group and J.C. Penney. 

Francesca's shares are down more than 51% this year. The company has a market cap of $15.4 million. 

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