Following a 29% drop in net sales during Q2, apparel, jewelry and accessories retailer Francesca’s will investigate strategic alternatives ranging from lease deferrals and refinancing to bankruptcy.
Francesca’s, which operates approximately 700 boutiques in 47 states and the District of Columbia, experienced a comp sales drop of 5% for the three months ended Aug. 1, 2020, even though this figure excludes sales from boutiques that were closed four or more days per week due to COVID-19.
The retailer has retained FTI Capital Advisors to help evaluate possible strategies, including but not limited to:
- Further lease concessions and deferrals;
- Further reductions of operating and capital expenditures;
- Raising additional capital, including seeking a refinancing of the company’s debt; and
- Restructuring its debt through a private restructuring or one done under the protection of applicable bankruptcy laws.
“During the second quarter, we continued to take measures to optimize sales and monetize inventory through our e-Commerce channel as well as our reopened boutiques,” said Andrew Clarke, President and CEO of Francesca’s in a statement. “We remain encouraged by the growth we are seeing in new customers and have initiated tests in new categories, including loungewear and face masks, as we see the opportunity to benefit from the market disruption.
“As we continue to navigate through the pandemic, we remain focused on managing costs and liquidity, including the further reduction of non-critical spending and continued negotiations with vendors and landlords on payment terms,” Clarke added.
A company statement cautioned that any steps Francesca’s takes to improve its financial position are subject to numerous uncertainties, including “negotiations with creditors and investors and conditions in the credit and capital markets.”
The retailer reported that as of Sept. 4, 2020, it had $12.2 million in outstanding debt, and that it expected to receive $10.7 million in income tax refunds related to the CARES Act, which is designed to help businesses affected by the pandemic.