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Why Did Francesca's (FRAN) Stock Hit New Low?

Benjamin Rains
Updated
Shares of women's fashion boutique Francesca's (FRAN) plummeted to a new 52-week low on Monday after the struggling company announced the departure of a top executive.

Shares of women’s fashion boutique Francesca's FRAN plummeted to a new 52-week low on Monday after the struggling company announced the departure of a top executive.

The boutique chain announced that its chief merchandising officer and executive vice president, Laurie Hummel, who previously held leadership positions at Kohl's KSS and Macy's M, is set to leave the company after less than two years at Francesca's.

It is unclear at this point if Hummel was relieved of her duties or if she stepped away, but Francesca's now finds itself in flux during a tumultuous time for retail.

“We have a lot of talent in our merchandising team and are confident in their ability to execute our strategy as we search for a new Chief Merchant,” Francesca's President and CEO Steve Lawrence said in a statement. “During this period, the team will report directly to me. We wish Laurie well in her future endeavors.” 

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Francesca's also released some preliminary results for the company’s upcoming second-quarter earnings report. The Houston-based retailer expects its quarterly comparable store sales to fall by 3% from the year-ago period. Francesca's also projects to report second-quarter earnings of $0.20 per share, which surpassed the company’s previous expectations.

“That said, we note that back-to-school has been off to a very challenging start and our comparable sales have further decelerated from July,” Lawrence continued. “We will provide additional detail on our second quarter performance, as well as discuss our third quarter and full year outlook, on our upcoming earnings call.”

Shares of Francesca's plummeted by over 10% on Monday morning to touch a new 52-week low of $6.71 a share. The stock now hovers down around 7% through mid-afternoon trading.

Francesca's is currently a Zacks Rank #3 (Hold) but scored an “A” grade for Value and a “B” for Growth and Momentum in our Style Scores system, giving it an overall VGM grade of an “A.” The fashion retail company is set to report its second-quarter results on September 6.

Retail Sector

Francesca's is a small company with a market cap of roughly $275 million, so even though its shares have traded hands over four times above its average volume on Monday, it isn’t likely to drag the whole retail sector down with it. But the fact that the company cited poor back to school sales as a reason for its projected revenue decline might frighten some retail investors.

Shares of fellow fashion-focused retailers, such as American Eagle AEO, Nordstrom JWN, and The Gap GPS all fell on Monday. American Eagle took the biggest hit, as its shares dipped by 3.83%, also touching a new 52-week low.

Shares of retail sector ETFs also fell on Monday. The SPDR S&P Retail ETF XRT, the Amplify Online Retail ETF IBUY, and the PowerShares Dynamic Retail Portfolio ETF PMR all dropped marginally. The Direxion Daily Retail Bull 3x Shares ETF RETL dipped by 2.17% and touched a new 52-week low at $21.22 a share.

However, shares of some of retail’s biggest names, including Wal-Mart WMT, Dillard’s DDS Kohl's KSS, and Macy's M all saw marginal gains. Target TGT stock jumped by 2.03%

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