Francesca's: The Risk Looks Higher Than The Reward

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About: Francesca's Holdings Corporation (FRAN)
by: Detroit Bear
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Detroit Bear
Deep Value, special situations, long-term horizon, value
Summary

Francesca's two-year stacked comp in Q3 was -32% and it could be more than 30% again in Q4.

The company does not understand its customers, hiring outside consultants to figure out what's wrong.

Capital allocation has been abysmal, leaving the company in poor financial shape.

The potential downside outweighs the reward given management's track record.

Shares of Francesca’s (FRAN) are down more than 50% since I first analyzed the retailer just under one month ago. After publishing my article, the company posted terrible Q3 results that were