Is a New Mobile App Enough to Save Francesca’s From Bankruptcy?
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After warning last month that it could go bankrupt, Francesca’s is moving forward with plans to launch its first mobile app.
Following a surge in e-commerce business during the coronavirus-induced store closure period, the company said it aims to launch a new iOS app this summer, with an Android app to follow ahead of the holiday season. The app will offer improved navigation and ease of use over web browsers on mobile, Francesca’s said.
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“Given the accelerating shift to online shopping, we are excited to be stepping up our digital transformation strategy with the launch of this mobile app. In addition to enhancing her online shopping experience, the app will provide valuable insights into how customers interact with our brand, enabling us to interact with her in a more relevant and impactful way,” stated Francesca’s CEO Andrew Clarke.
While Francesca’s saw boost in e-commerce sales during the pandemic, the forced shutdown of its more than 700 boutiques led to significant declines in comparable sales, net revenues and gross profits, the company revealed in a Securities and Exchange Commission filing last month. What’s more, the company said it would need to obtain additional funds to avoid filing for Chapter 11 bankruptcy protection.
“If we are unable to generate or obtain the requisite amount of financing needed to fund our business operations or execute our growth strategy, our liquidity and ability to continue operations could be materially adversely affected,” it wrote. “As a result, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.”
In May, Francesca’s said it had significant doubt about its ability to continue as a going concern. Additionally, the company skipped rent payments on leased units for the months of April, May and June, violating certain covenants under its asset-based credit and term loan agreements. As of Feb. 1, Francesca’s had 5,236 staff members — 1,159 full-time workers and 4,077 part-time employees — but it furloughed “substantially all” of its workforce in mid-April in an effort to boost liquidity. It also reduced base pay for senior leadership and suspended all capital expenditures.
Amid the growth of digital and changing consumer preferences, Francesca’s had fallen on hard times in recent years: The company reported its first operating loss in 2018 — and recorded an another operating loss the following year. In May, it posted “relatively flat” fourth-quarter revenues of $118.9 million versus $119.3 million a year prior, along with a 1% gain in same-store sales.
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