Payroll Concerns Force Francesca’s to Trim Staff
Women’s specialty chain Francesca’s is slimming down its staff.
The cuts are believed to be part of a plan to pull back on spending due to continued liquidity constraints. And payroll was said to be an area where cuts were needed because the company allegedly overspent in 2023, according to one source. The exact amount over budget couldn’t be substantiated, although there are rumblings that it was close to $1 million.
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An executive at Francesca’s did not respond to a request for comment by press time.
The retailer’s liquidity problems has resulted in some vendors complaining that they haven’t been paid for nearly a year, while others said they have held back on shipments because they haven’t been paid in months. The company’s liquidity doesn’t appear to have improved, but a retailer’s slowest period also is typically in the months following the holiday season. That said, it is believed that product shipments from suppliers have remained lean thus far in 2024.
The latest cost-cutting moves appear to be centered at the store level. Sourcing Journal was told that Francesca’s has eliminated some store leadership positions, opting instead to have managers covering more than one location in a move that creates a “multi-store leader” function. SJ was also told that the full-time Assistant Boutique Leader position has been downgraded to part-time, with no benefits.
There also have been concerns in the fashion market that store closures could be next. SJ did not find any evidence of planned store closures at this point in time.
Management at Francesca’s is said to be looking for new financing, but that might not be easy to get. Lenders have tightened credit standards and interest rates, even though they are holding steady, remain higher than they were even a year ago.
According to Creditsafe data, the number of on-time payments made by Francesca’s has plummeted from 71.9 percent in December 2023 to 21.1 percent in January 2024, and it dropped even further in February 2024 to 18.5 percent. The number of late payments, at 1 to 30 days, skyrocketed from 15.5 percent in December 2023 to 66.4 percent in January 2024. Moreover, the number of late payments from 31 to 60 days jumped from 2.4 percent in January 2024 to 60.3 percent in February, while the number of delinquent payments at 91 days or more climbed from 9.7 percent in January 204 to 13.1 percent in February, according to Ragini Bhalla, Creditsafe’s head of brand and company spokesperson.
Founded in 1999, the specialty chain began trading publicly on the Nasdaq Global Select Market in July 2011. The COVID pandemic, which saw nonessential retailers temporarily close their stores as people sheltered in their homes, exasperated the chain’s troubles and put the company on a list of retailers on bankruptcy watch by credit analysts. The retailer in December 2020 filed for Chapter 11 bankruptcy court protection and was sold in February 2021 to TerraMar Capital’s affiliate Francesca’s Acquisition LLC for $18 million.
Under new ownership, the company expanded its offerings by chasing the “tween” market with its Franki by Francesca’s line. The retailer in May 2023 went on to acquire the Miley Cyrus and Suki Waterhouse approved startup Richer Poorer, which sells sweats, tees, tanks, intimates, dresses and loungewear. The Richer Poorer acquisition added staff to its 2023 payroll costs.
