10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended May 3, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              to

Commission File Number: 001-35239

FRANCESCA’S HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	20-8874704
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8760 Clay Road Houston, TX	77080
(Address of principal executive offices)	(Zip Code)

(713) 864-1358

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x    No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No x

The registrant had 42,213,700 shares (excluding 3,179,581 of treasury stock) of its common stock outstanding as of May 31, 2014.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets as of May 3, 2014, February 1, 2014 and May 4, 2013	3
	Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended May 3, 2014 and May 4, 2013	4
	Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the Thirteen Weeks Ended May 3, 2014	5
	Unaudited Consolidated Statements of Cash Flows for the Thirteen Weeks Ended May 3, 2014 and May 4, 2013	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION	19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 6.	Exhibits	20

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Francesca’s Holdings Corporation

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

	May 3, 2014			February 1, 2014			May 4, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	25,413		$	37,498		$	33,763
Accounts receivable		10,822			8,984			7,645
Inventories		28,779			24,614			23,330
Deferred income taxes		4,643			4,565			3,567
Prepaid expenses and other current assets		6,179			6,764			4,772
Total current assets		75,836			82,425			73,077
Property and equipment, net		69,799			64,131			55,729
Deferred income taxes		3,113			2,335			2,893
Other assets, net		1,724			1,654			1,383
TOTAL ASSETS	$	150,472		$	150,545		$	133,082
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,758		$	10,207		$	8,623
Accrued liabilities		9,640			9,823			14,010
Total current liabilities		19,398			20,030			22,633
Landlord incentives and deferred rent		32,333			27,448			26,151
Long-term debt		15,000			25,000			—
Total liabilities		66,731			72,478			48,784
Commitments and contingencies
Stockholders’ equity:
Common stock - $.01 par value, 80.0 million shares authorized; 45.4 million, 45.2 million and 44.0 million shares issued at May 3, 2014, February 1, 2014 and May 4, 2013, respectively.		454			452			440
Additional paid-in capital		103,574			101,192			86,464
Retained earnings (accumulated deficit)		39,856			31,296			(2,606	)
Treasury stock, at cost – 3.2 million, 2.9 million and 0 shares held at May 3, 2014, February 1, 2014 and May 4, 2013, respectively.		(60,143	)		(54,873	)		—
Total stockholders’ equity		83,741			78,067			84,298
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	150,472		$	150,545		$	133,082

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

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Francesca’s Holdings Corporation

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Net sales	$	85,424		$	78,987
Cost of goods sold and occupancy costs		43,592			37,615
Gross profit		41,832			41,372
Selling, general and administrative expenses		27,812			23,351
Income from operations		14,020			18,021
Interest expense		(221	)		(116	)
Other income		103			83
Income before income tax expense		13,902			17,988
Income tax expense		5,342			7,051
Net income	$	8,560		$	10,937
Basic earnings per common share	$	0.20		$	0.25
Diluted earnings per common share	$	0.20		$	0.24
Weighted average shares outstanding:
Basic shares		42,189			43,939
Diluted shares		42,362			44,880

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

4

Francesca’s Holdings Corporation

Unaudited Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

	Common Stock
	Shares Outstanding			Par Value		Additional Paid-in Capital		Retained Earnings		Treasury Stock, at cost			Total Stockholders' Equity
Balance, February 1, 2014		42,349		$	452	$	101,192	$	31,296	$	(54,873	)	$	78,067
Net income		—			—		—		8,560		—			8,560
Stock-based compensation		—			—		832		—		—			832
Stock options exercised and related tax benefit		150			2		1,550		—		—			1,552
Repurchases of common stock		(285	)		—		—		—		(5,270	)		(5,270	)
Balance, May 3, 2014		42,214		$	454	$	103,574	$	39,856	$	(60,143	)	$	83,741

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

5

Francesca’s Holdings Corporation

Unaudited Consolidated Statements of Cash Flows

(In thousands)

	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Cash Flows From Operating Activities:
Net income	$	8,560		$	10,937
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		2,982			2,237
Stock-based compensation expense		832			990
Excess tax benefit from stock-based compensation		(581	)		(2,373	)
Loss on sale of assets		17			110
Amortization of debt issuance costs		61			73
Deferred income taxes		(855	)		(597	)
Changes in operating assets and liabilities:
Accounts receivable		(1,256	)		(5,141	)
Inventories		(4,164	)		(4,281	)
Prepaid expenses and other assets		453			93
Accounts payable		(1,039	)		265
Accrued liabilities		(185	)		5,717
Landlord incentive and deferred rent		4,885			4,059
Net cash provided by operating activities		9,710			12,089
Cash Flows Used in Investing Activities:
Purchase of property and equipment		(8,078	)		(8,517	)
Net cash used in investing activities		(8,078	)		(8,517	)
Cash Flows Provided by (Used in) Financing Activities:
Repayments of borrowings under the revolving credit facility		(10,000	)		-
Repurchases of common stock		(5,270	)		-
Proceeds from the exercise of stock options		972			221
Taxes paid related to net settlement of equity awards		-			(2,280	)
Excess tax benefit from stock-based compensation		581			2,373
Net cash provided by (used in) financing activities		(13,717	)		314
Net increase (decrease) in cash and cash equivalents		(12,085	)		3,886
Cash and cash equivalents, beginning of year		37,498			29,877
Cash and cash equivalents, end of period	$	25,413		$	33,763
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	$	459		$	2,372
Interest paid	$	181		$	40

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Business

Francesca’s Holdings Corporation is a holding company incorporated in 2007 under the laws of the State of Delaware whose business operations are conducted through its subsidiaries.  Unless the context otherwise requires, the “Company,” refers to Francesca’s Holdings Corporation and its consolidated subsidiaries. The Company operates a national chain of retail boutiques designed and merchandised to feel like independently owned, upscale boutiques and provide its customers with an inviting, intimate and fun shopping experience. The Company offers a diverse and balanced mix of apparel, jewelry, accessories and gifts at attractive prices. At May 3, 2014, the Company operated 513 boutiques, which are located in 46 states throughout the United States and the District of Columbia, and its direct-to-consumer website. 

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations, changes in equity, and cash flows at the dates and for the periods presented. The financial information as of February 1, 2014 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2014.

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K.

Due to seasonal variations in the retail industry, interim results are not necessarily indicative of results that may be expected for any other interim period or for a full year.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company and all its subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Fiscal Year

The Company maintains its accounts on a 52- or 53-week year ending on the Saturday closest to January 31st. Fiscal years 2014 and 2013 each include 52 weeks of operations. The fiscal quarters ended May 3, 2014 and May 4, 2013 refer to the thirteen-week periods ended as of those dates.

Management Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales return, and expenses during the reporting periods. Actual results could differ materially from those estimates.

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

Recent Accounting Pronouncements

In May 2014 the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers.” This pronouncement was issued to improve the financial reporting of revenue and improve comparability of the top line in financial statements globally and is effective for reporting periods beginning on or after December 15, 2016. The Company is in the process of assessing the provisions of this new guidance and has not determined whether the adoption will have a material impact on our consolidated financial statements.

Subsequent Event

In June 2014 management determined that the Company should dispose of sufficient amounts of slow moving inventory during the second fiscal quarter to accelerate the flow of new merchandise into its boutiques. The Company estimates that during the second quarter it will dispose of approximately $2.5 to $3.5 million of inventory at cost before taxes or $0.04 to $0.05 diluted earnings per share.

2. Earnings Per Share

Basic earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of stock options and restricted stock grants using the treasury stock method.

The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted earnings per share:

	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013
	(in thousands, except per share data)
Numerator:
Net income	$	8,560	$	10,937
Denominator:
Weighted-average common shares outstanding - basic		42,189		43,939
Options and other dilutive securities		173		941
Weighted-average common shares outstanding - diluted		42,362		44,880
Per common share:
Basic earnings per common share	$	0.20	$	0.25
Diluted earnings per common share	$	0.20	$	0.24

Stock options to purchase common stock in the amount of 0.8 million shares in each of the thirteen weeks ended May 3, 2014 and May 4, 2013 were not included in the computation of diluted earnings per share due to their anti-dilutive effect.

3. Fair value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount reflected in the consolidated balance sheets of financial assets and liabilities, which includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximated their fair values due to the short term nature of these financial assets and liabilities. The carrying amount of the Company’s debt approximates its fair value primarily due to the variable component of interest on debt.

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

4. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective tax rate. The effective income tax rates for the thirteen weeks ended May 3, 2014 and May 4, 2013 were 38.4% and 39.2%, respectively. The difference between our effective tax rate and federal statutory rate primarily relates to state income taxes.

5. Revolving Credit Facility

On August 30, 2013, Francesca’s Collections, Inc. (“Francesca’s Collections” or the “Borrower”), as borrower, and its parent company, Francesca’s LLC, a wholly owned subsidiary of the Company, entered into a Second Amended and Restated Credit Agreement with Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the lenders party thereto. The credit facility provides capacity of $75.0 million (including up to $10.0 million for letters of credit) and matures on August 30, 2018.  The facility also contains an option permitting the Borrower, subject to certain requirements and conditions, to arrange with the lenders for additional incremental commitments up to an aggregate of $25.0 million, subject to reductions in the event the Borrower has certain indebtedness outstanding.  At May 3, 2014, $15.0 million was outstanding under the credit facility and no letters of credit were outstanding.

The credit facility contains customary events of default and requires the Borrower to comply with certain financial covenants. As of May 3, 2014, the Borrower was in compliance with all covenants under the credit facility. The credit facility restricts the amount of dividends the Borrower can pay; provided that the Borrower is permitted to pay dividends to the extent it has available capacity in its available investment basket (as defined in the Second Amended and Restated Credit Agreement), no default or event of default is continuing, certain procedural requirements have been satisfied and the Borrower is in pro forma compliance with a maximum secured leverage ratio. At May 3, 2014, the Borrower would have met the conditions for paying dividends out of the available investment basket. All obligations under the credit facility are secured by substantially all the assets of the Borrower and any subsidiary guarantor, if any. All obligations under the facility are unconditionally guaranteed by, subject to certain exceptions, by Francesca’s LLC and each of the Borrower’s existing and future direct and indirect wholly-owned domestic subsidiaries.

6. Stock-based Compensation

The Company’s employees participate in various stock-based compensation plans, including stock options and restricted stock awards.

Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company estimates forfeitures for grants that are not expected to vest. The stock-based compensation cost recognized in the thirteen weeks ended May 3, 2014 and May 4, 2013 totaled $0.8 million and $1.0 million, respectively. 

Stock Options

During the thirteen weeks ended May 3, 2014 and May 4, 2013, the intrinsic value of stock options exercised totaled $2.0 million and $6.3 million, respectively, while stock options were granted at a weighted average grant date fair value of $11.11 and $15.28, respectively.

9

Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

As of May 3, 2014 there was approximately $6.9 million of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted-average period of 2.6 years.

Restricted Stock Awards

On April 11, 2014, the Company awarded 158,451 service and performance-based restricted stock awards to certain executives and other key employees. These awards entitle the grantee to receive a maximum of 1.5 shares of common stock per service and performance-based restricted stock award if the Company achieves specified annual performance goals set at the beginning of each year over a three year period. The grantee may earn a portion of the award based on the annual performance of each individual year but must remain with the Company for the entire three year vesting period to receive such awards. Specified performance goals include the achievement of certain levels of earnings per share and net sales growth. The fair value of the restricted stock awards is based on the closing price of the Company’s common stock on the award date, which was $17.04 per share for those awards related to the fiscal 2014 performance period. Compensation expense is recognized when it is probable that specified performance goals will be achieved. Such compensation is recognized from the award date over the remaining vesting period.

7. Share Repurchases

On September 3, 2013, the Company’s Board of Directors authorized a $100.0 million share repurchase program commencing on the same date.  This authorization has no expiration date.  Under the repurchase program, purchases can be made from time to time in the open market, in privately negotiated transactions, under Rule 10b5-1 plans or through other available means.  The specific timing and amount of the repurchases is dependent on market conditions, securities law limitations and other factors.  During the thirteen weeks ended May 3, 2014, the Company repurchased 285,000 shares of its common stock at a cost of approximately $5.3 million or an average price (including brokers’ commission) of $18.49 per share.  The cost of repurchased shares is presented as treasury stock in the unaudited consolidated balance sheets.  As of May 3, 2014, the remaining balance available for future share repurchase was approximately $39.9 million.  

8. Commitment and Contingencies

Operating Leases

The Company leases boutique space and office space under operating leases expiring in various years through the fiscal year ending 2025. Certain of the leases provide that the Company may cancel the lease, with penalties as defined in the lease, if the Company’s boutique sales at that location fall below an established level. Certain leases provide for additional rent payments to be made when sales exceed a base amount. Certain operating leases provide for renewal options for periods from three to five years at their fair rental value at the time of renewal.

10

Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

Minimum future rental payments under non-cancellable operating leases as of May 3, 2014, are as follows:

Fiscal year	Amount
	(In thousands)
Remainder of 2014	$	24,089
2015		32,654
2016		31,920
2017		30,595
2018		28,609
Thereafter		80,042
	$	227,909

Legal Proceedings

On September 27, 2013 and November 4, 2013, two purported class action lawsuits entitled Ortuzar v. Francesca’s Holdings Corp., et al. and West Palm Beach Police Pension Fund v. Francesca’s Holdings Corp., et al. were filed in the United States District Court for the  Southern District of New York against the Company and certain of its current and former directors and officers for alleged violations of the federal securities laws arising from statements in certain public disclosures regarding the Company’s current and future business and financial  condition. On December 19, 2013, the Court consolidated the actions and appointed Arkansas Teacher Retirement System as lead plaintiff. On March 14, 2014, lead plaintiff filed a consolidated class action complaint purportedly on behalf of shareholders that purchased or acquired the Company’s publicly traded common stock between July 22, 2011 and September 3, 2013 against the Company and certain of its current and former directors and officers. The consolidated complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a) (2), and 15 of the Securities Act of 1933 for allegedly false and misleading statements in the Company’s public disclosures concerning, among other things, the Company’s relationship with certain vendors. The lawsuit seeks damages in an unspecified amount. On May 13, 2014 defendants moved to dismiss the consolidated complaint. The Company believes that the allegations contained in the consolidated complaint are without merit and intends to vigorously defend itself against all claims asserted therein. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time and, as such, the Company has not recorded an accrual for any possible loss.

On December 11, 2013, a purported shareholder derivative action entitled Daniell v. De Merritt, et al., was filed on behalf of the Company in the District Court of Harris County, Texas, naming certain of the Company’s current and former officers and directors as defendants and naming the Company as a nominal defendant. The complaint alleges breaches of fiduciary duty including the dissemination of false and misleading statements, failure to maintain internal controls, and insider selling and misappropriation of information, unjust enrichment, abuse of control, and gross mismanagement. The derivative action seeks damages in an unspecified amount, an order directing the Company “to reform and improve” corporate governance and internal controls, restitution and disgorgement from the defendants, and costs and attorneys’ fees. On January 30, 2014, the Company and defendants moved to dismiss the complaint, on May 9, 2014, plaintiff filed an amended petition alleging the same causes of action and adding CCMP Capital, LLC as a defendant. On May 16, 2014, plaintiff filed a notice of nonsuit seeking an order dismissing his claims without prejudice. On May 28, 2014, plaintiff filed a substantially similar complaint in the Court of Chancery of the State of Delaware alleging the same causes of action against the same parties as the amended petition in Texas.

The Company, from time to time, is subject to various claims and legal proceedings arising in the ordinary course of business.  While the outcome of any such claim cannot be predicted with certainty, in the opinion of management, the outcome of these matters is unlikely to have a material adverse effect on the Company’s business, results of operations or financial condition. 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements concerning our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. These statements may include words such as “aim”, “anticipate”, “assume”, “believe”, “can have”, “could”, “due”, “estimate”, “expect”, “goal”, “intend”, “likely”, “may”, “objective”, “plan”, “potential”, “positioned”, “predict”, “should”, “target”, “will”, “would” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends. For example, all statements we make relating to our estimated and projected earnings, sales, costs, expenditures, cash flows, growth rates, market share and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. These statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in many cases beyond our control. All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations. These risks and uncertainties include, but are not limited to, the following: the risk that we cannot anticipate, identify and respond quickly to changing fashion trends and customer preferences; our ability to attract a sufficient number of customers to our boutiques or sell sufficient quantities of our merchandise through our direct-to-consumer business; our ability to successfully open and operate new boutiques each year; and our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth. For additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward looking statements, please refer to “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014 and filed with the Securities and Exchange Commission (“SEC”) on March 28, 2014 and any risk factors contained in subsequent Quarterly Reports on Form 10-Q we file with the SEC.

We derive many of our forward-looking statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in this report as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. These forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise any forward-looking statements publicly after the date of this report whether as a result of new information, future developments or otherwise.

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Overview

Unless the context otherwise requires, the “Company,” “we,” “our,” “ours,” “us” and “francescas ® ” refer to Francesca’s Holdings Corporation and its consolidated subsidiaries.

francesca’s^® is a growing specialty retailer with retail locations designed and merchandised to feel like independently owned, upscale boutiques providing customers a fun and differentiated shopping experience. The merchandise assortment is a diverse and balanced mix of apparel, jewelry, accessories and gifts. As of May 3, 2014, francesca’s ^® operated 513 boutiques in 46 states and the District of Columbia and also served its customers through www.francescas.com, its direct-to-consumer website. The information contained on our website is not incorporated by reference into this Quarterly Report on Form 10-Q and you should not consider information contained on our website to be part of this Quarterly Report on Form 10-Q.

Our net sales increased 8% to $85.4 million in the thirteen weeks ended May 3, 2014 from $79.0 million in the thirteen weeks ended May 4, 2013. Over the same period, income from operations decreased by 22% to $14.0 million from $18.0 million in the prior year. Net income decreased 22% to $8.6 million, or $0.04 per diluted share, in the first quarter of fiscal year 2014 compared to net income of $10.9 million, or $0.24 per diluted share, in the comparable prior year period.

We have increased our boutique count to 513 boutiques as of May 3, 2014 from 416 boutiques as of May 4, 2013. To complete our planned boutique openings for the fiscal year 2014, we plan to open 23 boutiques during the remainder of the fiscal year.

Results of Operations

The following represents operating data for the thirteen weeks ended May 3, 2014 and May 4, 2013.

	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
Total net sales growth for period		8	%		29	%
Comparable sales growth for period(1)		(7	)%		2	%
Number of boutiques open at end of period		513			416
Net sales per average square foot for period (not in thousands)(2)	$	131		$	148
Average square feet per boutique (not in thousands)(3)		1,341			1,368
Total gross square feet at end of period (in thousands)		688			569

(1) A boutique is included in comparable sales on the first day of the fifteenth full month following the boutique’s opening. When a boutique that is included in comparable sales is relocated, we continue to consider sales from that boutique to be comparable sales. If a boutique is closed for thirty days or longer for a remodel or as a result of weather damage, fire or the like, we no longer consider sales from that boutique to be comparable sales. Comparable sales results include our direct-to-consumer sales.

(2) Net sales per average square foot are calculated by dividing net sales for the period by the average square feet during the period. Because of our rapid growth, for purposes of providing net sales per square foot measure, we use average square feet during the period as opposed to total gross square feet at the end of the period. For individual quarterly periods, average square feet is calculated as (a) the sum of total gross square feet at the beginning and end of the period, divided by (b) two. There may be variations in the way in which some of our competitors and other retailers calculate sales per square foot or similarly titled measures. As a result, average square feet and net sales per average square foot for the period may not be comparable to similar data made available by other retailers.  

(3) Average square feet per boutique is calculated by dividing total gross square feet at the end of the period by the number of boutiques at the end of the period.

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Boutique Count

The following table summarizes the number of boutiques open at the beginning and end of the periods indicated.

	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013
Number of boutiques open at beginning of period		451		360
Boutiques added		62		56
Number of boutiques open at the end of period		513		416

Thirteen Weeks Ended May 3, 2014 Compared to Thirteen Weeks Ended May 4, 2013

	Thirteen Weeks Ended
	May 3, 2014						May 4, 2013						Variance
	In USD			As a % of Net Sales(1)			In USD			As a % of Net Sales(1)			In USD			%			Basis Points
	(In thousands, except percentages)
Net sales	$	85,424			100.0	%	$	78,987			100.0	%	$	6,437			8	%		-
Cost of goods sold and occupancy costs		43,592			51.0	%		37,615			47.6	%		5,977			16	%		340
Gross profit		41,832			49.0	%		41,372			52.4	%		460			1	%		(340	)
Selling, general and administrative expenses		27,812			32.6	%		23,351			29.6	%		4,461			19	%		300
Income from operations		14,020			16.4	%		18,021			22.8	%		(4,001	)		(22	%)		(640	)
Interest expense		(221	)		(0.3	)%		(116	)		(0.1	)%		(105	)		91	%		(10	)
Other income		103			0.1	%		83			0.1	%		20			24	%		-
Income before income tax expense		13,902			16.3	%		17,988			22.8	%		(4,086	)		(23	%)		(650	)
Income tax expense		5,342			6.3	%		7,051			8.9	%		(1,709	)		(24	%)		(270	)
Net income	$	8,560			10.0	%	$	10,937			13.8	%	$	(2,377	)		(22	%)		(380	)

⁽¹⁾ Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.

Net Sales

Net sales increased 8% to $85.4 million in the thirteen weeks ended May 3, 2014 from $79.0 million in the thirteen weeks ended May 4, 2013. This increase is primarily attributable to the increase in non-comparable sales, which in turn is due to the increase in the number of boutiques in operation in the first quarter of fiscal year 2014 as compared to the same period of the prior year. This change was partially offset by a 7% decrease in comparable sales. The decrease in comparable sales was driven by a 7% decrease in transactions partially offset by an increase in direct-to-consumer sales of 84%. There were 360 comparable boutiques and 153 non-comparable boutiques open at May 3, 2014 compared to 283 and 133, respectively, at May 4, 2013. Our boutique sales were impacted by severe winter weather conditions in the quarter which caused temporary boutique closures throughout a large number of geographic regions.

Cost of Goods Sold and Occupancy Costs

Cost of goods sold and occupancy costs increased 16% to $43.6 million in the thirteen weeks ended May 3, 2014 from $37.6 million in the thirteen weeks ended May 4, 2013. Cost of merchandise and freight expenses increased by $3.6 million driven by the increased sales volume. Occupancy costs increased by $2.3 million due to the increase in the number of boutiques in operation during the thirteen weeks ended May 3, 2014 compared to the same period of the prior year.

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As a percentage of net sales, cost of goods sold and occupancy costs increased to 51.0% in the thirteen weeks ended May 3, 2014 from 47.6% in the thirteen weeks ended May 4, 2013. This unfavorable variance included a 180 basis point decrease in merchandise margins primarily as a result of increased markdowns and promotional activity related to the sale of carryover clearance inventory from the fourth quarter and the general competitive sales environment. Additionally, occupancy costs increased 160 basis points primarily due to the deleveraging of fixed expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 19% to $27.8 million in the thirteen weeks ended May 3, 2014 from $23.4 million in the thirteen weeks ended May 4, 2013. As a percentage of net sales, selling, general and administrative expense increased to 32.6% in the thirteen weeks ended May 3, 2014 as compared to 29.6% in the thirteen weeks ended May 4, 2013. This increase was primarily due to general deleveraging of expenses due to lower sales growth as well as the higher boutique and corporate payroll associated with expansion of the field leadership structure during late 2013 to support the larger boutique base.

Income Tax Expense

The decrease in provision for income taxes of $1.7 million in the thirteen weeks ended May 3, 2014 compared to the thirteen weeks ended May 4, 2013 was primarily due to the decrease in pre-tax income. The effective tax rate of 38.4% in the thirteen weeks ended May 3, 2014 was comparable to the effective tax rate of 39.2% in the thirteen weeks ended May 4, 2013.

Sales by Merchandise Category

	Thirteen Weeks Ended
	May 3, 2014					May 4, 2013
	In Dollars		As a % of Net Sales			In Dollars		As a % of Net Sales
	(in thousands, except percentages)
Apparel	$	44,764		52.3	%	$	39,849		50.7	%
Jewelry		18,321		21.4	%		18,981		24.1	%
Accessories		14,144		16.5	%		12,614		16.0	%
Gifts		8,399		9.8	%		7,230		9.2	%
Merchandise sales(1)	$	85,628		100.0	%	$	78,674		100.0	%

⁽¹⁾ Excludes gift card breakage income, shipping and change in return reserve.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and borrowings under our revolving credit facility. Our primary cash needs are for capital expenditures in connection with opening new boutiques and remodeling existing boutiques, investing in improved technology and distribution facility enhancements, funding normal working capital requirements and payments of interest and principal, if any, under our revolving credit facility. We may use cash or our revolving credit facility to issue letters of credit to support merchandise imports or for other corporate purposes. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts payable and other current liabilities. Our working capital position benefits from the fact that we generally collect cash from sales to customers the day of or, in the case of credit or debit card transactions, within several days of the related sales and we typically have up to 30 days to pay our vendors.

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We were in compliance with all covenants under our revolving credit facility as of May 3, 2014. On May 3, 2014, we had $25.4 million of cash and cash equivalents and approximately $60 million in borrowing availability under our revolving credit facility. There were no letters of credit outstanding at May 3, 2014.

We expect that our cash flow from operations along with borrowings under our revolving credit facility and tenant allowances for new boutiques will be sufficient to fund capital expenditures and our working capital requirements for at least the next twelve months.

Cash Flow

A summary of our operating, investing and financing activities are shown in the following table:

	Thirteen Weeks Ended
	May 3, 2014			May 4, 2013
	(In thousands)
Provided by operating activities	$	9,710		$	12,089
Used in investing activities		(8,078	)		(8,517	)
Provided by (used in) financing activities		(13,717	)		314
Net increase (decrease) in cash and cash equivalents	$	(12,085	)	$	3,886

Operating Activities

Operating activities consist of net income adjusted for non-cash items, including depreciation and amortization, deferred taxes, the effect of working capital changes and tenant allowances received from landlords. Net cash provided by operating activities was $9.7 million and $12.1 million in each of the thirteen weeks ended May 3, 2014 and May 4, 2013, respectively. The decrease in cash provided by operating activities in the current quarter was primarily due to lower net income as well as timing changes with respect to accounts payable, accrued liabilities and accounts receivable.

Investing Activities

Investing activities consist primarily of capital expenditures for new boutiques, improvements to existing boutiques, as well as investment in information technology and our distribution facility.

	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013
	(In thousands)
Capital expenditures for:
New boutiques	$	6,663	$	7,350
Existing boutiques		1,309		337
Technology		61		627
Corporate and distribution		45		203
Net cash used in investing activities	$	8,078	$	8,517

Our total capital expenditures for the thirteen weeks ended May 3, 2014 and May 4, 2013 were $8.1 million and $8.5 million, respectively, with new boutiques accounting for most of our spending at $6.7 million and $7.4 million, respectively. $1.3 million was paid during the period in connection with the remodeling of 19 existing boutiques. Spending for new boutiques included amounts associated with boutiques that will open subsequent to the end of each fiscal quarter. We opened 62 boutiques in the thirteen weeks ended May 3, 2014 compared to 56 boutiques in the thirteen weeks ended May 4, 2013. The average cost of the leasehold improvements, equipment, furniture and fixtures, excluding tenant allowances which are reflected in operating cash flows, for new boutiques opened in the thirteen weeks ended May 3, 2014 and May 4, 2013 was $182,000 and $172,000, respectively. The average tenant allowance per new boutique in the thirteen weeks ended May 3, 2014 and May 4, 2013 was $89,000 and $72,000, respectively. Tenant allowances are amortized as a reduction in rent expense over the term of the lease. The average collection period for these allowances is approximately six months after boutique opening. As a result, we fund the cost of new boutiques with cash flow from operations, build-out allowances from our landlords, or borrowings under our revolving credit facility. 

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Management anticipates that capital expenditures for the remainder of fiscal year 2014 will be approximately $17 million to $19 million. The majority of this amount will be spent on new boutique leasehold improvements at approximately $11 million to $13 million. Additionally, we plan to complete remodels for approximately 30-35 boutiques during the fiscal year. The remaining capital expenditures are expected to be used for our technology initiatives as well as corporate office and distribution center enhancements.

Financing Activities

Financing activities consist of borrowings and payments under our revolving credit facility, repurchases of our common stock, and proceeds from the exercise of stock options and the related tax consequence.

Net cash used in financing activities was $13.7 million during the thirteen weeks ended May 3, 2014 compared to net cash provided by financing activities of $0.3 million during the thirteen weeks ended May 4, 2013. During the quarter, we repaid $10.0 million of borrowings under our revolving credit facility and additionally repurchased $5.3 million of common stock.

Revolving Credit Facility

On August 30, 2013, Francesca’s Collections, Inc. (“Francesca’s Collections” or the “Borrower”), as borrower, and its parent company, Francesca's LLC, a wholly owned subsidiary of the Company, entered into a Second Amended and Restated Credit Agreement with Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the lenders party thereto. The credit facility provides capacity of $75.0 million (including up to $10.0 million for letters of credit) and matures on August 30, 2018. The facility also contains an option permitting the Borrower, subject to certain requirements and conditions, to arrange with the lenders for additional incremental commitments up to an aggregate of $25.0 million, subject to reductions in the event the Borrower has certain indebtedness outstanding. At May 3, 2014, $15.0 million was outstanding under the credit facility and no letters of credit were outstanding.

The credit facility contains customary events of default and requires the Borrower to comply with certain financial covenants. As of May 3, 2014, the Borrower was in compliance with all covenants under the credit facility. The credit facility restricts the amount of dividends the Borrower can pay; provided that the Borrower is permitted to pay dividends to the extent it has available capacity in its available investment basket (as defined in the Second Amended and Restated Credit Agreement), no default or event of default is continuing, certain procedural requirements have been satisfied and the Borrower is in pro forma compliance with a maximum secured leverage ratio. At May 3, 2014, the Borrower would have met the conditions for paying dividends out of the available investment basket. All obligations under the credit facility are secured by substantially all the assets of the Borrower and any subsidiary guarantor, if any. All obligations under the facility are unconditionally guaranteed by, subject to certain exceptions, by Francesca’s LLC and each of the Borrower’s existing and future direct and indirect wholly-owned domestic subsidiaries. 

During the thirteen weeks ended May 3, 2014, amounts outstanding under the credit facility accrued interest at an average rate of 2.0%.

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Share Repurchase Program

For information regarding our share repurchase program, please refer to Note 7 to our unaudited consolidated financial statements included in Part I of this report, which is incorporated herein by reference.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. A summary of the Company’s significant accounting policies is included in Note 1 to the Company’s annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2014.

Certain of the Company’s accounting policies and estimates are considered critical, as these policies and estimates are the most important to the depiction of the company’s consolidated financial statements and require significant, difficult, or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014. As of May 3, 2014, there were no significant changes to any of our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, please refer to Note 1 to our unaudited consolidated financial statements included in Part I of this Report, which is incorporated herein by reference.

Subsequent Event

We regularly review our inventory balances to identify slow moving merchandise. We generally use markdowns to clear this type of merchandise. However, due to the negative impact of various macro conditions on our planned sales levels within primarily the apparel and jewelry categories, inventory balances have outpaced sales. We believe that regular markdowns are insufficient to clear slow moving inventory at a pace that is suitable for our merchandising strategy. A primary reason our customer shops our boutiques, we believe, is her love for new fashion. Accordingly, in June 2014 we determined that we should dispose of sufficient amount of slow moving inventory during the second fiscal quarter to accelerate the flow of new merchandise into our boutiques. We believe that this strategy will adequately address our customers’ desire for new fashion and will likely allow us to attain improved results through the back half of 2014.We estimate that during the second quarter we will dispose of approximately $2.5 to $3.5 million of inventory at cost before taxes or $0.04 to $0.05 diluted earnings per share.

Contractual Obligations

There were no significant changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K for the fiscal year ended February 1, 2014, other than those which occur in the normal course of business.

Off Balance Sheet Arrangements

We are not party to any off balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal exposure to market risk relates to changes in interest rates. Our revolving credit facility carries floating interest rates that are tied to LIBOR, the federal funds rate and the prime rate, and therefore, our statements of operations and our cash flows could be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place. We historically have not used derivative financial instruments for speculative or trading purposes; however, this does not preclude our adoption of specific hedging strategies in the future. At May 3, 2014, we had $15.0 million of borrowings outstanding under our revolving credit facility and the weighted average interest rate during the period was 2.0%. Based on a sensitivity analysis at May 3, 2014, assuming the loan balance would be outstanding for the remainder of the fiscal year, a 100 basis point increase in interest rates would increase annual interest expense by $0.1 million.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our Disclosure Committee and management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures were effective at the reasonable assurance level as of May 3, 2014.

There were no changes in our internal control over financial reporting during the quarter ended May 3, 2014 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings involving us, please refer to Note 8 to our unaudited consolidated financial statements included in Part I of this Report, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in Item 1A contained in Part I of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014 and filed with the SEC on March 28, 2014.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about the Company’s share repurchase activity during the thirteen weeks ended May 3, 2014.

Period (1)	Total number of shares purchased		Average price paid per share(2)		Total number of shares purchased as part of a publicly announced plans or programs (3)		Approximate dollar value of shares that may yet be purchased under the plans or programs
February 2, 2014 – March 1, 2014		285,000	$	18.49		285,000	$	39,933,273
March 2, 2014 – April 5, 2014		—		—		—		—
April 6, 2014 – May 3, 2014		—		—		—		—
Total		285,000	$	18.49		285,000

⁽¹⁾ Periodic information is presented by reference to our fiscal monthly periods during the first quarter of fiscal year 2014.

⁽¹⁾ Average price paid per share includes brokers’ commission.

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⁽³⁾ On September 3, 2013, the Company's Board of Directors authorized a $100 million share repurchase program commencing on the same date. This authorization has no expiration date. Under the repurchase program, purchases can be made from time to time through open market purchases, in privately negotiated transactions, under a Rule 10b5-1 plans or through other available means. The specific timing and amount of repurchases is dependent on market conditions, securities law limitations and other factors.

ITEM 6. EXHIBITS

Exhibit No.	Description
10.1 ┼*	Form of Restricted Stock Award Agreement
31.1*	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)
31.2*	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)
32.1**	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Consolidated Balance Sheets as of May 3, 2014, February 1, 2014 and May 4, 2013, (ii) the Unaudited Consolidated Statements of Operations for the thirteen weeks ended May 3, 2014 and May 4, 2013, (iii) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the thirteen weeks ended May 3, 2014, (iv) Unaudited Consolidated Statements of Cash Flows for the thirteen weeks ended May 3, 2014 and May 4, 2013 and (v) the Notes to the Unaudited Consolidated Financial Statements.

┼ Indicates a management contract or compensatory plan or arrangement.

* Filed herewith.

** Furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Francesca’s Holdings Corporation
	(Registrant)
Date:  June 11, 2014	/s/ Mark Vendetti
	Mark Vendetti
	Chief Financial Officer (duly authorized officer and Principal Financial and Accounting Officer)

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EX-10.1

FRANCESCA’S HOLDINGS CORPORATION

2011 EQUITY INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT

THIS PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT (this “Award Agreement”) is dated as of (the “Award Date”) by and between Francesca’s Holdings Corporation, a Delaware corporation (the “Corporation”), and (the “Participant”).

W I T N E S S E T H

WHEREAS, pursuant to the Francesca’s Holdings Corporation 2011 Equity Incentive Plan (the “Plan”), the Corporation hereby grants to the Participant, effective as of the date hereof, a performance restricted stock award (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Participant, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1.Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.

2.Grant. Subject to the terms of this Award Agreement, the Corporation hereby grants to the Participant an Award with respect to an aggregate of restricted shares of Common Stock of the Corporation (the “Restricted Stock”), which aggregate number represents the maximum number of shares of Restricted Stock subject to the Award that may become vested in accordance with the terms of this Award Agreement (such maximum number of shares of Restricted Stock subject to the Award is referred to as the “Maximum Number” of shares). Of the Maximum Number of shares of Restricted Stock subject to the Award, shares represent the “target” number of shares of Restricted Stock subject to the Award (such target number of shares of Restricted Stock subject to the Award is referred to as the “Target Number” of shares).

3.Performance-Based and Time-Based Vesting. Subject to Section 8 below, the Award shall become eligible to vest with respect to each of the Corporation’s 2014, 2015 and 2016 fiscal years (each, a “Performance Year”) based on the achievement of certain performance goals as set forth in Section 3(a) of this Award Agreement and, with respect to any shares of Restricted Stock subject to the Award that become eligible to vest in accordance with Section 3(a) of this Award Agreement, such shares shall vest and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse based on the achievement of the time-based vesting requirements set forth in Section 3(b) of this Award Agreement.

(a)Eligibility to Vest Based Upon Corporate Performance. The total Target Number of shares of Restricted Stock subject to the Award (subject to adjustment under Section 7.1 of the Plan) is divided into three separate tranches as follows: one-third (1/3) of the Target Number of shares of Restricted Stock subject to the Award (rounded to the nearest whole share) will be eligible to vest with respect to a performance measurement period consisting of the 2014 Performance Year (the “2014 Target Shares”); one-third (1/3) of the Target Number of shares of Restricted Stock subject to the Award (rounded to the nearest whole share) will be eligible to vest with respect to a performance measurement period consisting of the 2015 Performance Year (the “2015 Target Shares”); and the remaining (approximately one-third (1/3)) portion of the Target Number of shares of Restricted Stock subject to the Award will be eligible to vest with respect to a performance measurement period consisting of the 2016 Performance Year (the “2016 Target Shares”). (For purposes of this Award Agreement, “Target Shares” means either the 2014 Target Shares, the 2015 Target Shares or the 2016 Target Shares, as applicable.) In each case, the number of Target Shares that may become eligible to vest with respect to the applicable Performance Year may range from zero percent (0%) to one hundred fifty percent (150%) of the total number of Target Shares for that Performance Year, as determined in accordance with Exhibit A attached hereto. The percentage of the Target Shares that become eligible to vest, if any, based on the achievement of the performance goals with respect to the applicable Performance Year, as determined in accordance with Exhibit A attached hereto, are referred to as the “Eligible Shares” with respect to that Performance Year. (For purposes of clarity, in no event shall the maximum number of shares that are deemed to be Eligible Shares (on an aggregate basis with respect to the 2014, 2015 and 2016 Performance Years) exceed the Maximum Number of shares of Restricted Stock subject to the Award.) Any Maximum Shares corresponding to a particular Performance Year that the Administrator determines shall not be Eligible Shares in accordance with this Section 3(a) with respect to such Performance Year shall terminate and be forfeited as of the last day of the applicable Performance Year, and the Participant shall have no further rights with respect to any such Maximum Shares that are not determined to be Eligible Shares in accordance with this Section 3(a).

(b)Vesting. Subject to the terms and conditions of this Award Agreement, the number of Maximum Shares that (1) the Administrator has determined are Eligible Shares in accordance with Section 3(a) of this Award Agreement and (2) do not otherwise vest in accordance with Section 8 of this Award Agreement, if any, shall vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, on the third (3^rd) anniversary of the Award Date (the “Vesting Date”), subject to the Participant’s continuous employment or service to the Corporation through the Vesting Date.

4.Continuance of Employment. Except as expressly provided in Section 8 of this Award Agreement, the vesting schedule requires continued employment or service through the Vesting Date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Award Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not (except as expressly provided in Section 8) entitle the Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan.

Nothing contained in this Award Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Participant’s status as an employee at will who is subject to termination without cause, confers upon the Participant any right to remain employed by or in service to the Corporation or any of its Subsidiaries, interferes in any way with the right of the Corporation or any of its Subsidiaries at any time to terminate such employment or services, or affects the right of the Corporation or any of its Subsidiaries to increase or decrease the Participant’s other compensation or benefits. Nothing in this Award Agreement, however, is intended to adversely affect any independent contractual right of the Participant without his or her consent thereto.

5.Dividend and Voting Rights. After the Award Date, the Participant shall be entitled to cash dividends with respect to the shares of Restricted Stock subject to the Award even though such shares are not vested but shall not be entitled to voting rights with respect to the shares of Restricted Stock; provided that such rights to cash dividends shall terminate immediately as to any shares of Restricted Stock that are forfeited pursuant to Section 8 below; and provided, further, that the Participant agrees that promptly following any such forfeiture of the shares of Restricted Stock, the Participant will make a cash payment to the Company equal to the amount of any cash dividends received by the Participant in respect of any such unvested, forfeited shares. To the extent the shares are forfeited after the record date and before the payment date for a particular dividend, the Participant shall, promptly after the dividend is paid, make a cash payment to the Company equal to the amount of any such cash dividend received by the Participant in respect of such forfeited shares.

6.Restrictions on Transfer. Prior to the time that they have become vested pursuant to Section 3 or Section 8 hereof or Section 7 of the Plan, neither the Restricted Stock, nor any interest therein, amount payable in respect thereof, or Restricted Property (as defined in Section 9 hereof) may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7.Stock Certificates.

(a)Book Entry Form. The Corporation shall issue the shares of Restricted Stock subject to the Award either: (a) in certificate form as provided in Section 7(b) below; or (b) in book entry form, registered in the name of the Participant with notations regarding the applicable restrictions on transfer imposed under this Award Agreement.

(b)Certificates to be Held by Corporation; Legend. Any certificates representing shares of Restricted Stock that may be delivered to the Participant by the Corporation prior to vesting shall be redelivered to the Corporation to be held by the Corporation until the restrictions on such shares shall have lapsed and the shares shall thereby have become vested or the shares represented thereby have been forfeited hereunder. Such certificates shall bear the following legend and any other legends the Corporation may determine to be necessary or advisable to comply with all applicable laws, rules, and regulations:

“The ownership of this certificate and the shares of stock evidenced hereby and any interest therein are subject to substantial restrictions on transfer under an Agreement entered into between the registered owner and Francesca’s Holdings Corporation. A copy of such Agreement is on file in the office of the Secretary of Francesca’s Holdings Corporation.”

(c)Delivery of Certificates Upon Vesting. Promptly after the vesting of any shares of Restricted Stock pursuant to Section 3 or Section 8 hereof or Section 7 of the Plan and the satisfaction of any and all related tax withholding obligations pursuant to Section 10, the Corporation shall, as applicable, either remove the notations on any shares of Restricted Stock issued in book entry form which have vested or deliver to the Participant a certificate or certificates evidencing the number of shares of Restricted Stock which have vested (or, in either case, such lesser number of shares as may result after giving effect to Section 10). The Participant (or the beneficiary or personal representative of the Participant in the event of the Participant’s death or disability, as the case may be) shall deliver to the Corporation any representations or other documents or assurances as the Corporation or its counsel may determine to be necessary or advisable in order to ensure compliance with all applicable laws, rules, and regulations with respect to the grant of the Award and the delivery of shares of Common Stock in respect thereof. The shares so delivered shall no longer be restricted shares hereunder.

(d)Stock Power; Power of Attorney. Concurrently with the execution and delivery of this Award Agreement, the Participant shall deliver to the Corporation an executed stock power in the form attached hereto as Exhibit B, in blank, with respect to such shares. The Corporation shall not deliver any share certificates in accordance with this Award Agreement unless and until the Corporation shall have received such stock power executed by the Participant. The Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint by execution of this Award Agreement, the Corporation and each of its authorized representatives as the Participant’s attorney(s)-in-fact to effect any transfer of unvested forfeited shares (or shares otherwise reacquired by the Corporation hereunder) to the Corporation as may be required pursuant to the Plan or this Award Agreement and to execute such documents as the Corporation or such representatives deem necessary or advisable in connection with any such transfer.

8.Effect of Termination of Employment or Services; Change in Control Event.

(a)General. If the Participant ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary (the date of such termination of employment or service is referred to as the Participant’s “Severance Date”), the Participant’s shares of Restricted Stock (and related Restricted Property as defined in Section 9 hereof) shall, except as expressly provided below, be forfeited to the Corporation to the extent such shares have not become vested pursuant to Section 3 hereof or Section 7 of the Plan upon the Severance Date (regardless of the reason for such termination of employment or service, whether with or without cause, voluntarily or involuntarily, or due to death or disability). Upon the occurrence of any forfeiture of shares of Restricted Stock hereunder, such unvested, forfeited shares and related Restricted Property shall be automatically transferred to the Corporation as of the Severance Date, without any other action by the Participant (or the Participant’s beneficiary or personal representative in the event of the Participant’s death or disability, as applicable). No consideration shall be paid by the Corporation with respect to such transfer. The Corporation may exercise its powers under Section 7(d) hereof and take any other action necessary or advisable to evidence such transfer. The Participant (or the Participant’s beneficiary or personal representative in the event of the Participant’s death or disability, as applicable) shall deliver any additional documents of transfer that the Corporation may request to confirm the transfer of such unvested, forfeited shares and related Restricted Property to the Corporation.

(b)Termination Without Cause, With Good Reason or Due to Death. In the event the Participant ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary prior to the Vesting Date, and such termination of employment is by the Corporation or a Subsidiary without Cause (as defined below), by the Participant for Good Reason (as defined below) or due to the death of the Participant, the following shall apply with respect to the Award:

(i) Any shares of Restricted Stock subject to the Award that have been deemed to be Eligible Shares with respect to a Performance Year that occurred prior to the Performance Year in which the Severance Date occurs shall immediately vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, as of the Severance Date.

(ii) With respect to the Target Shares applicable to the Performance Year in which the Severance Date occurs, such Target Shares shall be subject to adjustment and pro-rated vesting as provided in the next sentence. In such circumstances: (A) the number of such Target Shares that will become eligible to vest shall be determined as though the applicable Performance Year ended as of the Severance Date, the applicable performance goals for such Performance Year shall be pro-rated based on the ratio of the number of calendar days in the applicable Performance Year that occurred while the Participant was employed by or providing services to the Corporation or a Subsidiary to the total number of calendar days in the Performance Year, and the performance conditions applicable to such Target Shares shall be determined based on actual performance for such shortened period against such pro-rated goals, with the number of Target Shares that may become eligible to vest with respect to the applicable Performance Year determined in accordance with Exhibit A attached hereto (as modified to give effect to the preceding provisions of this paragraph), and (B) the number of such Target Shares that are determined to be eligible to vest based on such shortened performance period, if any, shall be pro-rated based on the ratio of the number of calendar days in the applicable Performance Year that occurred while the Participant was employed by or providing services to the Corporation or a Subsidiary to the total number of calendar days in the Performance Year. Any shares of Restricted Stock subject to the Award that are deemed eligible to vest in accordance with this Section 8(b)(ii) shall immediately vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, as of the Severance Date.

(iii) Any shares of Restricted Stock subject to the Award with respect to a Performance Year that is scheduled to commence following the Performance Year in which the Severance Date occurs shall be forfeited to the Corporation in accordance with Section 8(a) of this Award Agreement.

(c)Change in Control. In the event a Change in Control (as defined in the Plan) occurs prior to the Vesting Date and prior to a termination of the Participant’s employment by or service to the Corporation or a Subsidiary for any reason, the following shall apply with respect to the Award:

(i) Any shares of Restricted Stock subject to the Award that have been deemed to be Eligible Shares with respect to a Performance Year that occurred prior to the Performance Year in which the Change in Control occurs shall immediately vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, as of the date of such Change in Control.

(ii) With respect to the Target Shares applicable to the Performance Year in which the Change in Control occurs, such Target Shares shall be subject to adjustment and pro-rated vesting as provided in the next sentence. In such circumstances: (A) the number of such Target Shares that will become eligible to vest shall be determined as though the applicable Performance Year ended as of the date of the Change of Control, the applicable performance goals for such Performance Year shall be pro-rated based on the ratio of the number of calendar days in the applicable Performance Year that occurred prior to the date of the Change of Control to the total number of calendar days in the Performance Year, and the performance conditions applicable to such Target Shares shall be determined based on actual performance for such shortened period against such pro-rated goals, with the number of Target Shares that may become eligible to vest with respect to the applicable Performance Year determined in accordance with Exhibit A attached hereto (as modified to give effect to the preceding provisions of this paragraph), and (B) the number of such Target Shares that are determined to be eligible to vest based on such shortened performance period, if any, shall be pro-rated based on the ratio of the number of calendar days in the applicable Performance Year that occurred prior to the date of the Change of Control to the total number of calendar days in the Performance Year. Any shares of Restricted Stock subject to the Award that are deemed eligible to vest in accordance with this Section 8(c)(ii) shall immediately vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, as of the date of the Change of Control.

(iii) Any shares of Restricted Stock subject to the Award with respect to a Performance Year that is scheduled to commence following the Performance Year in which the Change of Control occurs shall be forfeited to the Corporation in accordance with Section 8(a) of this Award Agreement.

(d)Defined Terms. The following definitions shall apply for purposes of this Award Agreement:

(i) “Cause” with respect to the Participant means that one or more of the following has occurred:  (A) the Participant has committed a felony or a crime involving moral turpitude (under the laws of the United States or any relevant state, or a similar crime or offense under the applicable laws of any relevant foreign jurisdiction); (B) the Participant has engaged in acts of fraud, dishonesty or other acts of material misconduct in the course of the Participant’s duties; (C) the Participant’s abuse of narcotics or alcohol that has or may reasonably cause material harm the Corporation; (D) any material violation by the Participant of the Corporation’s written policies that causes material harm to the Company; (E) the Participant’s material failure to perform or uphold his or her duties and/or his or her material failure to comply with reasonable directives of the Corporation’s Chief Executive Officer or Board of Directors, as applicable; or (F) any material breach by the Participant of this Award Agreement or any other contract the Participant is a party to with the Corporation or any Subsidiary.

(ii) “Good Reason” with respect to the Participant means the definition of “Good Reason” provided in any written employment agreement (or offer letter or similar written agreement) between the Participant and Corporation or any Subsidiary.  If the Participant is not covered by such an agreement with the Corporation or a Subsidiary that defines such term, then “Good Reason” with respect to the Participant means the occurrence (without the Participant’s consent) of any one or more of the following conditions: (A) a material diminution in the Participant’s rate of base salary; (B) a material diminution in the Participant’s authority, duties, or responsibilities; (C) a material change in the geographic location of the Participant’s principal office with the Corporation (for this purpose, in no event shall a relocation of such office to a new location that is not more than fifty (50) miles from the current location of the Corporation’s executive offices constitute a “material change”); or (D) a material breach by the Corporation of this Award Agreement; provided, however, that any such condition or conditions, as applicable, shall not constitute Good Reason unless both (x) the Participant provides written notice to the Corporation of the condition claimed to constitute Good Reason within sixty (60) days of the initial existence of such condition(s) (such notice to be delivered in accordance with Section 11), and (y) the Corporation fails to remedy such condition(s) within thirty (30) days of receiving such written notice thereof; and provided, further, that in all events the termination of the Participant’s employment with the Corporation shall not constitute a termination for Good Reason unless such termination occurs not more than one hundred and twenty (120) days following the initial existence of the condition claimed to constitute Good Reason.

9.Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan, the Administrator shall make adjustments in accordance with such section in the number and kind of securities that may become vested under the Award. If any adjustment shall be made under Section 7.1 of the Plan or an event described in Section 7.2 of the Plan shall occur and the shares of Restricted Stock are not fully vested upon such event or prior thereto, the restrictions applicable to such shares of Restricted Stock shall continue in effect with respect to any consideration, property or other securities (the “Restricted Property” and, for the purposes of this Award Agreement, “Restricted Stock” shall include “Restricted Property”, unless the context otherwise requires) received in respect of such Restricted Stock. Such Restricted Property shall vest at such times and in such proportion as the shares of Restricted Stock to which the Restricted Property is attributable vest, or would have vested pursuant to the terms hereof if such shares of Restricted Stock had remained outstanding. To the extent that the Restricted Property includes any cash (other than regular cash dividends), such cash shall be invested, pursuant to policies established by the Administrator, in interest bearing, FDIC-insured (subject to applicable insurance limits) deposits of a depository institution selected by the Administrator, the earnings on which shall be added to and become a part of the Restricted Property.

10.Tax Withholding. Subject to Section 8.1 of the Plan, upon any vesting of the Restricted Stock, the Corporation shall automatically withhold and reacquire the appropriate number of whole shares of Restricted Stock, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such vesting at the minimum applicable withholding rates. In the event that the Corporation cannot satisfy such withholding obligations by withholding and reacquiring shares of Restricted Stock, or in the event that the Participant makes or has made an election pursuant to Section 83(b) of the Code or the occurrence of any other withholding event with respect to the Award, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other compensation payable to the Participant any sums required by federal, state or local tax law to be withheld with respect to such vesting of any Restricted Stock or such Section 83(b) election or other withholding event.

11.Notices. Any notice to be given under the terms of this Award Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Participant at the Participant’s last address reflected on the Corporation’s payroll records. Any notice shall be delivered in person or shall be enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Participant is no longer an Eligible Person, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 11.

12.Plan. The Award and all rights of the Participant under this Award Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Participant agrees to be bound by the terms of the Plan and this Award Agreement. The Participant acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Award Agreement. Unless otherwise expressly provided in other sections of this Award Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Participant unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13.Entire Agreement. This Award Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan may be amended pursuant to Section 8.6 of the Plan. This Award Agreement may be amended by the Board from time to time. Any such amendment must be in writing and signed by the Corporation. Any such amendment that materially and adversely affects the Participant’s rights under this Award Agreement requires the consent of the Participant in order to be effective with respect to the Award. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Participant hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

14.Counterparts. This Award Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

15.Section Headings. The section headings of this Award Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

16.Governing Law. This Award Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of law principles thereunder.

17.Clawback Policy. The Restricted Stock is subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of the Restricted Stock or other cash or property received with respect to the Restricted Stock (including any value received from a disposition of the Restricted Stock).

18.Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM AGAINST OUT OF OR RELATING TO THE PLAN OR THIS PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT (INCLUDING THESE TERMS).

19.No Advice Regarding Grant. The Participant is hereby advised to consult with his or her own tax, legal and/or investment advisors with respect to any advice the Participant may determine is needed or appropriate with respect to the Restricted Stock (including, without limitation, to determine the foreign, state, local, estate and/or gift tax consequences with respect to the Award, the advantages and disadvantages of making an election under Section 83(b) of the Code with respect to the Award, and the process and requirements for such an election). Neither the Corporation nor any of its officers, directors, affiliates or advisors makes any representation (except for the terms and conditions expressly set forth in this Award Agreement) or recommendation with respect to the Award or the making an election under Section 83(b) of the Code with respect to the Award. In the event the Participant desires to make an election under Section 83(b) of the Code with respect to the Award, it is the Participant’s sole responsibility to do so timely. Except for the withholding rights set forth in Section 10 above, the Participant is solely responsible for any and all tax liability that may arise with respect to the Award.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Corporation has caused this Award Agreement to be executed on its behalf by a duly authorized officer and the Participant has hereunto set his or her hand as of the date and year first above written.

FRANCESCA’S HOLDINGS CORPORATION,
a Delaware corporation

By: 

Print Name:

Its:

PARTICIPANT

Signature

Print Name

CONSENT OF SPOUSE

In consideration of the execution of the foregoing Performance Restricted Stock Award Agreement by Francesca’s Holdings Corporation, I, _____________________________, the spouse of the Participant therein named, do hereby join with my spouse in executing the foregoing Performance Restricted Stock Award Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated: _____________, 20__

Signature of Spouse

Print Name

EXHIBIT A

PERFORMANCE-BASED VESTING REQUIREMENTS

This Exhibit A is subject to the other provisions of the Award Agreement (including, without limitation, Sections 4, 8 and 9 of the Award Agreement).

The aggregate percentage of the 2014 Target Shares, the 2015 Target Shares and the 2016 Target Shares, as applicable, that shall be deemed to be Eligible Shares in accordance with Section 3(a) of the Award Agreement shall be determined as follows: (1) fifty percent (50%) of the Target Shares for the applicable Performance Year shall become eligible to vest based on the Corporation’s level of achievement of the EPS Goal for such Performance Year; and (2) fifty percent (50%) of the Target Shares for the applicable Performance Year shall become eligible to vest based on the Corporation’s level of achievement of the Net Sales Growth Goal for such Performance Year. For the 2014 Performance Year, the aggregate percentage of the 2014 Target Shares that shall be deemed to be Eligible Shares in accordance with Section 3(a) of the Award Agreement shall be determined in accordance with the table below as follows:

EPS Goal for the 2014 Performance Year		Net Sales Growth Goal for the 2014 Performance Year
Actual Level of EPS for the 2014 Performance Year	Vesting Eligibility Percentage	Actual Level of Net Sales Growth for the 2014 Performance Year	Vesting Eligibility Percentage
Less than $1.20	0%	Less than 17%	0%
$1.20	75%	17%	75%
$1.30	100%	20%	100%
$1.40 or Greater	150%	23% or Greater	150%

For actual EPS or Net Sales Growth achievement results between two points in the preceding tables, the actual payout percentage shall be determined on a straight-line bases between the two closest points based on the actual level of achievement of the EPS Goal or the Net Sales Growth Goal, as applicable, for the applicable Performance Year (with the actual payout percentage in each case rounded down to the nearest whole percentage).

Determination. As soon as practicable (and in all events within two and one-half months) after the last day of each applicable Performance Year, the Administrator shall determine performance for the Performance Year and whether and the extent to which the Target Shares corresponding to that Performance Year shall be deemed to be Eligible Shares that will be eligible to become vested in accordance with the time-based requirements under Section 3(b) of this Award Agreement. The number of Target Shares that will be deemed to be Eligible Shares for a particular Performance Year shall be determined as follows: (1) fifty percent (50%) of the number of Target Shares corresponding to that Performance Year (the 2014 Target Shares, the 2015 Target Shares or the 2016 Target Shares, as the case may be) will be multiplied by the EPS Goal Vesting Eligibility Percentage determined pursuant to the preceding table (based on the actual level of EPS for that Performance Year); and (2) fifty percent (50%) of the number of Target Shares corresponding to that Performance Year (the 2014 Target Shares, the 2015 Target Shares or the 2016 Target Shares, as the case may be) will be multiplied by the Net Sales Growth Goal Vesting Eligibility Percentage determined pursuant to the preceding table (based on the actual level of Net Sales Growth for that Performance Year). Such determinations by the Administrator shall be final and binding.

Defined Terms. For purposes of the Award, the following definitions will apply.

“EPS” means the Company’s earnings per share for a particular fiscal year as determined by the Company in accordance with its standard practices and procedures reflected in its financial statements for that fiscal year; provided that EPS for a particular fiscal year shall be subject to appropriate adjustments for stock splits, reverse stock splits, stock dividends and repurchases by the Company of its outstanding shares of Common Stock during the fiscal year.

“EPS Goal” means the target level of EPS established by the Administrator for the applicable Performance Year, equal to 100% achievement of such target level of EPS for that Performance Year. The EPS Goal for the 2014 Performance Year was established at the time the Award was granted. The EPS Goals for the 2015 Performance Year and the 2016 Performance Year will be established by the Administrator not later than ninety (90) days after the start of the applicable Performance Year (and in any event at a time when it is substantially uncertain whether the EPS Goal for the applicable year will be achieved).

“Net Sales Growth” means, for a particular fiscal year of the Company, the Company’s growth in net sales for the fiscal year as compared to the Company’s net sales for the immediately preceding fiscal year, expressed on a percentage basis, as determined by the Company in accordance with its standard practices and procedures reflected in its financial statements for that fiscal year.

“Net Sales Growth Goal” means the target level of Net Sales Growth established by the Administrator for the applicable Performance Year, equal to 100% achievement of such target level of Net Sales Growth for that Performance Year. The Net Sales Growth Goal for the 2014 Performance Year was established at the time the Award was granted. The Net Sales Growth Goals for the 2015 Performance Year and the 2016 Performance Year will be established by the Administrator not later than ninety (90) days after the start of the applicable Performance Year (and in any event at a time when it is substantially uncertain whether the Net Sales Growth Goal for the applicable year will be achieved).

Adjustments.  For purposes of determining EPS and Net Sales Growth under the Award for the 2014 Performance Year, the Administrator shall adjust (without duplication) the Corporation’s EPS or Net Sales Growth, as applicable (as determined before giving effect to such adjustments), for the 2014 Performance Year for the following items:

(a) increased or decreased to eliminate the financial statement impact of employee retention and earn-out costs that result from mergers and acquisitions;

(b) increased or decreased to eliminate the financial statement impact of divestitures;

(c) increased or decreased to eliminate the financial statement impact of any new changes in accounting standards announced during the year that are required to be applied during the year in accordance with U.S. Generally Accepted Accounting Principles;

(d) increased or decreased to eliminate the financial impact for the dispositions or impairments of long-lived assets, excluding gaming operations equipment;

(e) increased or decreased to eliminate the financial impact related to early extinguishment of debt and debt related instruments; and

(f) increased or decreased to eliminate the financial impact of natural disasters and related insurance recoveries.

EPS and Net Sales Growth for the 2015 Performance Year and the 2016 Performance Year shall be subject to adjustment as expressly provided by the Administrator at the beginning of the applicable Performance Year. The Administrator’s determination of whether an adjustment is required, and the nature and extent of any such adjustment, shall be final and binding.

* * * * *

EXHIBIT B

STOCK POWER

FOR VALUE RECEIVED and pursuant to that certain Performance Restricted Stock Award Agreement between Francesca’s Holdings Corporation, a Delaware corporation (the “Corporation”), and the individual named below (the “Individual”) dated as of _____________, 20__, the Individual, hereby sells, assigns and transfers to the Corporation, an aggregate ________ shares of Common Stock of the Corporation, standing in the Individual’s name on the books of the Corporation and represented by stock certificate number(s) _____________________________________________ to which this instrument is attached, and hereby irrevocably constitutes and appoints _________________ ____________________________________ as his or her attorney in fact and agent to transfer such shares on the books of the Corporation, with full power of substitution in the premises.

Dated _____________, ________

Signature

Print Name

(Instruction: Please do not fill in any blanks other than the signature line. The purpose of the assignment is to enable the Corporation to exercise its sale/purchase option set forth in the Performance Restricted Stock Award Agreement without requiring additional signatures on the part of the Individual.)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Neill P. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Francesca’s Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 11, 2014
	/s/ Neill Davis
	Neill Davis
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Mark Vendetti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Francesca’s Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 11, 2014
	/s/ Mark Vendetti
	Mark Vendetti
	Chief Financial Officer (duly authorized officer and Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Neill P. Davis, the Chief Executive Officer of Francesca’s Holdings Corporation, certify that (i) the quarterly report on Form 10-Q for the fiscal quarter ended May 3, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Francesca’s Holdings Corporation as of the dates and for the periods set forth therein.

/s/ Neill Davis

Neill Davis

Chief Executive Officer

June 11, 2014

Date

I, Mark Vendetti, the Chief Financial Officer of Francesca’s Holdings Corporation, certify that (i) the quarterly report on Form 10-Q for the fiscal quarter ended May 3, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Francesca’s Holdings Corporation as of the dates and for the periods set forth therein.

/s/ Mark Vendetti

Mark Vendetti

Chief Financial Officer (duly authorized officer and Principal Financial and Accounting Officer)

June 11, 2014

Date

  The foregoing certifications are being furnished solely to accompany the Quarterly Report on Form 10-Q pursuant to 18 U.S.C. § 1350 and Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. These certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

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Commitment and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	May 03, 2014
Schedule of Future Minimum Lease Payments
Remainder of 2014	$ 24,089
2015	32,654
2016	31,920
2017	30,595
2018	28,609
Thereafter	80,042
Total	$ 227,909

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Fair value of Financial Instruments

3 Months Ended

May 03, 2014

Fair Value Disclosures [Abstract]

Fair value of Financial Instruments

3. Fair value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount reflected in the consolidated balance sheets of financial assets and liabilities, which includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximated their fair values due to the short term nature of these financial assets and liabilities. The carrying amount of the Company’s debt approximates its fair value primarily due to the variable component of interest on debt.

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Earnings per Share

3 Months Ended

May 03, 2014

Earnings Per Share [Abstract]

Earnings per Share

2. Earnings Per Share

Basic earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of stock options and restricted stock grants using the treasury stock method.

The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted earnings per share:

	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013
	(in thousands, except per share data)
Numerator:
Net income	$	8,560	$	10,937
Denominator:
Weighted-average common shares outstanding - basic		42,189		43,939
Options and other dilutive securities		173		941
Weighted-average common shares outstanding - diluted		42,362		44,880
Per common share:
Basic earnings per common share	$	0.20	$	0.25
Diluted earnings per common share	$	0.20	$	0.24

Stock options to purchase common stock in the amount of 0.8 million shares in each of the thirteen weeks ended May 3, 2014 and May 4, 2013 were not included in the computation of diluted earnings per share due to their anti-dilutive effect.

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Unaudited Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	May 03, 2014	Feb. 01, 2014	May 04, 2013
Current assets:
Cash and cash equivalents	$ 25,413	$ 37,498	$ 33,763
Accounts receivable	10,822	8,984	7,645
Inventories	28,779	24,614	23,330
Deferred income taxes	4,643	4,565	3,567
Prepaid expenses and other current assets	6,179	6,764	4,772
Total current assets	75,836	82,425	73,077
Property and equipment, net	69,799	64,131	55,729
Deferred income taxes	3,113	2,335	2,893
Other assets, net	1,724	1,654	1,383
TOTAL ASSETS	150,472	150,545	133,082
Current liabilities:
Accounts payable	9,758	10,207	8,623
Accrued liabilities	9,640	9,823	14,010
Total current liabilities	19,398	20,030	22,633
Landlord incentives and deferred rent	32,333	27,448	26,151
Long-term debt	15,000	25,000	0
Total liabilities	66,731	72,478	48,784
Commitments and contingencies
Stockholders’ equity:
Common stock - $.01 par value, 80.0 million shares authorized; 45.4 million, 45.2 million and 44.0 million shares issued at May 3, 2014, February 1, 2014 and May 4, 2013, respectively.	454	452	440
Additional paid-in capital	103,574	101,192	86,464
Retained earnings (accumulated deficit)	39,856	31,296	(2,606)
Treasury stock, at cost - 3.2 million, 2.9 million and 0 shares held at May 3, 2014, February 1, 2014 and May 4, 2013, respectively.	(60,143)	(54,873)	0
Total stockholders’ equity	83,741	78,067	84,298
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 150,472	$ 150,545	$ 133,082

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Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	May 03, 2014	May 04, 2013
Cash Flows From Operating Activities:
Net income	$ 8,560	$ 10,937
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	2,982	2,237
Stock-based compensation expense	832	990
Excess tax benefit from stock-based compensation	(581)	(2,373)
Loss on sale of assets	17	110
Amortization of debt issuance costs	61	73
Deferred income taxes	(855)	(597)
Changes in operating assets and liabilities:
Accounts receivable	(1,256)	(5,141)
Inventories	(4,164)	(4,281)
Prepaid expenses and other assets	453	93
Accounts payable	(1,039)	265
Accrued liabilities	(185)	5,717
Landlord incentive and deferred rent	4,885	4,059
Net cash provided by operating activities	9,710	12,089
Cash Flows Used in Investing Activities:
Purchase of property and equipment	(8,078)	(8,517)
Net cash used in investing activities	(8,078)	(8,517)
Cash Flows Provided by (Used in) Financing Activities:
Repayments of borrowings under the revolving credit facility	(10,000)	0
Repurchases of common stock	(5,270)	0
Proceeds from the exercise of stock options	972	221
Taxes paid related to net settlement of equity awards	0	(2,280)
Excess tax benefit from stock-based compensation	581	2,373
Net cash provided by (used in) financing activities	(13,717)	314
Net increase (decrease) in cash and cash equivalents	(12,085)	3,886
Cash and cash equivalents, beginning of year	37,498	29,877
Cash and cash equivalents, end of period	25,413	33,763
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	459	2,372
Interest paid	$ 181	$ 40

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Revolving Credit Facility (Details Textual) (Revolving Credit Facility [Member], USD $) In Millions, unless otherwise specified	3 Months Ended
	May 03, 2014
Revolving Credit Facility [Member]
Revolving Credit Facility Details
Revolving Credit Facility, Initiation Date	Aug. 30, 2013
Revolving Credit Facility Maximum Borrowing Capacity	$ 75.0
Availability for Letters of Credit Under the Revolving Credit Facility	10.0
Revolving Credit Facility, Expiration Date	Aug. 30, 2018
Available Option to Increase the Borrowing Capacity Under the Revolving Credit Faciltiy	25.0
Amount Outstanding under the Revolving Credit Facility	$ 15.0
Covenant Compliance	As of May 3, 2014, the Borrower was in compliance with all covenants under the credit facility. The credit facility restricts the amount of dividends the Borrower can pay; provided that the Borrower is permitted to pay dividends to the extent it has available capacity in its available investment basket (as defined in the Second Amended and Restated Credit Agreement), no default or event of default is continuing, certain procedural requirements have been satisfied and the Borrower is in pro forma compliance with a maximum secured leverage ratio. At May 3, 2014, the Borrower would have met the conditions for paying dividends out of the available investment basket. All obligations under the credit facility are secured by substantially all the assets of the Borrower and any subsidiary guarantor,

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Share Repurchases (Details Textual) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	1 Months Ended	3 Months Ended
	Sep. 03, 2013	May 03, 2014
Treasury Stock Disclosure [Line Items]
Amount Authorized Under the Stock Repurchase Program	$ 100,000,000
Number of Treasury Stock Acquired		285
Cost of Treasury Stocks Acquired		5,270,000
Average Cost Per Share of Treasury Stock Acquired		$ 18.49
Remaining Authorized Amount Under the Stock Repurchase Program		$ 39,900,000

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Summary of Significant Accounting Policies

3 Months Ended

May 03, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Nature of Business

Francesca’s Holdings Corporation is a holding company incorporated in  2007 under the laws of the State of Delaware whose business operations are conducted through its subsidiaries.  Unless the context otherwise requires, the “Company,” refers to Francesca’s Holdings Corporation and its consolidated subsidiaries. The Company operates a national chain of retail boutiques designed and merchandised to feel like independently owned, upscale boutiques and provide its customers with an inviting, intimate and fun shopping experience. The Company offers a diverse and balanced mix of apparel, jewelry, accessories and gifts at attractive prices. At May 3, 2014, the Company operated  513 boutiques, which are located in 46 states throughout the United States and the District of Columbia, and its direct-to-consumer website. 

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations, changes in equity, and cash flows at the dates and for the periods presented. The financial information as of February 1, 2014 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2014.

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K.

Due to seasonal variations in the retail industry, interim results are not necessarily indicative of results that may be expected for any other interim period or for a full year.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company and all its subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Fiscal Year

The Company maintains its accounts on a 52- or 53-week year ending on the Saturday closest to January 31st. Fiscal years 2014 and 2013 each include 52 weeks of operations. The fiscal quarters ended May 3, 2014 and May 4, 2013 refer to the thirteen-week periods ended as of those dates.

Management Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales return, and expenses during the reporting periods. Actual results could differ materially from those estimates. 

Recent Accounting Pronouncements

In May 2014 the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers.” This pronouncement was issued to improve the financial reporting of revenue and improve comparability of the top line in financial statements globally and is effective for reporting periods beginning on or after December 15, 2016. The Company is in the process of assessing the provisions of this new guidance and has not determined whether the adoption will have a material impact on our consolidated financial statements.

Subsequent Event

In June 2014 management determined that the Company should dispose of sufficient amounts of slow moving inventory during the second fiscal quarter to accelerate the flow of new merchandise into its boutiques. The Company estimates that during the second quarter it will dispose of approximately $2.5 to $3.5 million of inventory at cost before taxes or $0.04 to $0.05 diluted earnings per share.

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Unaudited Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	May 03, 2014	Feb. 01, 2014	May 04, 2013
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	80.0	80.0	80.0
Common stock, shares issued	45.4	45.2	44.0
Treasury stock, shares	3.2	2.9	0

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Commitment and Contingencies (Tables)

3 Months Ended

May 03, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Minimum future rental payments under non-cancellable operating leases as of May 3, 2014, are as follows:

Fiscal year	Amount
	(In thousands)
Remainder of 2014	$	24,089
2015		32,654
2016		31,920
2017		30,595
2018		28,609
Thereafter		80,042
	$	227,909

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Document And Entity Information	3 Months Ended
	May 03, 2014	May 31, 2014
Document Information [Line Items]
Entity Registrant Name	Francesca's Holdings CORP
Entity Central Index Key	0001399935
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Trading Symbol	FRAN
Entity Common Stock, Shares Outstanding		42,213,700
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 03, 2014
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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Summary of Significant Accounting Policies (Details Textual) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	May 03, 2014 States Boutiques	Aug. 02, 2014 Minimum [Member] Scenario, Forecast [Member]	Aug. 02, 2014 Maximum [Member] Scenario, Forecast [Member]
Company Information and Summary of Significant Accounting Policies [Line Items]
Year of Incorporation	2007
Entity Incorporation, State Country Name	Delaware
Number of Boutiques in Operation	513
Number of States in which Entity Operates	46
Inventory Write-down		$ 2.5	$ 3.5
Per Share Impact of Inventory Write Down		$ 0.04	$ 0.05

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Unaudited Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	May 03, 2014	May 04, 2013
Net sales	$ 85,424	$ 78,987
Cost of goods sold and occupancy costs	43,592	37,615
Gross profit	41,832	41,372
Selling, general and administrative expenses	27,812	23,351
Income from operations	14,020	18,021
Interest expense	(221)	(116)
Other income	103	83
Income before income tax expense	13,902	17,988
Income tax expense	5,342	7,051
Net income	$ 8,560	$ 10,937
Basic earnings per common share (in dollars per share)	$ 0.20	$ 0.25
Diluted earnings per common share (in dollars per share)	$ 0.20	$ 0.24
Weighted average shares outstanding:
Basic shares (in shares)	42,189	43,939
Diluted shares (in shares)	42,362	44,880

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Stock-based Compensation

3 Months Ended

May 03, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

6. Stock-based Compensation

The Company’s employees participate in various stock-based compensation plans, including stock options and restricted stock awards.

Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company estimates forfeitures for grants that are not expected to vest. The stock-based compensation cost recognized in the thirteen weeks ended May 3, 2014 and May 4, 2013 totaled $0.8 million and $1.0 million, respectively. 

Stock Options

During the thirteen weeks ended May 3, 2014 and May 4, 2013, the intrinsic value of stock options exercised totaled $2.0 million and $6.3 million, respectively, while stock options were granted at a weighted average grant date fair value of $11.11 and $15.28, respectively.

As of May 3, 2014 there was approximately $6.9 million of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted-average period of 2.6 years.

Restricted Stock Awards

On April 11, 2014, the Company awarded 158,451 service and performance-based restricted stock awards to certain executives and other key employees. These awards entitle the grantee to receive a maximum of 1.5 shares of common stock per service and performance-based restricted stock award if the Company achieves specified annual performance goals set at the beginning of each year over a three year period. The grantee may earn a portion of the award based on the annual performance of each individual year but must remain with the Company for the entire three year vesting period to receive such awards. Specified performance goals include the achievement of certain levels of earnings per share and net sales growth. The fair value of the restricted stock awards is based on the closing price of the Company’s common stock on the award date, which was $17.04 per share for those awards related to the fiscal 2014 performance  period. Compensation expense is recognized when it is probable that specified performance goals will be achieved. Such compensation is recognized from the award date over the remaining vesting period.

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Revolving Credit Facility

3 Months Ended

May 03, 2014

Debt Disclosure [Abstract]

Revolving Credit Facility

5. Revolving Credit Facility

On August 30, 2013, Francesca’s Collections, Inc. (“Francesca’s Collections” or the “Borrower”), as borrower, and its parent company, Francesca’s LLC, a wholly owned subsidiary of the Company, entered into a Second Amended and Restated Credit Agreement with Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the lenders party thereto. The credit facility provides capacity of $75.0 million (including up to $10.0 million for letters of credit) and matures on August 30, 2018.  The facility also contains an option permitting the Borrower, subject to certain requirements and conditions, to arrange with the lenders for additional incremental commitments up to an aggregate of $25.0 million, subject to reductions in the event the Borrower has certain indebtedness outstanding. At May 3, 2014, $15.0 million was outstanding under the credit facility and no letters of credit were outstanding.

The credit facility contains customary events of default and requires the Borrower to comply with certain financial covenants.  As of May 3, 2014, the Borrower was in compliance with all covenants under the credit facility.  The credit facility restricts the amount of dividends the Borrower can pay; provided that the Borrower is permitted to pay dividends to the extent it has available capacity in its available investment basket (as defined in the Second Amended and Restated Credit Agreement), no default or event of default is continuing, certain procedural requirements have been satisfied and the Borrower is in pro forma compliance with a maximum secured leverage ratio. At May 3, 2014, the Borrower would have met the conditions for paying dividends out of the available investment basket. All obligations under the credit facility are secured by substantially all the assets of the Borrower and any subsidiary guarantor, if any. All obligations under the facility are unconditionally guaranteed by, subject to certain exceptions, by Francesca’s LLC and each of the Borrower’s existing and future direct and indirect wholly-owned domestic subsidiaries.

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Stock-based Compensation (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	May 03, 2014	May 04, 2013
Stock-based Compensation Disclosures
Stock-based Compensation	$ 0.8	$ 1.0
Employee Stock Option [Member]
Stock-based Compensation Disclosures
Weighted Average Grant Date Fair Value of Options Granted During the Period (in dollars per share)	$ 11.11	$ 15.28
Aggregate Intrinsic Value of Options Exercised	2.0	6.3
Unrecognized Compensation Cost Related to Stock Options	$ 6.9
Weighted Average Period Over Which Unrecognized Compensation Costs Related to Non-vested Awards will be Recognized	2 years 7 months 6 days
Restricted Stock [Member]
Stock-based Compensation Disclosures
Restricted Stocks Granted During the Period (in shares)	158,451
Maximum Shares to be Received if the Performance Goals are Achieved	1.5
Weighted Average Fair Value of Restricted Stocks Granted During the Period	$ 17.04

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Earnings per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	May 03, 2014	May 04, 2013
Numerator:
Net income	$ 8,560	$ 10,937
Denominator:
Weighted-average common shares outstanding - basic (in shares)	42,189	43,939
Options and other dilutive securities (in shares)	173	941
Weighted-average common shares outstanding - diluted (in shares)	42,362	44,880
Per common share:
Basic earnings per common share (in dollars per share)	$ 0.20	$ 0.25
Diluted earnings per common share (in dollars per share)	$ 0.20	$ 0.24

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

May 03, 2014

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations, changes in equity, and cash flows at the dates and for the periods presented. The financial information as of February 1, 2014 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2014.

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the fiscal year ended February 1, 2014 included in the Company’s Annual Report on Form 10-K.

Due to seasonal variations in the retail industry, interim results are not necessarily indicative of results that may be expected for any other interim period or for a full year.

Principles of Consolidation

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company and all its subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Fiscal Year

Fiscal Year

The Company maintains its accounts on a 52- or 53-week year ending on the Saturday closest to January 31st. Fiscal years 2014 and 2013 each include 52 weeks of operations. The fiscal quarters ended May 3, 2014 and May 4, 2013 refer to the thirteen-week periods ended as of those dates.

Management Estimates and Assumptions

Management Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, net of estimated sales return, and expenses during the reporting periods. Actual results could differ materially from those estimates. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014 the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers.” This pronouncement was issued to improve the financial reporting of revenue and improve comparability of the top line in financial statements globally and is effective for reporting periods beginning on or after December 15, 2016. The Company is in the process of assessing the provisions of this new guidance and has not determined whether the adoption will have a material impact on our consolidated financial statements.

Subsequent Event

Subsequent Event

In June 2014 management determined that the Company should dispose of sufficient amounts of slow moving inventory during the second fiscal quarter to accelerate the flow of new merchandise into its boutiques. The Company estimates that during the second quarter it will dispose of approximately $2.5 to $3.5 million of inventory at cost before taxes or $0.04 to $0.05 diluted earnings per share.

Earnings per Share

Earnings Per Share

Basic earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted-average number of common shares outstanding for the period and include the dilutive impact of stock options and restricted stock grants using the treasury stock method.

Fair Value of Financial Instruments

Fair value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount reflected in the consolidated balance sheets of financial assets and liabilities, which includes cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximated their fair values due to the short term nature of these financial assets and liabilities. The carrying amount of the Company’s debt approximates its fair value primarily due to the variable component of interest on debt.

Stock-Based Compensation

Stock-based Compensation

Stock-based compensation cost is measured at the grant date fair value and is recognized as an expense on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company estimates forfeitures for grants that are not expected to vest. The stock-based compensation cost recognized in the thirteen weeks ended May 3, 2014 and May 4, 2013 totaled $0.8 million and $1.0 million, respectively. 

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Share Repurchases

3 Months Ended

May 03, 2014

Share Repurchases [Abstract]

Share Repurchases

7. Share Repurchases

On September 3, 2013, the Company’s Board of Directors authorized a $100.0 million share repurchase program commencing on the same date.  This authorization has no expiration date.  Under the repurchase program, purchases can be made from time to time in the open market, in privately negotiated transactions, under Rule 10b5-1 plans or through other available means.  The specific timing and amount of the repurchases is dependent on market conditions, securities law limitations and other factors.  During the thirteen weeks ended May 3, 2014, the Company repurchased  285,000 shares of its common stock at a cost of approximately $5.3 million or an average price (including brokers’ commission) of $18.49 per share.  The cost of repurchased shares is presented as treasury stock in the unaudited consolidated balance sheets.  As of May 3, 2014, the remaining balance available for future share repurchase was approximately $39.9 million.

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Commitment and Contingencies

3 Months Ended

May 03, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitment and Contingencies

Operating Leases

The Company leases boutique space and office space under operating leases expiring in various years through the fiscal year ending 2025. Certain of the leases provide that the Company may cancel the lease, with penalties as defined in the lease, if the Company’s boutique sales at that location fall below an established level. Certain leases provide for additional rent payments to be made when sales exceed a base amount. Certain operating leases provide for renewal options for periods from three to five years at their fair rental value at the time of renewal.

Minimum future rental payments under non-cancellable operating leases as of May 3, 2014, are as follows:

Fiscal year	Amount
	(In thousands)
Remainder of 2014	$	24,089
2015		32,654
2016		31,920
2017		30,595
2018		28,609
Thereafter		80,042
	$	227,909

Legal Proceedings

On September 27, 2013 and November 4, 2013, two purported class action lawsuits entitled Ortuzar v. Francesca’s Holdings Corp., et al. and West Palm Beach Police Pension Fund v. Francesca’s Holdings Corp., et al. were filed in the United States District Court for the  Southern District of New York against the Company and certain of its current and former directors and officers for alleged violations of the federal securities laws arising from statements in certain public disclosures regarding the Company’s current and future business and financial  condition. On December 19, 2013, the Court consolidated the actions and appointed Arkansas Teacher Retirement System as lead plaintiff. On March 14, 2014, lead plaintiff filed a consolidated class action complaint purportedly on behalf of shareholders that purchased or acquired the Company’s publicly traded common stock between July 22, 2011 and September 3, 2013 against the Company and certain of its current and former directors and officers. The consolidated complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a) (2), and 15 of the Securities Act of 1933 for allegedly false and misleading statements in the Company’s public disclosures concerning, among other things, the Company’s relationship with certain vendors. The lawsuit seeks damages in an unspecified amount. On May 13, 2014 defendants moved to dismiss the consolidated complaint. The Company believes that the allegations contained in the consolidated complaint are without merit and intends to vigorously defend itself against all claims asserted therein. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time and, as such, the Company has not recorded an accrual for any possible loss.

On December 11, 2013, a purported shareholder derivative action entitled Daniell v. De Merritt, et al., was filed on behalf of the Company in the District Court of Harris County, Texas, naming certain of the Company’s current and former officers and directors as defendants and naming the Company as a nominal defendant. The complaint alleges breaches of fiduciary duty including the dissemination of false and misleading statements, failure to maintain internal controls, and insider selling and misappropriation of information, unjust enrichment, abuse of control, and gross mismanagement. The derivative action seeks damages in an unspecified amount, an order directing the Company “to reform and improve” corporate governance and internal controls, restitution and disgorgement from the defendants, and costs and attorneys’ fees. On January 30, 2014, the Company and defendants moved to dismiss the complaint, on May 9, 2014, plaintiff filed an amended petition alleging the same causes of action and adding CCMP Capital, LLC as a defendant. On May 16, 2014, plaintiff filed a notice of nonsuit seeking an order dismissing his claims without prejudice. On May 28, 2014, plaintiff filed a substantially similar complaint in the Court of Chancery of the State of Delaware alleging the same causes of action against the same parties as the amended petition in Texas.

The Company, from time to time, is subject to various claims and legal proceedings arising in the ordinary course of business.  While the outcome of any such claim cannot be predicted with certainty, in the opinion of management, the outcome of these matters is unlikely to have a material adverse effect on the Company’s business, results of operations or financial condition. 

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Earnings per Share (Tables)

3 Months Ended

May 03, 2014

Earnings Per Share [Abstract]

Earnings per share

The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or if the restricted stock grants were fully vested and reconciles the weighted-average common shares outstanding used in the computation of basic and diluted earnings per share:

	Thirteen Weeks Ended
	May 3, 2014		May 4, 2013
	(in thousands, except per share data)
Numerator:
Net income	$	8,560	$	10,937
Denominator:
Weighted-average common shares outstanding - basic		42,189		43,939
Options and other dilutive securities		173		941
Weighted-average common shares outstanding - diluted		42,362		44,880
Per common share:
Basic earnings per common share	$	0.20	$	0.25
Diluted earnings per common share	$	0.20	$	0.24

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Income Taxes (Details Textual)	3 Months Ended
	May 03, 2014	May 04, 2013
Income Tax Disclosure [Line Items]
Effective Income Tax Rate	38.40%	39.20%

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Unaudited Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands	Total USD ($)	Common Stock Outstanding (in shares)	Common Stock USD ($)	Additional Paid-in Capital USD ($)	Retained Earnings (Accumulated Deficit) USD ($)	Treasury Stock USD ($)
Balance at Feb. 01, 2014	$ 78,067		$ 452	$ 101,192	$ 31,296	$ (54,873)
Balance (in shares) at Feb. 01, 2014		42,349
Net income	8,560		0	0	8,560	0
Stock-based compensation	832		0	832	0	0
Stock options exercised and related tax benefit	1,552		2	1,550	0	0
Stock options exercised and related tax benefit (in shares)		150
Repurchases of common stock	(5,270)		0	0	0	(5,270)
Repurchases of common stock (in shares)	(285)	(285)
Balance at May. 03, 2014	$ 83,741		$ 454	$ 103,574	$ 39,856	$ (60,143)
Balance (in shares) at May. 03, 2014		42,214

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Income Taxes

3 Months Ended

May 03, 2014

Income Tax Disclosure [Abstract]

Income Taxes

4. Income Taxes

The provision for income taxes is based on the current estimate of the annual effective tax rate. The effective income tax rates for the thirteen weeks ended May 3, 2014 and May 4, 2013 were 38.4% and 39.2%, respectively. The difference between our effective tax rate and federal statutory rate primarily relates to state income taxes.

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Earnings per Share (Details Textual) In Millions, unless otherwise specified	3 Months Ended
	May 03, 2014	May 04, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0.8	0.8