Francesca's Holdings CORP (Form: 10-Q, Received: 09/09/2015 16:45:40)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended August 1, 2015

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 42,334,032 shares (excluding 3,179,581 of treasury stock) of its common stock outstanding as of August 31, 2015.

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PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Unaudited Consolidated Balance Sheets as of August 1, 2015, January 31, 2015 and August 2, 2014	3

	Unaudited Consolidated Statements of Operations for the Thirteen and Twenty Six Weeks Ended August 1, 2015 and August 2, 2014	4

	Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the Twenty Six Weeks Ended August 1, 2015	5

	Unaudited Consolidated Statements of Cash Flows for the Twenty Six Weeks Ended August 1, 2015 and August 2, 2014	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	19

Item 4.	Controls and Procedures	19

PART II.	OTHER INFORMATION	19

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 6.	Exhibits	20

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Francesca’s Holdings Corporation

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

	August 1, 2015			January 31, 2015			August 2, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	48,840		$	39,071		$	24,861
Accounts receivable		9,061			12,279			9,905
Inventories		33,642			23,801			30,191
Deferred income taxes		5,537			4,858			4,726
Prepaid expenses and other current assets		5,915			5,890			6,965
Total current assets		102,995			85,899			76,648
Property and equipment, net		80,176			74,095			71,217
Deferred income taxes		5,426			3,642			4,562
Other assets, net		1,677			1,909			1,538
TOTAL ASSETS	$	190,274		$	165,545		$	153,965

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,301		$	11,550		$	11,380
Accrued liabilities		13,465			11,904			9,088
Total current liabilities		26,766			23,454			20,468
Landlord incentives and deferred rent		37,404			32,877			33,097
Long-term debt		-			-			5,000
Total liabilities		64,170			56,331			58,565

Commitments and contingencies

Stockholders’ equity:
Common stock - $0.01 par value, 80.0 million shares authorized; 45.5 million shares issued at each August 1, 2015, January 31, 2015 and August 2, 2014.		455			455			455
Additional paid-in capital		105,843			105,498			104,925
Retained earnings		79,949			63,404			50,163
Treasury stock, at cost - 3.2 million shares at each August 1, 2015, January 31, 2015 and August 2, 2014.		(60,143	)		(60,143	)		(60,143	)
Total stockholders’ equity		126,104			109,214			95,400
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	190,274		$	165,545		$	153,965

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						Twenty Six Weeks Ended
	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Net sales	$	106,033		$	97,319		$	201,044		$	182,743
Cost of goods sold and occupancy costs		55,725			52,004			105,843			95,596
Gross profit		50,308			45,315			95,201			87,147
Selling, general and administrative expenses		35,133			28,653			68,136			56,465
Income from operations		15,175			16,662			27,065			30,682
Interest expense		(112	)		(169	)		(222	)		(390	)
Other (expense) income		(54	)		56			(120	)		159
Income before income tax expense		15,009			16,549			26,723			30,451
Income tax expense		5,705			6,242			10,178			11,584
Net income	$	9,304		$	10,307		$	16,545		$	18,867

Basic earnings per common share	$	0.22		$	0.24		$	0.39		$	0.45
Diluted earnings per common share	$	0.22		$	0.24		$	0.39		$	0.45

Weighted average shares outstanding:
Basic shares		42,332			42,252			42,318			42,220
Diluted shares		42,433			42,367			42,425			42,364

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

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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, January 31, 2015		42,298	$	455	$	105,498		$	63,404	$	(60,143	)	$	109,214
Net income		-		-		-			16,545		-			16,545
Stock-based compensation		-		-		1,591			-		-			1,591
Stock options exercised		36		-		169			-		-			169
Tax effect of stock-based compensation		-		-		(1,415	)		-		-			(1,415	)
Balance, August 1, 2015		42,334	$	455	$	105,843		$	79,949	$	(60,143	)	$	126,104

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 Cash Flows

(In thousands)

	Twenty Six Weeks Ended
	August 1, 2015			August 2, 2014
Cash Flows From Operating Activities:
Net income	$	16,545		$	18,867
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,000			6,366
Stock-based compensation expense		1,591			1,629
Excess tax benefit from stock-based compensation		(61	)		(775	)
Loss on sale of assets		282			121
Deferred income taxes		(3,940	)		(2,388	)
Changes in operating assets and liabilities:
Accounts receivable		3,279			(146	)
Inventories		(9,841	)		(5,577	)
Prepaid expenses and other assets		86			(208	)
Accounts payable		2,466			1,480
Accrued liabilities		1,561			(735	)
Landlord incentives and deferred rent		4,527			5,649
Net cash provided by operating activities		24,495			24,283

Cash Flows From Investing Activities:
Purchases of property and equipment		(14,959	)		(13,759	)
Proceeds from sale of assets		3			2
Net cash used in investing activities		(14,956	)		(13,757	)

Cash Flows From Financing Activities:
Proceeds from the exercise of stock options		169			1,332
Excess tax benefit from stock-based compensation		61			775
Repayments of borrowings under the revolving credit facility		-			(20,000	)
Repurchases of common stock		-			(5,270	)
Net cash provided by (used in) financing activities		230			(23,163	)

Net increase (decrease) in cash and cash equivalents		9,769			(12,637	)
Cash and cash equivalents, beginning of year		39,071			37,498
Cash and cash equivalents, end of period	$	48,840		$	24,861

Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	$	8,335		$	9,413
Interest paid	$	94		$	288

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

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 unique, 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 values. At August 1, 2015, the Company operated 608 boutiques, which are located in 47 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 January 31, 2015 was derived from the Company’s audited consolidated financial statements and notes thereto as of and for the fiscal year ended January 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2015.

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 January 31, 2015 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 2015 and 2014 each include 52 weeks of operations. The fiscal quarters ended August 1, 2015 and August 2, 2014 refer to the thirteen-week periods ended as of those dates. The year-to-date periods ended August 1, 2015 and August 2, 2014 refer to the twenty-six week periods ended as of those dates.

Reclassifications

Certain prior year amounts in the consolidated statements of cash flows have been reclassified to facilitate comparability with the current year’s presentation. These reclassifications do not materially impact the consolidated financial statements for the prior periods presented.

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 returns, 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 July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the effect that the new guidance will have on its financial statements and related disclosures.

In May 2014 the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This pronouncement requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. In July 2015, the FASB deferred the effective date of ASU 2014-09. Accordingly, this standard is effective for reporting periods beginning on or after December 15, 2017, including interim periods within that fiscal year, with early adoption permitted for interim and annual 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.

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 more dilutive of the treasury stock method or the two-class method.

The following table summarizes the potential dilution that could occur if options to acquire common stock were exercised or if 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				Twenty Six Weeks Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
	(in thousands, except per share data)
Numerator:
Net income	$	9,304	$	10,307	$	16,545	$	18,867

Denominator:
Weighted-average common shares outstanding - basic		42,332		42,252		42,318		42,220
Options and other dilutive securities		101		115		107		144
Weighted-average common shares outstanding - diluted		42,433		42,367		42,425		42,364

Per common share:
Basic earnings per common share	$	0.22	$	0.24	$	0.39	$	0.45
Diluted earnings per common share	$	0.22	$	0.24	$	0.39	$	0.45

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

Potentially issuable shares under the Company’s stock-based compensation plans totaling 0.4 million and 0.5 million shares in the thirteen and twenty six weeks ended August 1, 2015, respectively, and 0.9 million shares in each of the thirteen and twenty six weeks ended August 2, 2014 were excluded in the computation of diluted weighted-average common stock outstanding due to their anti-dilutive effect. The Company also excluded contingently issuable performance awards totaling 1.1 million shares in each of the thirteen and twenty six weeks ended August 1, 2015 and less than 0.1 million shares in each of the thirteen and twenty six weeks ended August 2, 2014 from the computation of diluted earnings per share because the pre-established goals have not been satisfied as of the end of each period.

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.

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 and twenty six weeks ended August 1, 2015 were 38.0% and 38.1%, respectively. The effective tax rates for the thirteen and twenty six weeks ended August 2, 2014 were 37.7% and 38.0%, respectively. The difference between our effective tax rate and federal statutory rate primarily relates to state income taxes.

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, each 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 August 1, 2015, no borrowings or letters of credit were outstanding under the credit facility.

The credit facility contains customary events of default and requires the Borrower to comply with certain financial covenants. As of August 1, 2015, 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 August 1, 2015, 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.

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 Company recognized stock-based compensation cost of $0.8 million in each of the thirteen weeks ended August 1, 2015 and August 2, 2014 and $1.6 million in each of the twenty six weeks ended August 1, 2015 and August 2, 2014, respectively.

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

Stock Options

During the twenty six weeks ended August 1, 2015 and August 2, 2014, the Company granted 81,460 and 77,584 of stock options to certain employees and members of its Board of Directors at a weighted average grant date fair value of $8.44 and $8.03, respectively.

As of August 1, 2015 there was approximately $7.9 million of unrecognized compensation cost related to non-vested stock options that is expected to be recognized over a weighted-average period of 3 years.

Restricted Stock Awards

In March 2015, the Company established performance goals for fiscal year 2015 applicable to 114,679 target shares of performance-based restricted stock awarded to certain executives and other key employees. Awards are considered “granted” when the performance goals related to those awards have been established. The number of shares that may ultimately vest will equal 0% to 150% of the target shares subject to the achievement of pre-established performance goals for the applicable fiscal year and employees’ continued service through the third anniversary of the date on which the award was originally approved by the Compensation Committee of the Board of Directors. The Company recognized stock-based compensation expense of approximately $0.2 million in each of the thirteen and twenty six weeks ended August 1, 2015 and $0 in each of the thirteen and twenty-six weeks ended August 2, 2014 related to these performance-based restricted stock awards.

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. There were no share repurchases in each of the thirteen weeks ended August 1, 2015 and August 2, 2014 and the twenty six weeks ended August 1, 2015. During the twenty six weeks ended August 2, 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 August 1, 2015, the remaining balance available for future share repurchase was approximately $39.9 million.

Commitments and Contingencies

Operating Leases

The Company leases boutique space and office space under operating leases expiring in various years through the fiscal year ending 2026. 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 August 1, 2015, are as follows:

Fiscal year	Amount
	(In thousands)
Remainder of 2015	$	19,095
2016		38,692
2017		37,860
2018		36,168
2019		33,439
Thereafter		85,873
	$	251,127

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Francesca’s Holdings Corporation

Notes to Unaudited Consolidated Financial Statements

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 asserted 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 sought damages in an unspecified amount. On May 13, 2014 the defendants moved to dismiss the consolidated complaint. By Order and Judgment entered April 1, 2015, the Court granted defendants’ motion to dismiss and dismissed the consolidated complaint in its entirety with prejudice and closed the case. On April 29, 2015, the lead plaintiff filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit of the Court’s judgment dismissing the consolidated complaint. On June 12, 2015, the U.S. Court of Appeals for the Second Circuit granted the parties’ stipulation of voluntary dismissal, which withdrew the appeal with prejudice.

On each of May 28, 2014 and July 8, 2014, a purported shareholder derivative action entitled Daniell v. De Merritt, et al. and Murphy v. Davis, et al., respectively, purportedly on behalf of the Company, was filed in the Delaware Court of Chancery, naming certain of the Company’s current and former officers, directors, and shareholders as defendants and naming the Company as a nominal defendant. On September 3, 2014, the Court of Chancery consolidated the Daniell and Murphy cases. Plaintiffs filed a consolidated amended complaint on September 23, 2014 alleging claims of breach of fiduciary duty and unjust enrichment. The consolidated amended complaint sought damages in an unspecified amount, an order directing the Company “to reform and improve” corporate governance and internal controls, equitable and/or injunctive relief, restitution and disgorgement from the defendants, and costs and attorneys’ fees. On October 23, 2014, defendants filed a motion to dismiss the consolidated amended complaint, which was fully briefed. On June 12, 2015, the plaintiffs voluntary dismissed the action with prejudice as to the named plaintiffs, and the Court entered an order dismissing the action with each party bearing its own fees and costs.

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; our ability to efficiently source and distribute additional merchandise quantities necessary to support our growth and; our ability to attract and integrate a new Chief Merchandising Officer. 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 January 31, 2015 and filed with the Securities and Exchange Commission (“SEC”) on March 27, 2015 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.

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 unique, 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 August 1, 2015, francesca’s ^® operated 608 boutiques in 47 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.

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During the thirteen weeks ended August 1, 2015, our net sales increased 9% to $106.0 million from $97.3 million, income from operations decreased by 9% to $15.2 million from $16.7 million and net income decreased 10% to $9.3 million, or $0.22 per diluted share, from $10.3 million, or $0.24 per diluted share, over the comparable prior year period. During the twenty six weeks ended August 1, 2015, our net sales increased 10% to $201.0 million from $182.7 million, income from operations decreased by 12% to $27.1 million from $30.7 million and net income decreased 12% to $16.5 million, or $0.39 per diluted share, from $18.9 million, or $0.45 per diluted share, over the comparable prior year period.

We have increased our boutique count to 608 boutiques as of August 1, 2015 from 526 boutiques as of August 2, 2014. We plan to open approximately 14 boutiques during the remainder of the fiscal year.

Results of Operations

The following represents operating data for the thirteen and twenty six weeks ended August 1, 2015 and August 2, 2014.

	Thirteen Weeks Ended						Twenty Six Weeks Ended
	August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
Total net sales growth for period		9	%		9	%		10	%		8	%
Comparable sales change for period ⁽¹⁾		(4	)%		(7	)%		(3	)%		(7	)%
Number of boutiques open at end of period		608			526			608			526
Net sales per average square foot for period (not in thousands) ⁽²⁾	$	130		$	140			256		$	273
Average square feet per boutique (not in thousands) ⁽³⁾		1,363			1,345			1,363			1,345
Total gross square feet at end of period (in thousands)		829			707			829			707

(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 is 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 open at the end of the period.

Boutique Count

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

	Thirteen Weeks Ended				Twenty Six Weeks Ended
	August 1, 2015		August 2, 2014		August 1, 2015		August 2, 2014
Number of boutiques open at beginning of period		589		513		539		451
Boutiques added		19		13		69		75
Number of boutiques open at the end of period		608		526		608		526

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Thirteen Weeks Ended August 1, 2015 Compared to Thirteen Weeks Ended August 2, 2014

	Thirteen Weeks Ended
	August 1, 2015						August 2, 2014						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	$	106,033			100.0	%	$	97,319			100.0	%	$	8,714			9	%		-
Cost of goods sold and occupancy costs		55,725			52.6	%		52,004			53.4	%		3,721			7	%		(90	)
Gross profit		50,308			47.4	%		45,315			46.6	%		4,993			11	%		90
Selling, general and administrative expenses		35,133			33.1	%		28,653			29.4	%		6,480			23	%		370
Income from operations		15,175			14.3	%		16,662			17.1	%		(1,487	)		(9	)%		(280	)
Interest expense		(112	)		(0.1	)%		(169	)		(0.2	)%		57			(34	)%		10
Other (expense) income		(54	)		(0.1	)%		56			0.1	%		(110	)		(196	)%		(20	)
Income before income tax expense		15,009			14.2	%		16,549			17.0	%		(1,540	)		(9	)%		(280	)
Income tax expense		5,705			5.4	%		6,242			6.4	%		(537	)		(9	)%		(100	)
Net income	$	9,304			8.8	%	$	10,307			10.6	%	$	(1,003	)		(10	)%		(180	)

⁽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 9% to $106.0 million in the thirteen weeks ended August 1, 2015 from $97.3 million in the thirteen weeks ended August 2, 2014. This increase was due to the increase in the number of boutiques in operation in the second quarter of fiscal year 2015 as compared to the same period of the prior year partially offset by a 4% decrease in comparable sales. The decrease in comparable sales was driven by a 3% decrease in comparable transactions. Our direct-to-consumer sales were flat at $3.6 million in each of the thirteen weeks ended August 1, 2015 and August 2, 2014. During the quarter, growth of our direct-to-consumer sales decelerated compared to prior periods. Our website traffic decreased during the quarter compared to the same period of the prior year. There were 513 comparable boutiques and 95 non-comparable boutiques open at August 1, 2015 compared to 416 and 110, respectively, at August 2, 2014.

Cost of Goods Sold and Occupancy Costs

Cost of goods sold and occupancy costs increased 7% to $55.7 million in the thirteen weeks ended August 1, 2015 from $52.0 million in the thirteen weeks ended August 2, 2014. Cost of merchandise and freight expenses increased by $0.5 million compared to the same period of the prior year due to increased sales volume partially offset by the decreased amount of charges related to the disposal of slow-moving merchandise. Occupancy costs increased by $3.2 million due to the increase in the number of boutiques in operation during the thirteen weeks ended August 1, 2015 compared to the same period of the prior year.

As a percentage of net sales, cost of goods sold and occupancy costs decreased to 52.6% in the thirteen weeks ended August 1, 2015 from 53.4% in the thirteen weeks ended August 2, 2014, a favorable variance of 90 basis points. This change was driven by 260 basis points improvement in merchandise margin partially offset by 170 basis points deleveraging of occupancy costs. The merchandise margin improvement is primarily attributable to the decreased amount of charges related to the disposal of slow-moving merchandise as well as lower promotions compared to the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 23% to $35.1 million in the thirteen weeks ended August 1, 2015 from $28.7 million in the thirteen weeks ended August 2, 2014. This increase was due to higher corporate and boutique payroll to support the larger boutique base. As a percentage of net sales, selling, general and administrative expense increased to 33.1% in the thirteen weeks ended August 1, 2015 as compared to 29.4% in the thirteen weeks ended August 2, 2014 due to deleveraging of expenses as the growth in expenses outpaced the growth in sales.

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Income Tax Expense

The decrease in provision for income taxes of $0.5 million in the thirteen weeks ended August 1, 2015 compared to the thirteen weeks ended August 2, 2014 was primarily due to the decrease in pre-tax income. The effective tax rate of 38.0% in the thirteen weeks ended August 1, 2015 was comparable to the effective tax rate of 37.7% in the thirteen weeks ended August 2, 2014.

Twenty Six Weeks Ended August 1, 2015 Compared to Twenty Six Weeks Ended August 2, 2014

	Twenty Six Weeks Ended
	August 1, 2015						August 2, 2014						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	$	201,044			100.0	%	$	182,743			100.0	%	$	18,301			10	%		-
Cost of goods sold and occupancy costs		105,843			52.6	%		95,596			52.3	%		10,247			11	%		30
Gross profit		95,201			47.4	%		87,147			47.7	%		8,054			9	%		(30	)
Selling, general and administrative expenses		68,136			33.9	%		56,465			30.9	%		11,671			21	%		300
Income from operations		27,065			13.5	%		30,682			16.8	%		(3,617	)		(12	)%		(330	)
Interest expense		(222	)		(0.1	)%		(390	)		(0.2	)%		168			(43	)%		10
Other (expense) income		(120	)		(0.1	)%		159			0.1	%		(279	)		(175	)%		(20	)
Income before income tax expense		26,723			13.3	%		30,451			16.7	%		(3,728	)		(12	)%		(340	)
Income tax expense		10,178			5.1	%		11,584			6.3	%		(1,406	)		(12	)%		(130	)
Net income	$	16,545			8.2	%	$	18,867			10.3	%	$	(2,322	)		(12	)%		(210	)

⁽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 10% to $201.0 million in the twenty six weeks ended August 1, 2015 from $182.7 million in the twenty six weeks ended August 2, 2014. This increase is due to the increase in the number of boutiques in operation in the twenty six weeks ended August 1, 2015 as compared to the same period of the prior year partially offset by a 3% decrease in comparable sales. The decrease in comparable sales was driven by a 5% decrease in comparable boutique transactions partially offset by 9% increase in our direct-to-consumer sales. Our direct-to-consumer sales totaled $7.2 million and $6.6 million in the twenty six weeks ended August 1, 2015 and August 2, 2014, respectively. There were 513 comparable boutiques and 95 non-comparable boutiques open at August 1, 2015 compared to 416 and 110, respectively, at August 2, 2014.

Cost of Goods Sold and Occupancy Costs

Cost of goods sold and occupancy costs increased 11% to $105.8 million in the twenty six weeks ended August 1, 2015 from $95.6 million in the twenty six weeks ended August 2, 2014. Cost of merchandise and freight expenses increased by $3.8 million compared to the same period of the prior year due to increased sales volume partially offset by the decreased amount of charges related to the disposal of slow moving merchandise. Occupancy costs increased by $6.5 million due to the increase in the number of boutiques in operation during the twenty six weeks ended August 1, 2015 compared to the same period of the prior year.

As a percentage of net sales, cost of goods sold and occupancy costs increased to 52.6% in the twenty six weeks ended August 1, 2015 from 52.3% in the twenty six weeks ended August 2, 2014, an unfavorable variance of 30 basis points. This change was driven by 170 basis points deleveraging of occupancy costs partially offset by 140 basis points of merchandise margin improvement. Our merchandise margin improved 140 basis points due to lower promotions as well as decreased amount of charges related to the disposal of slow-moving merchandise compared to last year.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 21% to $68.1 million in the twenty six weeks ended August 1, 2015 from $56.5 million in the twenty six weeks ended August 2, 2014. This increase was due to higher corporate and boutique payroll to support the larger boutique base. As a percentage of net sales, selling, general and administrative expense increased to 33.9% in the twenty six weeks ended August 1, 2015 as compared to 30.9% in the twenty six weeks ended August 2, 2014 due to deleveraging of expenses as the growth in expenses outpaced the growth in sales.

Income Tax Expense

The decrease in provision for income taxes of $1.4 million in the twenty six weeks ended August 1, 2015 compared to the twenty six weeks ended August 2, 2014 was primarily due to the decrease in pre-tax income. The effective tax rate of 38.1% in the twenty six weeks ended August 1, 2015 was comparable to the effective tax rate of 38.0% in the twenty six weeks ended August 2, 2014.

Sales by Merchandise Category

	Thirteen Weeks Ended										Twenty Six Weeks Ended
	August 1, 2015					August 2, 2014					August 1, 2015					August 2, 2014
	In Dollars		As a % of Net Sales			In Dollars		As a % of Net Sales			In Dollars		As a % of Net Sales			In Dollars		As a % of Net Sales
	(in thousands, except percentages)
Apparel	$	56,441		53.5	%	$	52,128		53.7	%	$	104,611		52.1	%	$	96,892		53.0	%
Jewelry		23,442		22.2	%		20,594		21.2	%		45,415		22.6	%		38,914		21.3	%
Accessories		14,537		13.8	%		14,526		15.0	%		29,891		14.9	%		28,670		15.7	%
Gifts		11,069		10.5	%		9,865		10.1	%		20,924		10.4	%		18,287		10.0	%
Merchandise sales ⁽¹⁾	$	105,489		100.0	%	$	97,113		100.0	%	$	200,841		100.0	%	$	182,763		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.

We were in compliance with all covenants under our revolving credit facility as of August 1, 2015. On August 1, 2015, we had $48.8 million of cash and cash equivalents and $75.0 million in borrowing availability under our revolving credit facility. There were no borrowings or letters of credit outstanding under our revolving credit facility at August 1, 2015.

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:

	Twenty Six Weeks Ended
	August 1, 2015			August 2, 2014
	(In thousands)
Provided by operating activities	$	24,495		$	24,283
Used in investing activities		(14,956	)		(13,757	)
Provided by (used in) financing activities		230			(23,163	)

Net increase (decrease) in cash and cash equivalents	$	9,769		$	(12,637	)

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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 $24.5 million and $24.3 million in each of the twenty six weeks ended August 1, 2015 and August 2, 2014, respectively. The increase in cash provided by operating activities in the current period as compared to the same period of the prior year was primarily due to timing changes and / or payments with respect to accounts receivable, inventory purchases, payroll and sales tax payable.

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.

	Twenty Six Weeks Ended
	August 1, 2015		August 2, 2014
	(In thousands)
Capital expenditures for:
New boutiques	$	9,424	$	10,134
Existing boutiques		3,776		2,783
Technology		1,157		696
Corporate and distribution		602		146
Total capital expenditures	$	14,959	$	13,759

Our total capital expenditures for the twenty six weeks ended August 1, 2015 and August 2, 2014 were $15.0 million and $13.8 million, respectively, with new boutiques accounting for most of our spending at $9.4 million and $10.1 million, respectively. Spending for new boutiques included amounts associated with boutiques that will open subsequent to the end of each fiscal quarter. We opened 69 boutiques in the twenty six weeks ended August 1, 2015 compared to 75 boutiques in the twenty six weeks ended August 2, 2014. 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 twenty-six weeks ended August 1, 2015 and August 2, 2014 was $218,000 and $199,000, respectively. The increase in the average boutique build-out costs was principally due to opening larger boutiques in the current year-to-date period, which averaged at approximately 1,460 square feet per boutique, compared to the prior year period, which averaged at approximately 1,260 square feet per boutique. The average tenant allowance per new boutique in the twenty six weeks ended August 1, 2015 decreased to $79,000 from $90,000 in the comparable prior year period. The decrease in average tenant allowance in the current period was principally due to opening more boutiques in non-mall locations. 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. Our spending for existing boutiques totaled $3.8 million and $2.8 million during the twenty six weeks ended August 1, 2015 and August 2, 2014, respectively. The majority of the amount spent for existing boutiques in the current period was used in upgrading display fixtures and equipment as well as remodeling 13 boutiques while the prior year amount was spent on remodeling 34 boutiques.

Our expected capital expenditures for the full fiscal year 2015 have decreased to approximately $25.0 million to $27.0 million from approximately $30.0 million to $32.0 million previously disclosed due to the postponement of infrastructure investments in our direct-to-consumer website which we now expect to commence development in fiscal year 2016. Additionally, current year spending for new boutiques that will open in fiscal year 2016 is planned to decrease as we now expect to open fewer boutiques in fiscal year 2016 compared to an average of 85 boutiques we have opened in the last three fiscal years.

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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 provided by financing activities was $0.2 million during the twenty six weeks ended August 1, 2015 which consist of proceeds from stock option exercises and the related tax benefit. Net cash used in financing activities in the twenty six weeks ended August 2, 2014 totaled $23.1 million which consists of $20.0 million repayments of borrowings under our revolving credit facility, $5.3 million repurchases of our common stock outstanding and $2.1 million proceeds from stock option exercises and the related tax benefit.

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, each 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 August 1, 2015, no borrowings or letters of credit were outstanding under the credit facility.

Share Repurchase Program

There were no share repurchases in each of the thirteen and twenty six weeks ended August 1, 2015. For additional 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 January 31, 2015.

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 January 31, 2015. As of August 1, 2015, 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 January 31, 2015.

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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.

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 January 31, 2015, 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 August 1, 2015, no borrowings were outstanding under our revolving credit facility.

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 August 1, 2015.

There were no changes in our internal control over financial reporting during the quarter ended August 1, 2015 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 January 31, 2015 and filed with the SEC on March 27, 2015.

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ITEM 6. EXHIBITS

Exhibit No.		Description

10.1+		Francesca’s Holdings Corporation’s 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of Form 8-K filed by Francesca’s Holdings Corporation on June 9, 2015)

10.2+*		Form of Non-qualified Stock Option Agreement

10.3+*		Form of Restricted Stock Award Agreement

10.4+		Transition Agreement, dated August 14, 2015, between Francesca’s Holdings Corporation and Sei Jin Alt (incorporated by reference to Exhibit 10.1 of Form 8-K filed by Francesca’s Holdings Corporation on August 18, 2015)

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 August 1, 2015, January 31, 2015 and August 2, 2014, (ii) the Unaudited Consolidated Statements of Operations for the Thirteen and Twenty Six Weeks Ended August 1, 2015 and August 2, 2014, (iii) Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Twenty Six Weeks Ended August 1, 2015, (iv) Unaudited Consolidated Statements of Cash Flows for the Twenty Six Weeks ended August 1, 2015 and August 2, 2014 and (v) the Notes to the Unaudited Consolidated Financial Statements.

* Filed herewith.

** Furnished herewith.

+ Indicates a management contract or compensatory plan or arrangement.

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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: September 9, 2015	/s/ Mark Vendetti
	Mark Vendetti
	Chief Financial Officer (duly authorized officer and Principal Financial and Accounting Officer)

Exhibit 10.2

FRANCESCA’S HOLDINGS CORPORATION
2015 EQUITY INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “ Option Agreement ”) dated by and between Francesca’s Holdings Corporation, a Delaware corporation (the “ Corporation ”), and (the “ Grantee ”) evidences the nonqualified stock option (the “Option” ) granted by the Corporation to the Grantee as to the number of shares of the Corporation’s Common Stock first set forth below.

Number of Shares of Common Stock : ¹	Award Date:

Exercise Price per Share : ¹ $	Expiration Date: ^1,2

Vesting ^1,2 The Option shall become vested as to 1/5 of the total number of shares of Common Stock subject to the Option on each of the first, second, third, fourth and fifth anniversaries of the Award Date.

The Option is granted under the Francesca’s Holdings Corporation 2015 Equity Incentive Plan (the “ Plan ”) and subject to the Terms and Conditions of Nonqualified Stock Option (the “ Terms ”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan. The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee. Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the Option set forth herein. The Grantee acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan.

“GRANTEE”		FRANCESCA’S HOLDINGS CORPORATION
		a Delaware corporation

Signature
		By:

Print Name		Print Name:

		Title:

CONSENT OF SPOUSE

In consideration of the Corporation’s execution of this Option Agreement, the undersigned spouse of the Grantee agrees to be bound by all of the terms and provisions hereof and of the Plan.


Signature of Spouse		Date

¹ Subject to adjustment under Section 7.1 of the Plan.

² Subject to early termination under Section 4 of the Terms and Section 7.2 of the Plan.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION

Vesting; Limits on Exercise; Incentive Stock Option Status .

The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the cover page of this Option Agreement. The Option may be exercised only to the extent the Option is vested and exercisable.

Cumulative Exercisability . To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent not previously exercised), and such right shall continue, until the expiration or earlier termination of the Option.

No Fractional Shares . Fractional share interests shall be disregarded, but may be cumulated.

Minimum Exercise . No fewer than 100 shares of Common Stock (subject to adjustment under Section 7.1 of the Plan) may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option.

Nonqualified Stock Option . The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning of Section 422 of the Code.

Continuance of Employment/Service Required; No Employment/Service Commitment .

The vesting schedule applicable to the Option requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee 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 4 below or under the Plan.

Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Corporation or any of its Subsidiaries, affects the Grantee’s status, if he or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or service, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other compensation.

Method of Exercise of Option .

The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such other person as the Administrator may require pursuant to such administrative exercise procedures as the Administrator may implement from time to time) of:

a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise procedures as the Administrator may require from time to time,

payment in full for the Exercise Price of the shares to be purchased in cash, check or by electronic funds transfer to the Corporation, or (subject to compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any non-cash payment) in shares of Common Stock already owned by the Grantee, valued at their fair market value (as determined under the Plan) on the exercise date;

any written statements or agreements required pursuant to Section 8.1 of the Plan; and

satisfaction of the tax withholding provisions of Section 8.5 of the Plan.

The Administrator also may, but is not required to, authorize a non-cash payment alternative pursuant to the terms of the Plan.

Early Termination of Option .

4.1 Expiration Date. Subject to earlier termination as provided below in this Section 4, the Option will terminate on the “Expiration Date” set forth on the cover page of this Option Agreement (the “ Expiration Date ”).

4.2 Possible Termination of Option upon Certain Corporate Events. The Option is subject to termination in connection with certain corporate events as provided in Section 7.2 of the Plan.

4.3 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to earlier termination on the Expiration Date of the Option or pursuant to Section 4.2 above, if the Grantee ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary, the following rules shall apply (the last day that the Grantee is employed by or provides services to the Corporation or a Subsidiary is referred to as the Grantee’s “ Departure Date ”):

other than as expressly provided below in this Section 4.3, (a) the Grantee will have until the date that is 3 months after his or her Departure Date to exercise the Option (or portion thereof) to the extent that it was vested on the Departure Date, (b) the Option, to the extent not vested on the Departure Date, shall terminate on the Departure Date, and (c) the Option, to the extent exercisable for the 3-month period following the Departure Date and not exercised during such period, shall terminate at the close of business on the last day of the 3-month period;

if the termination of the Grantee’s employment or services is the result of the Grantee’s death or Total Disability (as defined below), (a) the Grantee (or his beneficiary or personal representative, as the case may be) will have until the date that is 12 months after the Grantee’s Departure Date to exercise the Option (or portion thereof) to the extent that it was vested on the Departure Date, (b) the Option, to the extent not vested on the Departure Date, shall terminate on the Departure Date, and (c) the Option, to the extent exercisable for the 12-month period following the Departure Date and not exercised during such period, shall terminate at the close of business on the last day of the 12-month period;

if the Grantee’s employment or services are terminated by the Corporation or a Subsidiary for Cause (as defined below), the Option (whether vested or not) shall terminate on the Departure Date.

For purposes of the Option, “ Total Disability ” means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator).

For purposes of the Option, “ Cause ” means that the Grantee:

(1)

has been negligent in the discharge of his or her duties to the Corporation or any of its Subsidiaries, has refused to perform stated or assigned duties or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties;

(2)

has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violated any other duty, law, rule, regulation or policy of the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses);

(3)

has materially breached any of the provisions of any agreement with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or

(4)

has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; has improperly induced a vendor or customer to break or terminate any contract with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries; or has induced a principal for whom the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of its Subsidiaries acts as agent to terminate such agency relationship.

In all events the Option is subject to earlier termination on the Expiration Date of the Option or as contemplated by Section 4.2. The Administrator shall be the sole judge of whether the Grantee continues to render employment or services for purposes of this Option Agreement.

Non-Transferability .

The Option and any other rights of the Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except as set forth in Section 5.7 of the Plan.

Notices .

Any notice to be given under the terms of this Option Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or at such other address as either party may hereafter designate in writing to the other. Any such 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 Grantee is no longer employed by the Corporation or a Subsidiary, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 6.

Plan .

The Option and all rights of the Grantee under this Option Agreement are subject to the terms and conditions of the Plan, incorporated herein by this reference. The Grantee agrees to be bound by the terms of the Plan and this Option Agreement (including these Terms). The Grantee acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Option Agreement. Unless otherwise expressly provided in other sections of this Option 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 Grantee 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.

Entire Agreement .

This Option Agreement (including these Terms) 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 and this Option Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Grantee 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.

Governing Law .

This Option 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.

10.

Effect of this Agreement .

Subject to the Corporation’s right to terminate the Option pursuant to Section 7.2 of the Plan, this Option Agreement shall be assumed by, be binding upon and inure to the benefit of any successor or successors to the Corporation.

11.

Counterparts .

This Option 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.

12.

Section Headings .

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

13.

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 OPTION AGREEMENT (INCLUDING THESE TERMS).

Exhibit 10.3

FRANCESCA’S HOLDINGS CORPORATION

2015 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT (this “ Award Agreement ”) is dated as of ___________, 20__ by and between Francesca’s Holdings Corporation, a Delaware corporation (the “ Corporation ”), and _____________ (the “ Participant ”).

WITNESSETH

WHEREAS , pursuant to the Francesca’s Holdings Corporation 2015 Equity Incentive Plan (the “ Plan ”), the Corporation hereby grants to the Participant, effective as of ____________, 20__ (the “ Award Date ”), a 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 ”).

3. Vesting . Subject to the terms and conditions of this Award Agreement (including, without limitation, the terms of Section 8 below), the Award shall vest, and restrictions (other than those set forth in Section 8.1 of the Plan) shall lapse, in _________ installments on each of the _________________________ anniversaries of the Award Date. The Board reserves the right to accelerate the vesting of the Restricted Stock in such circumstances as it, in its sole discretion, deems appropriate and any such acceleration shall be effective only when set forth in a written instrument executed by an officer of the Corporation.

4. Continuance of Employment or Service . The vesting schedule requires continued employment or service through the applicable 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 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 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 A , 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 . 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.

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 th e 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 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 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 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

STOCK POWER

FOR VALUE RECEIVED and pursuant to that certain 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 Restricted Stock Award Agreement without requiring additional signatures on the part of the Individual.)

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Michael W. Barnes, certify that:

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

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;

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;

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

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: September 9, 2015	/s/ Michael W. Barnes
	Michael W. Barnes
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Mark Vendetti, certify that:

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

(a)

(b)

(c)

(d)

(a)

(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: September 9, 2015	/s/ Mark Vendetti
	Mark Vendetti
	Chief Financial Officer (duly authorized officer and Principal Financial and Accounting Officer)

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, Michael W. Barnes, the Chief Executive Officer of Francesca’s Holdings Corporation, certify that (i) the quarterly report on Form 10-Q for the fiscal quarter ended August 1, 2015 (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/ Michael W. Barnes
	Michael W. Barnes
	Chief Executive Officer

	September 9, 2015
	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 August 1, 2015 (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)

	September 9, 2015
	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.