Francesca's results beat on strong demand for affordable clothing

Women's clothing retailer Francesca's Holdings Corp reported quarterly results that beat Wall Street estimates, helped by margin improvement and strong demand for its affordable clothing and jewelry.

The company's shares rose as much as 7 percent to $29.40 after the bell.

Francesca's, whose merchandise is usually priced below $50, operates a "broad and shallow" selling strategy under which it carries a wide selection but limited quantities of individual styles. This helps preserve margins by keeping inventory costs in check.

Gross margins rose 92 basis points to 53.37 percent in the quarter ended February 2.

"The company's advantage is playing into the sweet spot of the current environment with compelling fashion apparel and attractively priced accessories," Wedbush Securities Inc analyst Betty Chen said, adding that Francesca's first-quarter forecast implied potential market share gains.

The company, which competes with chains such as Chico's Fas, LOFT, and Urban Outfitters, said it expects first-quarter revenue of between $79.5 million and $80.5 million.

Analysts on average were looking for sales of $78.4 million, according to Thomson Reuters I/B/E/S.

Net income rose 77 percent to $14.9 million, or 33 cents per share, in the fourth quarter ended February 2, while revenue climbed 40 percent to $86.7 million.

This beat analysts' expectations of a profit of 30 cents per share on revenue of $84.9 million.