Francesca's Holdings Corporation (FRAN - Snapshot Report) has a new CEO but comparable-store-sales continue to slide. Can this Zacks Rank #5 (Strong Sell) retailer turn it around?

Francesca's Holdings is a specialty woman's retailer, operating 538 boutiques in 47 states and the District of Columbia carrying apparel, shoes, jewelry and accessories. It also operates an ecommerce site on francescas.com.

Retail Veteran Announced as New CEO

On Dec 5, Francesca's announced that Michael Barnes, the former CEO of Signet Jewelers, would become CEO of Francesca's. He was also one of the original employees at Fossil and spent more than 25 years there growing the brand.

Francesca's has also been on a growth spurt, with dozens of store openings and a newly revamped web site.

Comparable Store Sales Fell Again

On Dec 10, Francesca's announced its fiscal 2014 third quarter results. While it met the Zacks Consensus Estimate of $0.17, same-store sales continued to slide.

In prior quarters, the company had blamed it on the poor weather and high inventories. But the weather wasn't a factor in the third quarter of this year.

Comparable-store-sales fell 6% but one bright spot was the direct-to-consumer sales, which jumped 53% from the year ago quarter. Through the third quarter, direct-to-consumer sales were up 76% over 2013.

However, as many retailers have been reporting, the environment remains increasingly promotional. Gross profit decreased to 47.3% from 50.7% in the third quarter of the prior year due to increased markdowns and continuing promotions.

The company also continued to open new stores, opening 12 boutiques in the quarter. It has added 87 new boutiques through the third quarter.

It's also been opening outlets and has opened 13 of those this year for a total of 16 stores.

Outlook for the Fourth Quarter is Still Grim

Citing the highly promotional holiday retail environment, Francesca's warned about the fourth quarter. It said its apparel business remained "challenged" and expected aggressive markdowns in order to clear inventory.

It saw a 475 to 525 basis points decrease in gross profit margin in the fourth quarter compared to a year ago.

Comparable-store-sales were expected to fall between 5% and 10% for the quarter. For the full year, comparable-store-sales were expected to fall 2% compared to the prior year.

It was expected to open just one new boutique in the fourth quarter.

Earnings Expected to Slide

The reason Francesca's is a Zacks Rank #5 (Strong Sell) is because analysts have been cutting estimates.

8 estimates were lowered for fiscal 2014 in the last 30 days. The 2014 Zacks Consensus Estimate has fallen to $0.79 from $0.92 in the last month. That's an earnings decline of 24% from fiscal 2013 as the company earned $1.05 last year.

Fiscal 2015 isn't looking much better. 9 estimates have been cut in the last 30 days.

The new CEO has only been on the job just a few weeks so it will take some time to institute changes. But Francesca's is clearly going the wrong direction.

Shares Jump on Hopes of a Turn Around

With news of the new CEO, Francesca's shares have actually rallied off of 2-year lows.

But if you think all of its problems means its a hidden gem, you'd be wrong.

You're not going to get a bargain. Francesca's is trading with a forward P/E of 20.5 which is well above the average of the S&P 500 which is 18x.

Specialty retail is tough right now. If you must buy a company in that industry, you might want to consider Deckers Outdoor Corp. (DECK - Analyst Report) which makes UGGs. It is a Zacks Rank #2 (Strong Buy) and analysts expect earnings growth of 14% this year and another 18.8% next year.

It's even trading with a cheaper valuation than Francesca's, with a forward P/E of just 19.3.