Express Inc. Hits 52-Week Low on Weak Q4 - Analyst Blog

Shares of Express, Inc. EXPR hit a 52-week low of $15.42 on Mar 17, and eventually closed at $15.64. The drop in share price could be attributed to weak fourth quarter and full year 2013 results reported last week. In fact, shares of this specialty apparel and accessories retailer have dipped roughly 17.4% year-to-date.

Express Inc. had slashed its earnings guidance for the fourth quarter and full year 2013 in Jan 2014 in view of the poor performance during the holiday season, including muted Thanksgiving sales. However, the actual result could not even meet the lowered expectations.

Factors Hurting Express, Inc.

On Mar 12, Express Inc. reported lower-than-expected earnings and sales in the fourth quarter of fiscal 2013. Fourth quarter earnings declined 19.7% to 57 cents per share from the prior-year earnings of 71 cents (excluding extra week in 2012) and fell 3.4% short of the Zacks Consensus Estimate of 59 cents. However, earnings came in line with the lower end of the company's guidance range of 57-61 cents.

Sluggish comps and higher-than-expected promotional activity during the holiday period and in January impacted both the top line and margins, which in turn led to soft earnings. Stiff competition from retailers like Abercrombie & Fitch Co ANF and Ann Inc. ANN during the holiday season lowered sales.

Sales of $715.9 million increased 1.6% from the prior year quarter (adjusted for the extra week), but lagged the Zacks Consensus Estimate of $729 million by 1.8%. Sales were impacted by the highly volatile environment, harsh weather and lower consumer spending. Sales in the Thanksgiving week also did not meet the company's internal expectations, which led to a weak top-line in the fourth quarter.

Gross margin declined 300 basis points from last year to 32.0% due to a decline in merchandise margin, owing to increased promotional activity. Buying and occupancy cost ratio also increased 80 basis points in the quarter, thereby aggravating the gross margin decline.

For full year 2013, Express Inc.'s earnings of $1.37 per share lagged the Zacks Consensus Estimate by 2.1%, whereas sales of $2.219 billion missed the consensus mark by 0.4%.

Weak First Quarter and Full Year 2014 Guidance

For the first quarter of full year 2014, the company projects a year-over-year decline in comp sales and earnings due to the continued decline in traffic, poor weather conditions and the negative impact of higher-than-expected promotional spending in the fourth quarter.

The company expects its comparable store sales to grow in negative low double-digit to negative high single-digit, lower than the flat comparable store sales growth in the prior-year quarter. The company expects its earnings to be in the range of 12 cents to 18 cents per share, much lower than 38 cents per share reported in the last year quarter.

Based on the first quarter guidance, the company expects 2014 comparable store sales to be negative low single-digit to flat compared with 3% growth in fiscal 2013. The company expects its earnings to be in the range of $1.03 - $1.23 per share, much lower than $1.37 per share reported in 2013.

Not all stocks are performing as poorly as Express Inc. Finish Line Inc. FINL is a better-ranked retailer with a Zacks Rank #2 (Buy).