Analysts At UBS Want Off The Express Train, Downgrade To Sell

UBS downgraded Express, Inc. EXPR to Sell from Neutral and slashed the price target by $6 to $10, saying EPS risk is skewed to the downside on deteriorating traffic, weaker same store sales trends, product issues and potential margin pressures.

"While EXPR believes its merchandise will be in a better position in 4Q/early '17, we didn't hear a clear diagnosis of product issues other than the consumer being confused by too much choice in 2Q. And guidance for traffic to remain a headwind through 4Q left us concerned that fixing the product issue could take more than 1-2 qtrs," analyst Michael Binetti wrote in a note.

Related Link: BMO Waiting To See 'Green Shoots' For Express, Trims Price Target

The analyst, who said the company may to have ramp up store closures further, cut his third quarter EPS estimate to $0.13 from $0.34 (versus guidance of $0.09 - $0.15) based on 9.1 estimated drop in same-store sales (guidance -HSD-LDD). Binetti also lowered his fourth quarter EPS view to $0.57 from $0.74 based on 8 percent estimated fall in same-store sales.

Still, the analyst sees downside risk to his fourth quarter estimate "given low visibility that product can improve significantly enough in the NT to bolster traffic trends-and expectations for aggressive industry-wide promotional levels."

As such, the analyst also trimmed his FY16 EPS forecast to $1.08 (from $1.51), in-line with lowered guidance of $1.00-$1.14 (previous $1.41-$1.54).

At time of writing, shares of Express were down 0.54 percent to $11.88.