Express, Inc. Reports Third Quarter 2014 Results; Introduces Fourth Quarter Outlook And Updates Full Year Guidance

COLUMBUS, Ohio, Dec. 4, 2014 /PRNewswire/ -- Express, Inc. EXPR, a specialty retail apparel chain operating approximately 640 stores, announced its financial results for the third quarter and first nine months of 2014. These results cover the 13 and 39 week periods ended November 1, 2014 and compare to the 13 and 39 week periods ended November 2, 2013.

Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that, "For the third quarter, EPS met the higher end of our guidance.  We saw an improvement in our merchandise margin and comparable sales were unchanged from the second quarter.  Our comparable sales reflected a weakening in our store performance as the quarter progressed that was only partially offset by strength in e-commerce and outlets.  As we began the fourth quarter, e-commerce enjoyed a strong Thanksgiving push through Cyber Monday and our outlet sales continued to exceed initial expectations.  However, we have updated annual guidance to reflect our current retail store trends and expectations that mall traffic will continue to remain challenging throughout the holiday period."

Commenting on the business from an operational standpoint, Mr. Weiss added, "It was a busy and productive quarter as we continued to execute on our strategic objectives.  Our Express Factory Outlet stores delivered exceptional results.  Our website and mobile commerce enhancements drove strong e-commerce growth and our marketing initiatives continued to elevate our brand.  On the international front, we introduced the Express brand to South Africa through the opening of shop-in-shop franchise locations."

Third Quarter 2014 Operating Results:

• Net sales decreased to $497.6 million from $503.8 million in the third quarter of 2013, a decrease of 1%.
• Comparable sales during the quarter (including e-commerce sales) decreased 5%, compared to a comparable sales increase of 5% in last year's third quarter. E-commerce sales rose 11% to $79.1 million.
• Gross margin as a percentage of net sales declined 110 basis points compared to last year's third quarter and represented 31.7% of net sales. Merchandise margins improved by 30 basis points, with this gain being more than offset by buying and occupancy costs which, as a percentage of sales,  rose by 140 basis points compared to last year's third quarter. The buying and occupancy de-leverage was primarily related to the combined impact of lower sales and higher rent and depreciation expenses.
• Selling, general, and administrative (SG&A) expenses were $126.5 million versus $128.4 million in last year's third quarter. As a percentage of net sales, SG&A expenses declined 10 basis points to 25.4% compared to 25.5% in last year's third quarter. This improvement relates primarily to the Company's cost cutting initiatives and continued discipline in this area.
• Operating income was $30.5 million, or 6.1% of net sales, compared to $36.7 million, or 7.3% of net sales in the third quarter of 2013.
• Income tax expense was $9.7 million, at an effective tax rate of 40.0%, compared to $12.4 million, at an effective tax rate of 39.2% in last year's third quarter.
• Net income was $14.6 million, or $0.17 per diluted share. This compares to net income of $19.3 million, or $0.23 per diluted share, in the third quarter of 2013.
• Real estate activity for the third quarter of 2014 is detailed in Schedule 4.

Thirty-Nine Week Period Operating Results:

• Net sales decreased 4% to $1.4 billion from $1.5 billion in the prior year period.
• Comparable sales during the period (including e-commerce sales) decreased 7%, compared to a 3% increase in the prior year period. E-commerce sales rose 4% to $209.9 million.
• Gross margin declined to 29.9% of net sales compared to 32.5% in the prior year period. Merchandise margin declined 20 basis points and buying and occupancy costs as a percentage of sales increased 240 basis points.
• SG&A expenses were $371.3 million versus $360.2 million in the prior year period. This represented 25.8% of net sales, compared to 24.0% in the same period last year.
• Operating income was $60.1 million, or 4.2% of net sales, compared to $128.8 million, or 8.6% of net sales, in the prior year period.
• The effective tax rate declined to 37.0% compared to 39.5% in the prior year period. The current period effective tax rate reflects a benefit of approximately $1.7 million associated with the completion of a multi-year tax examination.
• Net income was $26.5 million, or $0.31 per diluted share, compared to net income of $68.6 million, or $0.81 per diluted share, in the prior year period.

Third Quarter 2014 Balance Sheet Highlights:

• Cash and cash equivalents totaled $217.8 million versus $181.6 million at the end of 2013's third quarter.
• Capital expenditures totaled $86.6 million for the thirty-nine weeks ended November 1, 2014 compared to $78.8 million for the thirty-nine weeks ended November 2, 2013.
• Inventory was $350.3 million, an increase of 2%, compared to $343.0 million at the end of the third quarter of 2013. This includes approximately $23.1 million related to Express Factory Outlet stores.  Inventory per square foot was up 3% compared to the comparable period in 2013.

2014 Guidance:

The table below compares the Company's projected results for the 13 week period ended January 31, 2015 to the actual results for the 13 week period ended February 1, 2014.

 

The table below compares the Company's projected results for the 52 week period ended January 31, 2015 to the actual results for the 52 week period ended February 1, 2014.

 

Consistent with previous years, the quarterly and full year guidance excludes any non-core operating items that may occur.

Share Repurchase Program and Refinancing of Long Term Debt:
During the third quarter, the Company did not repurchase any shares of its stock or proceed with the refinancing of its 8 ¾% Senior Notes due 2018, which total approximately $200 million.

Conference Call Information:
A conference call to discuss third quarter 2014 results is scheduled for Thursday December 4, 2014, at 9:00 a.m. Eastern Time (ET). Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at: http://www.express.com/investor and remain available for 90 days. A telephone replay of this call will be available from 12:00 p.m. ET on December 4, 2014 until 11:59 p.m. ET on December 11, 2014 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13595178.

About Express, Inc.
Express is a specialty apparel and accessories retailer of women's and men's merchandise, targeting the 20 to 30 year old customer. The Company has over 30 years of experience offering a distinct combination of fashion and quality for multiple lifestyle occasions at an attractive value addressing fashion needs across work, casual, jeanswear, and going-out occasions. The Company currently operates more than 600 retail and factory outlet stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States, Canada and Puerto Rico. Express merchandise is also available at franchise locations in the Middle East, Latin America and South Africa. The Company also markets and sells its products through the Company's e-commerce website, www.express.com.

Forward-Looking Statements:
Certain statements are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and include, but are not limited to, (1) guidance for the fourth quarter and full year 2014, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, earnings per diluted share, and capital expenditures, (2) statements regarding expected store openings, store closures, and gross square footage, (3) statements regarding expectations for the holiday season, and (4) statements regarding the Company's future plans and initiatives. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (3) fluctuations in our sales and results of operations on a seasonal basis and due to store events, promotions, and a variety of other factors; (4) competition from other retailers; (5) customer traffic at malls, shopping centers, and our stores; (6) our dependence on a strong brand image; (7) our ability to develop and maintain a reliable omni-channel experience for our customers; (8) the failure or breach of information systems upon which we rely; (9) our ability to protect customer data from fraud and theft; (10) our dependence upon independent third parties to manufacture all of our merchandise; (11) changes in the cost of raw materials, labor, and freight; (12) supply chain disruption; (13) our dependence upon key executive management; (14) our growth strategy, including our new store, e-commerce, and international expansion plans; (15) our reliance on third parties to provide us with certain key services for our business; (16) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (17) impairment charges on long-lived assets;  (18) lease obligations and our substantial indebtedness, including restrictions imposed by such indebtedness on current and future operations; and (19) uncertainty associated with Sycamore Partners' expressed interest in acquiring the Company. Additional information concerning these and other factors can be found in Express, Inc.'s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

 

 

 

 

 

 

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SOURCE Express, Inc.