Express Posts Bottom, Topline Declines — but Trends Improving

David Moin
·5 min read

Express, which sells casual, occasion-based and work-appropriate fashion, posted a fourth-quarter net loss of $53.3 million, or $0.82 a diluted share, amid a comparable sales decline of 27 percent.

This compares to a net loss of $141.6 million, or a loss of $2.21 a diluted share, in the fourth quarter of 2019.

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Total sales for the fourth quarter ended Jan. 30 declined 29 percent to $430.34 million, compared to $606.73 million in the year-ago period.

The most recent loss was less than expected, and improving sales trends and gross margins were cited by Tim Baxter, chief executive officer, on Wednesday when the results were released.

“People are buying fashion,” Baxter said during a conference call. “The only caveat I would put on that is that the consumer’s expectation, I believe, has changed forever in terms of comfort. So while we are seeing a return to fashion and somewhat of a return to what we would have considered wear-to-work categories, the most critical thing is that those categories have become more and more comfortable so we launched men’s knit suits last year and we have continued to see incredible results in spite of the fact that that category is obviously very challenged. The fastest-turning component of that is actually fashion and comfort in our soft stretch suits.

“In women’s, we’ve introduced an entirely new range of modular suiting much of which is knit, including tailored looking bottoms that are actually just as stretchy and just as comfortable as your favorite sweatpants.”

Baxter said there were “encouraging trends in the Southeast, where coronavirus guidelines were less restrictive. Comps were on average 20 points better than in the more restrictive Northeast and California markets.”

He said Express is finalizing a strategy to grow digital sales to $1 billion in 2024. The strategy, more details of which will be discussed in the second quarter this year, involves product extensions and expansions; growth of the marketplace business with the addition of new categories such as active, swimwear and intimates; greater personalization; a relaunch of the Express Insider loyalty program, and website enhancements, such as faster checkout processes and improved search and navigation, among other changes.

On an adjusted basis, Express had a net loss of $43.1 million, or $0.66 a diluted share for the fourth quarter. The adjusted loss excludes the $5.5 million income tax benefit from the Coronavirus Aid Relief and Economic Security Act, the negative non-cash impacts of the deferred tax asset valuation allowance of $12.4 million and a $4.5 million pretax impairment charge.

In the year-ago period, the adjusted net loss was $141.6 million, or $2.21 a diluted share.

Earnings before interest, taxes, depreciation and amortization were a loss of $45 million, compared to a loss of $168.7 million in the year-ago period. EBITDA was negatively impacted by the asset impairment of $4.5 million in the fourth quarter of 2020 and the impairment of the intangible assets of $197.6 million and property, equipment, and lease assets of $2.1 million in the fourth quarter of 2019.

At the Express brand, a smaller format is being tested and the mall-based chain has begun diversifying the fleet to street locations. This year, eight more Express Edit concept stores, which have short-term leases, will be added.

Outlets performed better than the regular retail stores in the fourth quarter, and the company has begun bringing styles from retail stores to outlet more quickly.

Baxter said the UpWest brand, launched by Express at the end of 2019, is not yet material to results, but has performed ahead of expectations. It’s a direct-to-consumer brand with “product and purpose focused on comfort” and managed separately from Express, with its own design, merchandising and marketing teams. Additional UpWest pop-ups will open this year.

“Over the past 12 months, we have effectively managed our liquidity while meaningfully advancing the Expressway Forward strategy,” Baxter said. “We took appropriate action and made progress despite extraordinary circumstances and market conditions. We are well positioned to accelerate in 2021. I expect sales to continue improving sequentially each quarter, and that we will return to positive EBITDA in the back half of the year.”

The Expressway Forward strategy, launched early in 2020, emphasizes products with versatility and consistent newness, speed to market, intensifying e-commerce, reducing occasion-based categories while increasing denim fits and washes, and more personalized emails. The company cut $250 million in costs last year through expense and capital reductions and inventory cuts. Also, $140 million in additional financing and $85 million in savings through rent abatements, deferrals and reductions, were secured last year.

For all of 2020, Express lost $405 million, or $6.27 a share. On an adjusted basis, the net loss was $314.3 million, or $4.86 a share.

Consolidated net sales decreased 40 percent to $1.21 billion from $2.02 billion in 2019, with consolidated comparable sales down 27 percent. EBITDA was a loss of $384.7 million compared to a loss of $132.8 million in 2019. The company operates over 500 retail and outlet stores in the U.S. and Puerto Rico, as well as an online store.

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