Express Shares Face Delisting as Cash Crunch Mounts

Vicki M. Young
·5 min read

Things aren’t looking any brighter for Express Inc.

The company said earlier this week that the New York Stock Exchange has decided to begin the process of delisting the retailer’s common stock, with suspension of trading occurring immediately at the market close on March 6.. The shares were then moved over to the OTC Pink Open Market for trading.

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The delisting decision was reached because shares of Express failed to meet a certain listing requirement over market capitalization. The OTC Pink Open Market exchange is a more limited market and therefore less liquid. The delisting also came after the company in August completed a reverse stock split to regain listing compliance following an NYSE warning last year.

The good news is that the transition to the new exchange doesn’t affect the retailer’s business operations or its SEC reporting obligations.

Meanwhile, it appears that Express is still awaiting a $52 million CARES Act refund payment to help with its liquidity needs. The retailer’s CEO Stewart Glendinning in an internal memo on Feb. 14 noted that the payment has two installments, a $43 million payout from the IRS and a $9 million payment that is still under review as of November. And there is the possibility of a $5 million reduction in its income taxes for 2022.

Express did not respond to a query for comment.

Meanwhile, Express continues to preserve its liquidity, and that means it has had to delay payments to vendors.

Ragini Bhalla, head of brand and spokesperson for credit monitoring firm Creditsafe, said that Express “doesn’t have the strongest track record of paying its debts on time.”

According to Creditsafe data, late payments have been a consistent problem at Express, which has been burdened by mounting debt and cash flow problems. The debt load totaled $274.7 million at the end of the third fiscal quarter of 2023, which includes a $65 million loan taken out last year at a 15 percent interest rate, she said.

An added problem is that on-time payments made by Express plummeted from 91.8 percent in May 2023 to 66 percent last June. For late payments—deemed 1 to 30 days—in the second half of 2023, the tally was 29.1 percent in June, 26.8 percent in July, 33.6 percent in August, 37.6 percent in September, 35.7 percent in October, 27.5 percent in November and 28.2 percent in December. The percentage spiked up to 43.7 percent in January and were still elevated at 29.7 percent for February, Bhalla said of Creditsafe’s data points.

“This consistent increase in the number of late payments signals cash flow may be tight and the company may not have done the necessary cash flow forecasting to prepare for revenue declines, difficult market conditions, rising inflation and increased shipping costs,” she said.

Given its debt load, Bhalla said that if “Express doesn’t get that payment from the IRS, it’ll be hard for the retailer to continue operations for much longer.”

A source with significant familiarity of retail operations said the IRS payment is “locked up in bureaucracy.” This person also noted that many retailers are now in their “cash-burn” period and don’t become cash positive until their big selling season in the fall and over the holiday period.

The company’s former CEO Tim Baxter, who resigned last September amid declining second quarter revenue, said before he left that the company had expected to receive its CARES Act payment in the “back half of 2023.”

It was Baxter who led the charge to revamp and update merchandising among other shifts to transform the retailer. Those initiatives include more social selling, and a move off the mall to local stores where it can merchandise the assortment to cater to community needs. Baxter’s Expressway Forward Strategy as it looked to rejigger sales and consumer interest, a move that included closing 100 stores. At one point, following its new product assortment and brand positioning post-COVID, the retailer’s executives even touted a  new shirt cycle, and how the retailer has mostly gotten its “fashion right.”

But despite those efforts, the fashion retailer best known for catering to young professionals with stylish—yet affordable—work wear continue to struggle following the COVID pandemic. Many of its customers shifted to either working from home or a hybrid model that no longer required office attire for the full work week.

In addition to its Express stores, the chain also owns the UpWest brand. Express also has a licensing deal valued at $400 million with brand management firm WHP Global. The deal was structured as an IP joint venture, with WHP acquiring certain intellectual property assets from Express and holding a 60 percent stake for its $235 million investment in the venture.

It was the joint venture that acquired direct-to-consumer men’s brand Bonobos from Walmart Inc. for $75 million, a substantial discount to the $310 million Walmart paid for the brand in 2017. WHP paid $50 for Bonobos, while Express’ operating company Expr kicked in $25 million for the operating assets and certain liabilities.

Given WHP’s stake in the IP joint venture, the brand management firm also could elect to take a bigger investment stake in Express. That’s a move that would alleviate immediate financial pressures for Express and buy it more breathing room.