Is Time Running Out for Express?
Express Inc. has some tough negotiating ahead.
The specialty retailer is said to be in talks with lenders about restructuring options. It may not have many choices given its extensive losses.
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Express posted a nine-month net loss of $154.3 million for the third quarter ended Oct. 28. The cumulative loss for the period was far wider than the $39.3 million loss in the year-ago quarter. Net sales fell 5.7 percent in the period to $1.27 billion from $1.35 billion.
One month before the quarter ended, former CEO and board member Tim Baxter resigned, unrelated to the company’s accounting or financial reporting. Stewart Glendinning, whose experience in consumer products include serving as group president of prepared foods at Tyson Foods as well as its former CFO, was named as his successor. Express’ senior vice president of brand finance, planning and allocation Mark Still began serving as interim CFO in November, after former CFO and treasurer Jason Judd left to pursue another opportunity.
Express, which also operates its Upwest brand, was trying to curtail costs to improve its operational efficiency. The mostly mall-based retailer said last August that it would cut 150 jobs to trim expenses, a move that would result in one-time charges of $5 million but generate an expected $30 million in savings in fiscal 2024. In the same month, the company’s board authorized a 1-for-20 reverse stock split to avoid a delisting.
Express’ struggles to find its retail footing aren’t anything new. Back in 2020, Baxter showcased the firm’s Expressway Forward Strategy as it looked to rejigger sales and consumer interest, a move that included closing 100 stores. Even after the initial COVID outbreak in 2020, Baxter said that customers seemed to respond well to the chain’s new product assortment and brand positioning. In subsequent quarters in 2021 and 2022 , executives touted a key emphasis on denim as a key element of a model, versatile wardrobe, a new shirt cycle, and how the retailer has mostly gotten its “fashion right.”
Those touted fashion pluses didn’t seem to be enough, not even after Baxter in March 2022 said the company was on track to achieve its stated goal of “$1 billion in e-commerce demand with mid-single digit operating margin and over $100 million in operating profits by 2024.” Along the way, the retailer opened smaller off-mall stores called Express Edit. It tried to further grow its business through a direct selling framework around community commerce referred to as social selling, a modern-day version of the old Tupperware parties and the tagline “Avon Calling” except that this new update is conducted virtually.
But the targeted customer base also gives it much competition from fast-fashion players such as Shein and Temu. The pluses began turning into negatives towards the end of 2022 as sales declined and losses grew. The retailer inked 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. The aim was for the two to team up to build out a portfolio of brands.
It was a so-called “white knight” move that many on Wall Street believed would give Express some breathing room and financial ease in buying management more time to fix operations. Baxter at the time in his third-quarter conference call also acknowledged that the assortment mix “ha[d] some misses” in the women’s business.
Five months later, the joint venture said it was acquiring direct-to-consumer men’s brand Bonobos from Walmart Inc. for $75 million, a major discount to the $310 million purchase price Walmart paid in 2017. WHP paid $50 million for the brand, while Express’ operating company Expr acquired the operating assets and certain liabilities for $25 million.
A story in Bloomberg which first reported on lender talks said the discussions include close reviews of Express’ cash flow, as well as the chain’s liquidity needs.
Executives at Express did not respond to a request for comment.
