Express (EXPR 4.77, -0.28 -5.36%), which sells apparel focusing on young men
and women, is trading down modestly today, recording new lows, after the
company reported Q4 (Jan) results this morning. The stock had been down 13% at
the open but has climbed back to about -5% at this point. Adjusted EPS fell to
$0.19 from $0.33 in the prior year period. This result arrived at the high end
of the company’s prior guidance for EPS of $0.11-0.20 and exceeded market
expectations. Revenue fell 10.2% year/year to $628.4 mln, in-line with
expectations. Same store comps were -6%, in-line with prior guidance for -7% to
-5% performance. Given that the quarter’s results were mostly foreseen, the
report’s most problematic feature was its Q1 (Apr) guidance, as EXPR is
expecting a rough quarter: a loss of $(0.34)-(0.27) per share and a same store
comp decline of -11% to -9%.
From a retail product perspective, there were bright spots in the company’s women's business, with comp growth achieved in dresses, pants, skirts, jackets, and jewelry. However, these categories were offset by weakness in tops, and in particular casual tops and sweaters. Its men's business performed better than the women's division, achieving comp growth in shirts, casual pants, graphics, and jackets. However, that business noted headwinds of its own in sweaters, knits, and dress pants.
This stock has been very weak since late September 2018, when it was trading above $11. It dipped below $5 toward the end of last year following some weak earnings results. This led to the departure of Express' CEO in January. A search for a replacement is underway.
EXPR concedes that, despite its JanQ results being in-line with the guidance provided in November, its overall performance in the period was disappointing. Looking ahead, EXPR expects results to remain challenging in the near-term; that expectation is borne out by the April quarter’s weak guidance.
EXPR says that it is focusing on three key areas -- product, brand and product clarity, and customer acquisition and retention -- to reposition the business. As a fashion apparel retailer, EXPR knows that it must understand its customer and know that everything starts and ends with the product offering. EXPR plans to double down on customer insights and to reassess its testing and buying processes to ensure that it has the right customer data and that it uses this data to make the right buying decisions.
Express believes in the resiliency and relevancy of its brand and in its ability to capture long-term opportunities. Meanwhile, the Board is reportedly making good progress with the CEO search. EXPR is pleased with the quality of candidates that have shown interest, and EXPR is actively interviewing multiple individuals.
In sum, Express is really struggling right now. Investors will probably not get a clear sense of what the company can do to turn the brand around until a new CEO gets hired. The fact that the stock has bounced off its lows today despite some rough guidance is a good sign, though, and also, its balance sheet is in great shape, with $172 mln in cash/inv, or roughly $2.50 per share, and with no LT debt, so that should help provide protection on the downside.
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