Express Announces Key Measure to Continue Optimizing Its Store Footprint
May 04 2017 - 8:35AM
Business Wire
- Express to close its 17 stores in
Canada; following these closings, Express will continue to operate
635 stores in the U.S.
- Actions aligned with strategic focus
on improving profitability and optimizing the store
footprint
Express, Inc. (NYSE:EXPR) (the “Company”) today announces an
additional measure as part of its continued strategic approach to
improving profitability and managing and optimizing its store
footprint.
As part of this plan, Express intends to close all 17 Canadian
stores and discontinue its Canadian operations through its Canadian
subsidiary, Express Fashion Apparel Canada Inc. (“Express Canada”).
This morning, as a part of that process, Express Canada filed an
application for protection under the Companies’ Creditors
Arrangement Act (the “CCAA”) with the Ontario Superior Court of
Justice (Commercial List) in Toronto.
David Kornberg, Express, Inc. president and chief executive
officer noted that, "The challenging Canadian retail environment,
coupled with unfavorable exchange rates prevented us from meeting
the expectations we had when we entered the market in 2011. While
difficult, this action is best for the future of Express and we are
committed to carry it out in a way that reflects our respect and
appreciation for employees who are impacted. Our overriding focus
remains to invest in and direct our resources towards those areas
that can generate the greatest return, including growing our
e-commerce business, relaunching our customer loyalty program, and
continuing to build our omni-channel capabilities to allow our
customers to engage with our brand and shop wherever, whenever, and
however they want. The decision to exit Canada is consistent with
our long-term strategy and will have no impact on our operations in
the U.S., which remain in a solid financial position.”
For the fiscal year ended January 28, 2017, Express Canada had
net sales of approximately $34 million in U.S. dollars ($45 million
in Canadian dollars) and contributed a net loss of approximately $6
million in U.S. dollars to the Express, Inc. consolidated financial
statements.
Express Canada currently has 17 stores across Alberta, British
Columbia, and Ontario. To facilitate an orderly wind-down, Express
Canada intends to conduct store closing sales beginning mid-May.
Subsequent to the closings, Canadian customers will continue to be
able to make purchases through the Company's e-commerce website,
www.express.com, as well as through the Express mobile app. As part
of its application, Express Canada is seeking the appointment of
Alvarez & Marsal Canada as Monitor in the CCAA proceedings to
oversee the liquidation and wind-down process for Express
Canada.
As a result of the CCAA filing, Express, Inc. has determined
that Express Canada will be deconsolidated from Express, Inc.
financial statements as of the date of the filing. As shown in the
table below and detailed as follows, Express, Inc. expects this to
impact pre-tax profit on its consolidated financial statements in
the range of $28 to $34 million in 2017, driven primarily by the
write-down of its investment in Express Canada along with costs
associated with exiting Canada. The Company will incur charges of
approximately $6 million in the first quarter of 2017 and the
remaining $22 to $28 million of exit costs in the second quarter of
2017. In addition, the Company anticipates tax benefits related to
exiting Canada in the range of $14 to $16 million, of which
approximately $7 million is expected in the first quarter of 2017
and the remaining $7 to $9 million in the second quarter of 2017.
As a result, Express, Inc. expects to report an impact to net
income in the range of $14 to $18 million in 2017, of which
approximately a $1 million benefit is expected in the first quarter
of 2017 and an impact of $15 to $19 million expected in the second
quarter of 2017. Total after tax cash costs to exit Canada are
expected to be in a range of $8 to $12 million. The impact of these
exit costs was not included in the Company’s most recently provided
guidance.
The Company plans to release first quarter fiscal 2017 results
on Thursday, June 1, 2017.
The expected impact of Express Canada's CCAA Filing on the
Express, Inc. consolidated financial statements is as follows:
First Quarter 2017
Second Quarter 2017 Full Year
2017 Income (Loss) Before Tax (~$6 million)(1) ($22 to
$28 million)(2) ($28 to $34 million) Income Tax Benefit(3)
~$7 million $7 to $9 million $14 to $16 million
Net Income (Loss) ~$1 million ($15 to $19 million) ($14 to
$18 million) Total After-Tax Cash Costs ($8 to $12 million)
(1) Driven
primarily by a non-cash asset impairment charge of approximately $6
million in the first quarter of 2017. (2) Driven primarily by the
write-down of the investment in Express Canada along with costs
associated with exiting Canada in 2017. (3) Anticipated tax
benefits related to exiting Canada.
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. Express has more than 35 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 650 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 and online in Latin America. Express also markets and
sells its products through its e-commerce
website, www.express.com, as well
as on its mobile app.
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, the Company’s
plans to improve profitability and to make certain investments in
the business and results from such plans and investments, as well
as the plan to discontinue Canadian operations and expected
financial impacts. 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, and significant contingencies, many of which
are beyond the Company's control. Many factors could cause actual
results to differ materially and adversely from these
forward-looking statements. Additional information concerning these
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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Investors:Express, Inc.Mark Rupe,
614-474-4465Vice President, Investor RelationsorMedia:Express, Inc.Robin Hoffman,
614-474-4834Director, Communications
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