- 30% increase in net sales; 31% increase in
consolidated comparable sales
- 21% growth in eCommerce demand; on track to achieve goal
of $1.0 billion in eCommerce demand by 2024
- 640 basis point gross margin expansion despite a $6.0
million impact related to supply chain challenges
- Recorded the highest number of active Express Insider loyalty
program members in the Company's history
- Raises full year comparable sales outlook to an increase of 8%
- 10% and provides outlook for a mid-single digit increase in
second quarter comparable sales
Fashion apparel retailer Express, Inc. (NYSE: EXPR), announced
its financial results for the first quarter of 2022. These results,
which cover the thirteen weeks ended April 30, 2022, are compared
to the thirteen weeks ended May 1, 2021.
"Our first quarter results exceeded our expectations. We
delivered positive comparable sales of 31%, double-digit positive
comparable sales in every major category and every channel, and we
recorded the highest number of active loyalty program members in
the Company's history," said Tim Baxter, Chief Executive
Officer.
"We have made significant progress against each one of the four
foundational pillars of the EXPRESSway Forward strategy. Our brand
purpose is taking hold, and as we build, activate and amplify our
styling community, its reach and impact are expanding," continued
Baxter.
First Quarter 2022 Highlights
- Positive comparable sales, gross margin expansion and SG&A
leverage all exceeded expectations
- Increased comparable sales by 31%; drove double-digit positive
comparable sales in every category and every channel
- Drove a 21% increase in eCommerce demand and saw increases
across key metrics for the website and mobile app, including
traffic and average order value
- Delivered gross margin expansion of 640 basis points despite
the negative impact of $6 million of expense related to supply
chain challenges
- Generated a 20% increase in average unit retail through
increased full-price selling and reduced promotional activity
- Recorded the highest number of active Express Insider loyalty
members in the Company's history
"I am energized by our momentum and this is reflected in our
increased annual outlook," Baxter concluded.
First Quarter 2022 Operating
Results
- Consolidated net sales increased 30% to $450.8 million from
$345.8 million in the first quarter of 2021, with consolidated
comparable sales up 31%
- Comparable retail sales, which includes both Express stores and
eCommerce, increased 32% compared to the first quarter of 2021
- Comparable outlet store sales increased 30% versus the first
quarter of 2021
- Gross margin was 29.2% of net sales compared to 22.8% in last
year's first quarter, an increase of approximately 640 basis points
- Merchandise margin expanded by 20 basis points despite the
negative impact of $6.0 million of expense associated with ongoing
supply chain challenges. Without this impact, the expansion would
have been 160 basis points
- Buying and occupancy expenses leveraged approximately 620 basis
points compared to the first quarter of 2021 due to increased
sales
- Selling, general, and administrative (SG&A) expenses were
$141.1 million, 31.3% of net sales, versus $119.4 million, 34.5% of
net sales, in last year's first quarter. The improvement in
SG&A rate is driven by leveraging the increased sales.
- Operating loss was $9.1 million compared to a loss of $40.6
million in the first quarter of 2021
- Income tax benefit was $0.5 million at an effective tax rate of
3.9%. This compares to a benefit of $0.1 million at an effective
tax rate of 0.2% in the first quarter of 2021. The Company's
effective tax rate for the first quarter of 2022 was impacted
primarily by the recording of an additional $5.0 million valuation
allowance against the Company's deferred tax assets. Excluding this
valuation allowance the adjusted effective rate would have been
approximately 44%.
- Net loss was $11.9 million, or $0.18 per diluted share. On an
adjusted basis, net loss was $7.0 million, or a loss of $0.10 per
diluted share. The adjusted loss excludes the negative, non-cash
impact of the deferred tax asset valuation allowance of $5.0
million. This compares to a net loss of $45.7 million, or a loss of
$0.70 per diluted share, for the first quarter of 2021. On an
adjusted basis, net loss was $35.7 million, or a loss of $0.55 per
diluted share, in the first quarter of 2021.
- Earnings before interest, taxes, depreciation, and amortization
(EBITDA) was $5.8 million compared to negative EBITDA of $23.8
million in the first quarter of 2021
Balance Sheet and Cash Flow
Highlights
- Cash and cash equivalents totaled $37.1 million at the end of
the first quarter of 2022 versus $84.1 million at the end of the
first quarter of 2021
- Inventory was $371.2 million at the end of the first quarter,
up 40% compared to $264.5 million at the end of the prior year’s
first quarter, driven primarily by the pull-forward of purchases to
mitigate supply chain challenges as well as pack-and-hold for
late-arriving holiday inventory
- Short-term debt was $4.5 million and long-term debt was $203.5
million at the end of the first quarter of 2022 compared to
short-term debt of $37.8 million and long-term debt of $190.0
million at the end of the prior year’s first quarter
- At the end of the first quarter of 2022, $65.8 million remained
available for borrowing under the revolving credit facility
- Operating cash flow was negative $75.9 million for the thirteen
weeks ended April 30, 2022, compared to negative $1.6 million for
the thirteen weeks ended May 1, 2021
- Capital expenditures totaled $5.1 million for the thirteen
weeks ended April 30, 2022, compared to $3.6 million for the
thirteen weeks ended May 1, 2021
- Free cash flow was negative $81.0 million for the thirteen
weeks ended April 30, 2022, compared to negative $5.1 million for
the thirteen weeks ended May 1, 2021
2022 Outlook
This outlook is based on our strong year-to-date performance and
the strength of our product, brand, customer and execution
advancements, balanced against the ongoing supply chain challenges,
macroeconomic pressures, geopolitical events and other
uncertainties that may impact our business.
Second Quarter 2022
The Company expects the following for the second quarter of 2022
compared to the second quarter of 2021:
- Comparable sales to increase mid-single digits
- Gross margin rate to increase approximately 100 basis
points
- SG&A expenses as a percent of sales to delever
approximately 100 basis points, including incremental investments
in technology, higher labor expenses and general inflationary
pressures
- Net interest expense of $4 million
- Effective tax rate of 4%. Adjusted effective tax rate of
approximately 45% after adjusting for the impact of changes in the
valuation allowance recorded against deferred tax assets
Full Year 2022
The Company expects the following for the full year 2022
compared to the full year 2021:
- Comparable sales to increase 8% - 10%
- Gross margin rate to increase at least 100 basis points
- SG&A expenses as a percent of sales to be approximately
flat
- Net interest expense of $14 million
- Effective tax rate of 4%. Adjusted effective tax rate of
approximately 45% after adjusting for the impact of changes in the
valuation allowance recorded against deferred tax assets
- Diluted earnings per share of $0.24 to $0.34. Adjusted diluted
earnings per share of $0.14 to $0.20 after adjusting for the impact
of changes in the valuation allowance recorded against deferred tax
assets
- Capital expenditures of $50 - $55 million
- Inventory elevated in the second quarter and closer to parity
with sales growth in the back half of the year
Assumptions in the Company outlook may be affected by the
continued uncertainty of the pandemic and geopolitical events and
their impacts throughout the supply chain.
See Schedule 5 for a discussion of projected real estate
activity.
Conference Call
Information
A conference call to discuss first quarter 2022 results is
scheduled for May 25, 2022 at 9:00 a.m. Eastern Time (ET).
Investors and analysts interested in participating in the earnings
call are invited to dial (888) 550-5723 approximately ten minutes
prior to the start of the call. The conference call will also be
webcast live at www.express.com/investor and remain available for
90 days. A telephone replay of this call will be available
beginning at 12:00 p.m. ET on May 25, 2022 until 11:59 p.m. ET on
June 3, 2022 and can be accessed by dialing (800) 770-2030 and
entering the replay pin number 1790468. In addition, an investor
presentation of first quarter 2022 results will be available at
www.express.com/investor at
approximately 7:00 a.m. ET on May 25, 2022.
About Express, Inc.
Express is a modern, multichannel apparel and accessories brand
grounded in versatility, guided by its purpose - We Create
Confidence. We Inspire Self-Expression. - and powered by a styling
community. Launched in 1980 with the idea that style, quality and
value should all be found in one place, Express has been a part of
some of the most important and culture-defining fashion trends. The
Express Edit design philosophy ensures that the brand is always ‘of
the now’ so people can get dressed for every day and any occasion
knowing that Express can help them look the way they want to look
and feel the way they want to feel.
The Company operates over 550 retail and outlet stores in the
United States and Puerto Rico, the express.com online store and the
Express mobile app. Express, Inc. is comprised of the brands
Express and UpWest, and is traded on the NYSE under the symbol
EXPR. For more information, please visit www.express.com or www.upwest.com.
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 (1) guidance and
expectations, including statements regarding expected operating
margins, comparable sales, effective tax rates, interest income,
net income, diluted earnings per share, cash tax refunds,
liquidity, EBITDA, free cash flow, eCommerce demand, and capital
expenditures, (2) statements regarding expected store openings,
store closures, store conversions, and gross square footage, and
(3) statements regarding the Company's strategy, plans, and
initiatives, including, but not limited to, results expected from
such strategy, plans, and initiatives. You can identify these
forward-looking statements by the use of words in the future tense
and statements accompanied by words such as “outlook,” “indicator,”
“believes,” “expects,” “potential,” “continues,” “may,” “will,”
“should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,”
“scheduled,” “estimates,” “anticipates,” “opportunity,” “leads” or
the negative version of these words or other comparable words.
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. Among these factors are (1) changes in consumer
spending and general economic conditions; (2) the COVID-19 pandemic
and its continued impact on our business operations, store traffic,
employee availability, financial condition, liquidity and cash
flow; (3) geopolitical risks, including impacts from the ongoing
conflict between Russia and Ukraine and increased tensions between
China and Taiwan; (4) our ability to operate our business
efficiently, manage capital expenditures and costs, and obtain
financing when required; (5) our ability to identify and respond to
new and changing fashion trends, customer preferences, and other
related factors; (6) fluctuations in our sales, results of
operations, and cash levels on a seasonal basis and due to a
variety of other factors, including our product offerings relative
to customer demand, the mix of merchandise we sell, promotions, and
inventory levels; (7) customer traffic at malls, shopping centers,
and at our stores; (8) competition from other retailers; (9) our
dependence on a strong brand image; (10) our ability to adapt to
changing consumer behavior and develop and maintain a relevant and
reliable omni-channel experience for our customers; (11) the
failure or breach of information systems upon which we rely; (12)
our ability to protect customer data from fraud and theft; (13) our
dependence upon third parties to manufacture all of our
merchandise; (14) changes in the cost of raw materials, labor, and
freight; (15) supply chain or other business disruption, including
as a result of the coronavirus; (16) our dependence upon key
executive management; (17) our ability to execute our growth
strategy, EXPRESSway Forward, including engaging our customers and
acquiring new ones, executing with precision to accelerate sales
and profitability, creating great product and reinvigorating our
brand; (18) our substantial lease obligations; (19) our reliance on
third parties to provide us with certain key services for our
business; (20) impairment charges on long-lived assets; (21) claims
made against us resulting in litigation or changes in laws and
regulations applicable to our business; (22) our inability to
protect our trademarks or other intellectual property rights which
may preclude the use of our trademarks or other intellectual
property around the world; (23) restrictions imposed on us under
the terms of our asset-based loan facility, including restrictions
on the ability to effect share repurchases; (24) changes in tax
requirements, results of tax audits, and other factors that may
cause fluctuations in our effective tax rate; (25) changes in
tariff rates; and (26) natural disasters, extreme weather, public
health issues, including pandemics, fire, acts of terrorism or war
and other events that cause business interruption. These factors
should not be construed as exhaustive and should be read in
conjunction with the additional information concerning these and
other factors 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 required by
law.
Schedule 1
Express, Inc.
Consolidated Balance
Sheets
(In thousands)
(Unaudited)
April 30, 2022
January 29, 2022
May 1, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
37,140
$
41,176
$
84,072
Receivables, net
9,331
11,744
11,213
Income tax receivable
1,850
53,665
98,554
Inventories
371,249
358,795
264,488
Prepaid rent
5,701
5,602
4,683
Other
23,383
19,755
19,340
Total current assets
448,654
490,737
482,350
Right of Use Asset, Net
586,596
615,462
754,324
Property and Equipment
979,377
975,802
965,854
Less: accumulated depreciation
(841,137
)
(827,820
)
(799,389
)
Property and equipment, net
138,240
147,982
166,465
Non-Current Income Tax Receivable
52,278
—
—
Other Assets
4,816
5,273
3,600
TOTAL ASSETS
$
1,230,584
$
1,259,454
$
1,406,739
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Short-term lease liability
$
195,343
$
196,628
$
206,890
Accounts payable
181,318
231,974
159,013
Deferred revenue
32,833
35,985
29,861
Short-term debt
4,500
11,216
37,772
Accrued expenses
111,248
110,850
118,906
Total current liabilities
525,242
586,653
552,442
Long-Term Lease Liability
500,855
536,905
681,010
Long-Term Debt
203,483
117,581
190,025
Other Long-Term Liabilities
11,107
17,007
18,941
Total Liabilities
1,240,687
1,258,146
1,442,418
Commitments and Contingencies
Total Stockholders’ (Deficit)/Equity
(10,103
)
1,308
(35,679
)
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
1,230,584
$
1,259,454
$
1,406,739
Schedule 2
Express, Inc.
Consolidated Statements of
Income
(In thousands, except per share
amounts)
(Unaudited)
Thirteen Weeks Ended
April 30, 2022
May 1, 2021
Net Sales
$
450,785
$
345,759
Cost of Goods Sold, Buying and Occupancy
Costs
319,285
266,955
GROSS PROFIT
131,500
78,804
Operating Expenses:
Selling, general, and administrative
expenses
141,093
119,393
Other operating income, net
(490
)
(33
)
TOTAL OPERATING EXPENSES
140,603
119,360
OPERATING LOSS
(9,103
)
(40,556
)
Interest Expense, Net
3,494
5,252
Other Income, Net
(200
)
—
LOSS BEFORE INCOME TAXES
(12,397
)
(45,808
)
Income Tax Benefit
(483
)
(84
)
NET LOSS
$
(11,914
)
$
(45,724
)
EARNINGS PER SHARE:
Basic
$
(0.18
)
$
(0.70
)
Diluted
$
(0.18
)
$
(0.70
)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic
67,211
65,200
Diluted
67,211
65,200
Schedule 3
Express, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended
April 30, 2022
May 1, 2021
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss
$
(11,914
)
$
(45,724
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
15,172
18,497
Loss on disposal of property and
equipment
10
—
Share-based compensation
2,393
2,523
Landlord allowance amortization
(157
)
(77
)
Changes in operating assets and
liabilities:
Receivables, net
2,413
3,343
Income tax receivable
(463
)
12,788
Inventories
(12,454
)
(128
)
Accounts payable, deferred revenue, and
accrued expenses
(53,989
)
(3,426
)
Other assets and liabilities
(16,890
)
10,624
NET CASH USED IN OPERATING
ACTIVITIES
(75,879
)
(1,580
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(5,142
)
(3,562
)
NET CASH USED IN INVESTING
ACTIVITIES
(5,142
)
(3,562
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings under the
revolving credit facility
117,000
38,000
Repayment of borrowings under the
revolving credit facility
(37,000
)
(39,050
)
Proceeds from borrowings under the term
loan facility
—
50,000
Repayment of borrowings under the term
loan facility
(1,125
)
(12,404
)
Repayments of financing arrangements
—
(576
)
Costs incurred in connection with debt
arrangements
—
(463
)
Repurchase of common stock for tax
withholding obligations
(1,890
)
(2,167
)
NET CASH PROVIDED BY FINANCING
ACTIVITIES
76,985
33,340
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
(4,036
)
28,198
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
41,176
55,874
CASH AND CASH EQUIVALENTS, END OF
PERIOD
$
37,140
$
84,072
Schedule 4
Express, Inc. Supplemental
Information - Consolidated Statements of Income
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
The Company supplements the reporting of its financial
information determined under United States generally accepted
accounting principles (GAAP) with certain non-GAAP financial
measures: adjusted operating loss, adjusted net loss, adjusted
diluted earnings per share, EBITDA, and free cash flow. Management
strongly encourages investors and stockholders to review the
Company's financial statements and publicly-filed reports in their
entirety and not to rely on any single financial measure.
Adjusted Operating Loss, Net Loss and
Adjusted Diluted Earnings Per Share
Adjusted operating loss, adjusted net loss, and adjusted diluted
earnings per share are adjusted for certain non-recurring items
that the Company does not believe are directly related to its
underlying operations and may not be indicative of recurring
business operations.
How These Measures Are Useful
The Company believes that these non-GAAP measures provide
additional useful information to assist stockholders in
understanding its financial results and assessing its prospects for
future performance. Management believes adjusted operating loss,
adjusted net loss, and adjusted diluted earnings per share are
important indicators of the Company's business performance because
they exclude items that may not be indicative of, or are unrelated
to, the Company's underlying operating results, and may provide a
better baseline for analyzing trends in the business.
Limitations of the Usefulness of These Measures
Because non-GAAP financial measures are not standardized,
adjusted operating loss, adjusted net loss, and adjusted diluted
earnings per share may differ from similarly titled measures used
by other companies due to different methods of calculation. These
adjusted financial measures should not be considered in isolation
or as a substitute for reported operating loss, net loss, or
diluted earnings per share. These non-GAAP financial measures
reflect an additional way of viewing the Company's operations that,
when viewed with the GAAP results provide a more complete
understanding of the Company's business. A reconciliation to the
most directly comparable GAAP measure are set forth below:
Thirteen Weeks Ended April 30,
2022
(in thousands, except per share
amounts)
Operating Loss
Income Tax Impact
Net Loss
Diluted Earnings per
Share
Weighted Average Diluted
Shares Outstanding
Reported GAAP Measure
$
(9,103
)
$
(11,914
)
$
(0.18
)
67,211
Valuation allowance on deferred taxes
(a)
—
4,953
4,953
0.08
Adjusted Non-GAAP Measure
$
(9,103
)
$
(6,961
)
$
(0.10
)
- Valuation allowance provided against 2022 losses.
Thirteen Weeks Ended May 1,
2021
(in thousands, except per share
amounts)
Operating Loss
Income Tax Impact
Net Loss
Diluted Earnings per
Share
Weighted Average Diluted
Shares Outstanding
Reported GAAP Measure
$
(40,556
)
$
(45,724
)
$
(0.70
)
65,200
Valuation allowance on deferred taxes
(a)
—
9,977
9,977
0.15
Adjusted Non-GAAP Measure
$
(40,556
)
$
(35,747
)
$
(0.55
)
- Valuation allowance provided against 2021 losses.
EBITDA
EBITDA is defined as net loss before interest expense (net of
interest income), income tax benefit and depreciation and
amortization expense.
How These Measures Are Useful
When used in conjunction with GAAP financial measures, EBITDA is
a supplemental measure of operating performance that the Company
believes is a useful measure to facilitate comparisons to
historical performance. EBITDA is used as a performance measure in
the Company's long-term executive compensation program for purposes
of determining the number of equity awards that are ultimately
earned and is also a metric used in our short-term cash incentive
compensation plan.
Limitations of the Usefulness of These Measures
Because non-GAAP financial measures are not standardized, EBITDA
may differ from similarly titled measures used by other companies
due to different methods of calculation. Presentation of EBITDA is
not intended to be considered in isolation or as a substitute for
the financial information prepared and presented in accordance with
GAAP. EBITDA excludes certain normal recurring expenses. Therefore,
these measures may not provide a complete understanding of the
Company's performance and should be reviewed in conjunction with
the GAAP financial measures. A reconciliation of EBITDA to the most
directly comparable GAAP measures, is set forth below:
Thirteen Weeks Ended
(in thousands)
April 30, 2022
May 1, 2021
Net loss
$
(11,914
)
$
(45,724
)
Interest expense, net
3,494
5,252
Income tax benefit
(483
)
(84
)
Depreciation and amortization
14,736
16,754
EBITDA (Non-GAAP Measure)
$
5,833
$
(23,802
)
Free Cash Flow
Free cash flow is defined as cash used in operating activities
less capital expenditures.
How These Measures Are Useful
Management believes that free cash flow provides useful
information regarding liquidity as it shows our operating cash
flows less cash reinvested in the business (capital
expenditures).
Limitations of the Usefulness of These Measures
Because non-GAAP financial measures are not standardized, free
cash flow may differ from similarly titled measures used by other
companies due to different methods of calculation. Presentation of
free cash flow is not intended to be considered in isolation or as
a substitute for the financial information prepared and presented
in accordance with GAAP. These measures may not provide a complete
understanding of the Company's performance and should be reviewed
in conjunction with the GAAP financial measures. A reconciliation
of free cash flow to the most directly comparable GAAP measures, is
set forth below:
Thirteen Weeks Ended
(in thousands)
April 30, 2022
May 1, 2021
Net cash used in operating activities
$
(75,879
)
$
(1,580
)
Less:
Capital expenditures
(5,142
)
(3,562
)
Free Cash Flow (Non-GAAP Measure)
$
(81,021
)
$
(5,142
)
Schedule 5
Express, Inc.
Real Estate Activity
(Unaudited)
First Quarter 2022 -
Actual
April 30, 2022 -
Actual
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
(2)
344
Outlet Stores
—
(1)
202
Express Edit Stores
1
(1)
5
UpWest Stores
3
—
10
TOTAL
4
(4)
561
4.7 million
Second Quarter 2022 -
Projected
July 30, 2022 -
Projected
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
—
344
Outlet Stores
—
—
202
Express Edit Stores
1
—
6
UpWest Stores
4
—
14
TOTAL
5
—
566
4.7 million
Full Year 2022 -
Projected
January 28, 2023 -
Projected
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
(12)
334
Outlet Stores
—
(3)
200
Express Edit Stores
6
(1)
10
UpWest Stores
9
(1)
15
TOTAL
15
(17)
559
4.6 million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220524006011/en/
INVESTOR CONTACT Greg
Johnson VP, Investor Relations gjohnson@express.com (614)
474-4890
Express (NYSE:EXPR)
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