Delivers fifth consecutive quarter of positive
comparable sales versus pre-pandemic levels
Fashion apparel retailer Express, Inc. (NYSE: EXPR), announced
its financial results for the second quarter of 2022. These
results, which cover the thirteen weeks ended July 30, 2022, are
compared to the thirteen weeks ended July 31, 2021.
"In the second quarter, we delivered our fifth consecutive
quarter of positive comparable sales compared to pre-pandemic
levels, drove gross margin expansion of 50 basis points and
delivered operating income of $10 million," said Tim Baxter, Chief
Executive Officer. "While our performance was below our outlook, we
achieved solid results despite challenging macroeconomic conditions
that worsened as the quarter progressed."
Second Quarter 2022
Highlights
- Increased comparable sales by 1% compared to 2021, achieving
the fifth consecutive quarter of positive comparable sales compared
to pre-pandemic levels. Increased comparable sales by 4% compared
to 2019
- Drove record Express Factory Outlet stores revenue for a second
quarter and increased comparable sales by 2%
- Delivered gross margin expansion of 50 basis points compared to
2021, driven by net sales growth and lower compensation-related
expenses. Delivered 630 basis point expansion compared 2019
- Generated operating income of $10 million and EBITDA of $26
million
- Continued to operate with the highest number of active Express
Insider loyalty members in the Company's history
"While we have lowered our outlook for the back half of this
year to reflect the uncertainty of macroeconomic conditions, we
remain committed to our long-term objective of a mid-single digit
operating margin. We have demonstrated our ability to stay focused
on the fundamentals, control the controllables, and operate with
both discipline and agility," Baxter concluded.
Second Quarter 2022 Operating
Results
- Consolidated net sales increased 2% to $464.9 million from
$457.6 million in the second quarter of 2021, with consolidated
comparable sales up 1%
- Comparable retail sales, which includes both Express stores and
eCommerce, were flat compared to the second quarter of 2021. Retail
stores drove a 6% increase while eCommerce demand declined 6%.
However, we remain committed to achieving our long-term goal of
$1.0 billion in eCommerce demand
- Comparable outlet store sales increased 2% versus the second
quarter of 2021
- Gross margin was 33.1% of net sales compared to 32.6% in last
year's second quarter, an increase of approximately 50 basis points
- Merchandise margin contracted by 70 basis points primarily
driven by the impact of expense associated with supply chain
costs
- Buying and occupancy expenses leveraged approximately 120 basis
points due to increased sales and lower compensation-related
expenses
- Selling, general and administrative (SG&A) expenses were
$143.3 million, 30.8% of net sales, versus $134.6 million, 29.4% of
net sales, in last year's second quarter. The deleverage in the
SG&A rate was driven by incremental investments in technology
and higher store staffing levels
- Operating income was $10.4 million compared to $14.8 million in
the second quarter of 2021
- Income tax expense was $0.3 million at an effective tax rate of
3.5%. Income tax expense and the effective tax rate were
approximately zero during the second quarter of 2021
- Net income was $7.0 million, or $0.10 per diluted share. This
compares to net income of $10.6 million, or $0.15 per diluted
share, for the second quarter of 2021
- Earnings before interest, taxes, depreciation, and amortization
(EBITDA) was $25.6 million compared to EBITDA of $30.8 million in
the second quarter of 2021
Balance Sheet and Cash Flow
Highlights
- Cash and cash equivalents totaled $37.7 million at the end of
the second quarter of 2022 versus $33.9 million at the end of the
second quarter of 2021
- Inventory was $346.2 million at the end of the second quarter,
up 30% compared to $266.6 million at the end of the prior year’s
second quarter, driven primarily by the pull-forward of purchases
to mitigate supply chain challenges as well as pack-and-hold for
late-arriving 2021 holiday inventory
- Short-term debt was $4.5 million and long-term debt was $197.7
million at the end of the second quarter of 2022 compared to
short-term debt of $9.0 million and long-term debt of $109.2
million at the end of the prior year’s second quarter
- At the end of the second quarter of 2022, $70.9 million
remained available for borrowing under the revolving credit
facility
- Operating cash flow was negative $60.8 million for the
twenty-six weeks ended July 30, 2022, compared to $67.6 million for
the twenty-six weeks ended July 31, 2021
- Capital expenditures totaled $13.5 million for the twenty-six
weeks ended July 30, 2022, compared to $10.6 million for the
twenty-six weeks ended July 31, 2021
2022 Outlook
This outlook is based on our solid year-to-date performance and
the advancements we have made in each of the four foundational
pillars of our EXPRESSway Forward strategy (Product, Brand,
Customer, Execution), balanced against the increasingly challenging
macroeconomic environment, ongoing uncertainty of the supply chain,
geopolitical events and other uncertainties that may impact our
business.
Third Quarter 2022
The Company expects the following for the third quarter of 2022
compared to the third quarter of 2021:
- Comparable sales to decrease mid-single digits
- Gross margin rate to decrease approximately 350 basis
points
- SG&A expenses as a percent of sales to delever
approximately 350 basis points, including incremental investments
in technology and higher store labor expenses
- Net interest expense of $4 million
- Effective tax rate essentially zero percent
Full Year 2022
The Company expects the following for the full year 2022
compared to the full year 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
- Net interest expense of $16 million
- Effective tax rate essentially zero percent
- Diluted loss per share of $0.16 to $0.22
- Capital expenditures of approximately $50 million
- Inventory to move closer to parity with sales growth in the
back half of the year
Assumptions in the Company's 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 second quarter 2022 results is
scheduled for August 31, 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 August 31, 2022 until 11:59 p.m. ET
on September 7, 2022 and can be accessed by dialing (800) 770-2030
and entering the replay pin number 1790468. In addition, an
investor presentation of second quarter 2022 results will be
available at www.express.com/investor
at approximately 7:00 a.m. ET on August 31, 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)
July 30, 2022
January 29, 2022
July 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents
$
37,667
$
41,176
$
33,852
Receivables, net
11,924
11,744
10,470
Income tax receivable
2,229
53,665
53,892
Inventories
346,229
358,795
266,593
Prepaid rent
6,321
5,602
4,891
Other
22,628
19,755
14,415
Total current assets
426,998
490,737
384,113
Right of Use Asset, Net
546,259
615,462
704,909
Property and Equipment
989,088
975,802
963,089
Less: accumulated depreciation
(856,324
)
(827,820
)
(806,040
)
Property and equipment, net
132,764
147,982
157,049
Non-Current Income Tax Receivable
52,278
—
—
Other Assets
4,656
5,273
4,309
TOTAL ASSETS
$
1,162,955
$
1,259,454
$
1,250,380
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current Liabilities:
Short-term lease liability
$
190,324
$
196,628
$
212,659
Accounts payable
166,378
231,974
156,896
Deferred revenue
31,632
35,985
29,674
Short-term debt
4,500
11,216
8,966
Accrued expenses
106,087
110,850
111,854
Total current liabilities
498,921
586,653
520,049
Long-Term Lease Liability
456,661
536,905
624,582
Long-Term Debt
197,673
117,581
109,207
Other Long-Term Liabilities
10,213
17,007
20,036
Total Liabilities
1,163,468
1,258,146
1,273,874
Commitments and Contingencies
Total Stockholders’ (Deficit)/Equity
(513
)
1,308
(23,494
)
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
1,162,955
$
1,259,454
$
1,250,380
Schedule 2
Express, Inc.
Consolidated Statements of
Income
(In thousands, except per share
amounts)
(Unaudited)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
July 30, 2022
July 31, 2021
July 30, 2022
July 31, 2021
Net Sales
$
464,919
$
457,627
$
915,704
$
803,386
Cost of Goods Sold, Buying and Occupancy
Costs
311,218
308,320
630,503
575,275
GROSS PROFIT
153,701
149,307
285,201
228,111
Operating Expenses:
Selling, general, and administrative
expenses
143,278
134,562
284,371
253,955
Other operating expense/(income), net
11
(31
)
(479
)
(64
)
TOTAL OPERATING EXPENSES
143,289
134,531
283,892
253,891
OPERATING INCOME/(LOSS)
10,412
14,776
1,309
(25,780
)
Interest Expense, Net
3,800
4,115
7,294
9,367
Other Income, Net
(676
)
—
(876
)
—
INCOME/(LOSS) BEFORE INCOME
TAXES
7,288
10,661
(5,109
)
(35,147
)
Income Tax Expense/(Benefit)
252
22
(231
)
(62
)
NET INCOME/(LOSS)
$
7,036
$
10,639
$
(4,878
)
$
(35,085
)
EARNINGS PER SHARE:
Basic
$
0.10
$
0.16
$
(0.07
)
$
(0.53
)
Diluted
$
0.10
$
0.15
$
(0.07
)
$
(0.53
)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic
68,150
66,527
67,681
65,863
Diluted
68,747
69,565
67,681
65,863
Schedule 3
Express, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Twenty-Six Weeks Ended
July 30, 2022
July 31, 2021
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss
$
(4,878
)
$
(35,085
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization
30,088
35,866
Loss on disposal of property and
equipment
21
—
Share-based compensation
5,013
5,404
Landlord allowance amortization
(234
)
(172
)
Changes in operating assets and
liabilities:
Receivables, net
(180
)
4,086
Income tax receivable
(842
)
57,450
Inventories
12,566
(2,233
)
Accounts payable, deferred revenue, and
accrued expenses
(76,673
)
(12,896
)
Other assets and liabilities
(25,690
)
15,171
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
(60,809
)
67,591
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(13,494
)
(10,558
)
NET CASH USED IN INVESTING
ACTIVITIES
(13,494
)
(10,558
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings under the
revolving credit facility
144,000
38,000
Repayment of borrowings under the
revolving credit facility
(69,000
)
(119,050
)
Proceeds from borrowings under the term
loan facility
—
50,000
Repayment of borrowings under the term
loan facility
(2,250
)
(43,263
)
Repayments of financing arrangements
—
(769
)
Costs incurred in connection with debt
arrangements
—
(471
)
Repurchase of common stock for tax
withholding obligations
(1,956
)
(3,502
)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
70,794
(79,055
)
NET DECREASE IN CASH AND CASH
EQUIVALENTS
(3,509
)
(22,022
)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
41,176
55,874
CASH AND CASH EQUIVALENTS, END OF
PERIOD
$
37,667
$
33,852
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 such as EBITDA. 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.
EBITDA
EBITDA is defined as net income/(loss) before interest expense
(net of interest income), income tax expense/(benefit) and
depreciation and amortization expense.
How This Measure Is 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 This Measure
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
Twenty-Six Weeks Ended
(in thousands)
July 30, 2022
July 31, 2021
July 30, 2022
July 31, 2021
Net income/(loss)
$
7,036
$
10,639
$
(4,878
)
$
(35,085
)
Interest expense, net
3,800
4,115
7,294
9,367
Income tax expense/(benefit)
252
22
(231
)
(62
)
Depreciation and amortization
14,477
16,002
29,213
32,756
EBITDA (Non-GAAP Measure)
$
25,565
$
30,778
$
31,398
$
6,976
Schedule 5
Express, Inc.
Real Estate Activity
(Unaudited)
Second Quarter 2022 -
Actual
July 30, 2022 - Actual
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
(1)
343
Outlet Stores
—
—
202
Express Edit Stores
—
—
5
UpWest Stores
4
—
14
TOTAL
4
(1)
564
4.7 million
Third Quarter 2022 -
Projected
October 29, 2022 -
Projected
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
(1)
342
Outlet Stores
—
—
202
Express Edit Stores
4
—
9
UpWest Stores
2
(1)
15
TOTAL
6
(2)
568
4.7 million
Full Year 2022 -
Projected
January 28, 2023 -
Projected
Company-Operated
Stores
Opened
Closed
Store Count
Gross Square Footage
Retail Stores
—
(13)
333
Outlet Stores
—
(3)
200
Express Edit Stores
7
(1)
11
UpWest Stores
9
(3)
13
TOTAL
16
(20)
557
4.6 million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220830005917/en/
INVESTOR CONTACT Greg
Johnson VP, Investor Relations gjohnson@express.com (614)
474-4890
Express (NYSE:EXPR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Express (NYSE:EXPR)
Historical Stock Chart
From Apr 2023 to Apr 2024