- First quarter diluted loss per share of $2.41; adjusted
diluted loss per share of $1.55
- Ended quarter with $236 million in cash
- Phased re-opening of stores began on May 1; 303
(approximately 50%) now open with an additional 58 confirmed to
open this week
- Continued momentum on long-term strategy - The EXPRESSway
Forward
Fashion apparel retailer Express, Inc. (NYSE:EXPR), announced
its financial results for the first quarter of 2020. These results,
which cover the thirteen weeks ended May 2, 2020, are compared to
the thirteen weeks ended May 4, 2019.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200603005219/en/
Express storefront at Easton Town Center
in Columbus, Ohio. (Photo: Business Wire)
"The impact of the COVID-19 pandemic on our industry, economy,
communities, associates, and customers over the last few months is
unlike anything we have experienced before; and the protests and
demonstrations across the country over the last week create even
more uncertainty. As a Company, our efforts have been focused on
protecting the safety of our associates and customers, and ensuring
sufficient liquidity to continue the important work of our
transformation,” said Tim Baxter, Chief Executive Officer.
“Response to product that reflects our new design &
merchandising vision – The Express Edit – with its emphasis on
versatility and value, has been positive, and the new ways in which
we are communicating our brand positioning – Creating Confidence
& Inspiring Self-Expression – are resonating with our
customers,” Baxter continued. “Through the clear direction of our
Executive team and the dedication of our associates, our
organization did not miss a beat. The teams made a smooth
transition to working from home, kept a sharp focus on our key
initiatives and hit every milestone in our product development
cycle and new Go to Market process. And as our stores reopened, I
witnessed reunions between sales associates and customers that
speak volumes about the strength of our brand, the relevance of our
positioning and the importance of physical retail. I am so proud of
all the ways our leaders and teams have kept moving on The
EXPRESSway Forward. I am confident that with the decisive actions
we have taken and the strategy we have implemented, we will achieve
our long-term objectives.”
COVID-19 Impact Mitigation Actions:
As previously announced, the Company took a number of actions to
support associates and maintain liquidity throughout the COVID-19
pandemic, which are as follows:
- Provided medical benefit continuation for all full-time
furloughed associates
- Implemented work from home protocols to maintain
productivity
- Accessed $165 million from its $250 million asset based credit
facility
- Cut second quarter inventory receipts by over $100 million
- Identified cost savings of approximately $75 million dollars to
be realized in 2020, including the impact from our previously
announced COVID-19 mitigation actions, and a decrease in our
variable costs as a result of the decline in sales
- Lowered expected annual capital expenditures by approximately
$25 million
- Anticipated cash benefits in 2020 from the Coronavirus Aid
Relief and Economic Security (CARES) Act of approximately $20
million, including the expanded operating loss carry back, employer
payroll tax credit and deferral provisions. Additional significant
cash benefits from the CARES Act are also expected to be realized
in 2021.
The total liquidity benefits from these actions in 2020 are
expected to be approximately $385 million, of which $195 million
was realized in the first quarter. These benefits are incremental
to the previously announced cost savings associated with The
EXPRESSway Forward strategy.
First Quarter 2020 Operating Results:
- Consolidated net sales decreased 53% to $210.3 million from
$451.3 million in the first quarter of 2019.
- Gross margin was (22.0)% of net sales compared to 27.1% in last
year's first quarter. The decrease was driven by the sales impact
from COVID-19, higher valuation reserves related to inventory and
certain fabric commitments and a $14.7 million non-cash impairment
charge taken against certain long-lived store assets.
- Selling, general, and administrative (SG&A) expenses were
$99.2 million, 47.2% of net sales, versus $135.4 million, 30.0% of
net sales, in last year's first quarter. The decrease was driven
primarily by the previously announced corporate restructuring, the
COVID-19 mitigation actions taken by the Company, and a reduction
in variable costs driven by the sales decline.
- Operating loss was $145.3 million compared to a loss of $11.6
million in the first quarter of 2019.
- Income tax expense was $6.0 million at an effective tax rate of
(4.0)%, compared to income tax benefit of $0.9 million at an
effective tax rate of 8.4% in last year's first quarter. The
Company's effective tax rate for the first quarter of 2020 was
impacted primarily by the recording of a valuation allowance
against the Company's deferred tax assets.
- Net loss was $154.1 million, or a loss of $2.41 per diluted
share. On an adjusted basis, net loss was $99.4 million, or a loss
of $1.55 per diluted share for the first quarter of 2020. The
adjusted loss excludes the income tax benefit from the CARES Act of
$19.5 million, as well as the negative non-cash impacts of the
$61.1 million deferred tax asset valuation allowance, the $14.7
million pretax impairment charge mentioned above, and a $2.7
million pretax write-off of the Company's 2016 investment in
Homage. This compares to a net loss of $9.9 million, or a loss of
$0.15 per diluted share, in the first quarter of 2019.
First Quarter 2020 Balance Sheet Highlights:
- Cash and cash equivalents totaled $236.2 million versus $144.2
million at the end of the first quarter of 2019.
- Capital expenditures totaled $4.2 million for the thirteen
weeks ended May 2, 2020, compared to $4.1 million for the thirteen
weeks ended May 4, 2019.
- Inventory was $268.8 million at the end of the first quarter,
down 6% compared to $285.6 million at the end of the prior year’s
first quarter.
Store Reopening Plans:
As of June 3, 2020, the Company has opened 303 stores, in
accordance with the latest federal and state guidelines. The
Company is taking the following actions to provide a safe and
comfortable environment for our associates and customers:
- Training associates on the new health and safety protocols
- Practicing proper social distancing, and providing contact-free
customer service and payment options
- Implementing enhanced cleaning and sanitizing procedures across
all stores
- Designating a maximum capacity for each store
- Installing Plexiglas shields at all checkout counters
- Requiring all associates to wear face coverings
- Offering curbside pickup at Easton in Columbus, OH and Chicago,
IL test locations with a plan to expand to more stores
- Introducing enhanced buy online pick-up in stores ("BOPIS")
customer experience in select reopened stores, with plans to roll
out to the entire store base by the end of the third quarter
The Company is taking a phased approach to reopening stores,
with the pace and staffing calibrated to mall traffic and consumer
demand. Plans will be accelerated or modified based on the
learnings as well as any updated associate and customer safety
measures.
Open store locations and hours of operation are available at
www.express.com. The Company’s website and mobile app remain
available to customers.
Second Quarter 2020 Guidance:
Due to the uncertainty surrounding the current environment, the
Company will not provide guidance for the second quarter or the
year at this time, with the exception of capital expenditures,
which are expected to be in the range of $20 million to $25 million
for the full year 2020.
Conference Call Information:
A conference call to discuss first quarter 2020 results is
scheduled for June 3, 2020 at 9:00 a.m. Eastern Time (ET).
Investors and analysts interested in participating in the call are
invited to dial (877) 683-0508 approximately ten minutes prior to
the start of the call. The conference call will also be webcast
live at http://www.express.com/investor and remain available for 90
days. A telephone replay of this call will be available at 12:00
p.m. ET on June 3, 2020 until 11:59 p.m. ET on June 10, 2020 and
can be accessed by dialing (800) 585-8367 and entering the replay
pin number 9374457*. In addition, an investor presentation of first
quarter 2020 results will be available at
http://www.express.com/investor at approximately 7:00 a.m. ET on
June 3, 2020.
About Express, Inc.:
Express is a leading fashion brand for women and men. Since
1980, Express has provided the latest apparel and accessories to
help customers build a wardrobe for every occasion, offering
fashion and quality at an attractive value. The company operates
retail and factory outlet stores in the United States and Puerto
Rico, as well as an online destination. For more information,
please visit www.express.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, 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. 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
impact and its continued impact on our business operations, store
traffic, employee availability, financial condition, liquidity and
cash flow; (3) our ability to identify and respond to new and
changing fashion trends, customer preferences, and other related
factors; (4) 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; (5) customer traffic at malls, shopping centers, and at our
stores; (6) competition from other retailers; (7) our dependence on
a strong brand image; (8) our ability to adapt to changing consumer
behavior and develop and maintain a relevant and reliable
omni-channel experience for our customers; (9) the failure or
breach of information systems upon which we rely; (10) our ability
to protect customer data from fraud and theft; (11) our dependence
upon third parties to manufacture all of our merchandise; (12)
changes in the cost of raw materials, labor, and freight; (13)
supply chain or other business disruption, including as a result of
the coronavirus; (14) our dependence upon key executive management;
(15) 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; (16) our
substantial lease obligations; (17) our reliance on third parties
to provide us with certain key services for our business; (18)
impairment charges on long-lived assets; (19) claims made against
us resulting in litigation or changes in laws and regulations
applicable to our business; (20) 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; (21) restrictions imposed on us under the terms of our
asset-based loan facility, including restrictions on the ability to
effect share repurchases; (22) changes in tax requirements, results
of tax audits, and other factors that may cause fluctuations in our
effective tax rate; (23) changes in tariff rates; and (24) natural
disasters, extreme weather, public health issues, including
pandemics, fire, acts of terrorism or war and other events that
cause business interruption. Additional information concerning
these and other 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 required by law.
Schedule 1
Express, Inc.
Consolidated Balance
Sheets
(In thousands)
(Unaudited)
May 2, 2020
February 1, 2020
May 4, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
236,185
$
207,139
$
144,233
Receivables, net
12,897
10,824
13,916
Inventories
268,787
220,303
285,641
Prepaid rent
330
6,850
6,212
Other
35,881
25,573
29,219
Total current assets
554,080
470,689
479,221
RIGHT OF USE ASSET, NET
963,142
1,010,216
1,149,360
PROPERTY AND EQUIPMENT
985,091
979,639
1,010,648
Less: accumulated depreciation
(754,414
)
(731,309
)
(723,400
)
Property and equipment, net
230,677
248,330
287,248
TRADENAME/DOMAIN NAMES/TRADEMARKS
—
—
197,618
DEFERRED TAX ASSETS
—
54,973
6,605
OTHER ASSETS
51,285
6,531
6,635
Total assets
$
1,799,184
$
1,790,739
$
2,126,687
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES:
Short-term lease liability
$
225,383
$
226,174
$
228,212
Accounts payable
123,429
126,863
133,598
Deferred revenue
31,331
38,227
36,304
Accrued expenses
91,797
76,211
95,752
Total current liabilities
471,940
467,475
493,866
LONG-TERM LEASE LIABILITY
879,983
897,304
1,042,146
LONG-TERM DEBT
165,000
—
—
DEFERRED LEASE CREDITS
1,731
1,835
3,473
OTHER LONG-TERM LIABILITIES
26,316
17,823
21,455
Total liabilities
1,544,970
1,384,437
1,560,940
COMMITMENTS AND CONTINGENCIES
Total stockholders’ equity
254,214
406,302
565,747
Total liabilities and stockholders’
equity
$
1,799,184
$
1,790,739
$
2,126,687
Schedule 2
Express, Inc.
Consolidated Statements of
Income
(In thousands, except per share
amounts)
(Unaudited)
Thirteen Weeks Ended
May 2, 2020
May 4, 2019
NET SALES
$
210,275
$
451,271
COST OF GOODS SOLD, BUYING AND OCCUPANCY
COSTS
256,482
328,768
Gross (loss)/profit
(46,207
)
122,503
OPERATING EXPENSES:
Selling, general, and administrative
expenses
99,165
135,367
Other operating income, net
(93
)
(1,310
)
Total operating expenses
99,072
134,057
OPERATING LOSS
(145,279
)
(11,554
)
INTEREST EXPENSE/(INCOME), NET
56
(712
)
OTHER EXPENSE, NET
2,733
—
LOSS BEFORE INCOME TAXES
(148,068
)
(10,842
)
INCOME TAX EXPENSE/(BENEFIT)
5,982
(908
)
NET LOSS
$
(154,050
)
$
(9,934
)
EARNINGS PER SHARE:
Basic
$
(2.41
)
$
(0.15
)
Diluted
$
(2.41
)
$
(0.15
)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic
64,030
66,845
Diluted
64,030
66,845
Schedule 3
Express, Inc.
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended
May 2, 2020
May 4, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(154,050
)
$
(9,934
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
19,332
22,216
Loss on disposal of property and
equipment
—
350
Impairment of property, equipment and
lease assets
14,678
—
Equity method investment impairment
2,733
—
Share-based compensation
2,502
2,372
Deferred taxes
64,424
(14
)
Landlord allowance amortization
(104
)
(813
)
Changes in operating assets and
liabilities:
Receivables, net
(2,073
)
3,453
Inventories
(48,485
)
(17,875
)
Accounts payable, deferred revenue, and
accrued expenses
2,117
(10,819
)
Other assets and liabilities
(32,312
)
(5,881
)
Net cash used in operating activities
(131,238
)
(16,945
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(4,176
)
(4,078
)
Net cash used in investing activities
(4,176
)
(4,078
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from financing arrangements
165,000
—
Payments on lease financing
obligations
—
(27
)
Repurchase of common stock under share
repurchase program
—
(4,889
)
Repurchase of common stock for tax
withholding obligations
(540
)
(1,498
)
Net cash provided by (used in) financing
activities
164,460
(6,414
)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
29,046
(27,437
)
CASH AND CASH EQUIVALENTS, Beginning of
period
207,139
171,670
CASH AND CASH EQUIVALENTS, End of
period
$
236,185
$
144,233
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 net loss, adjusted operating loss, and adjusted
diluted earnings per share. 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
net loss, adjusted operating 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. In addition, adjusted diluted earnings per share 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 adjusted operating
loss is a metric used in our short-term cash incentive compensation
plan. Because non-GAAP financial measures are not standardized, it
may not be possible to compare these financial measures with other
companies' non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for reported net loss, operating
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 and the below
reconciliations to the corresponding GAAP financial measures,
provide a more complete understanding of the Company's business.
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.
Thirteen Weeks Ended May 2,
2020
(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
$
(145,279
)
$
(154,050
)
$
(2.41
)
64,030
Impairment of property, equipment and
lease assets
14,678
(3,856
)
10,822
0.17
Equity method investment impairment
(a)
—
(642
)
2,091
0.03
Valuation allowance on deferred taxes
(b)
—
61,075
61,075
0.95
Tax impact of the CARES Act (c)
—
(19,473
)
(19,473
)
(0.30
)
Tax impact of executive departures (d)
—
111
111
—
Adjusted Non-GAAP Measure
$
(130,601
)
$
(99,424
)
$
(1.55
)
- Impairment before tax was $2.7 million and was recorded in
Other Expense, net
- Valuation allowance provided against incurred and potential
2020 losses and previously recognized deferred tax assets, less net
operating losses utilized within CARES Act
- The Company recognized an income tax benefit of $19.5 million
primarily due to a net operating loss carryback under the enacted
U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act.
- Represents the tax impact related to the expiration of former
executive non-qualified stock options.
Schedule 5
Express, Inc.
Real Estate Activity
(Unaudited)
First Quarter 2020 -
Actual
May 2, 2020 - Actual
Company-Operated
Stores
Opened
Closed
Conversion
Store Count
Gross Square Footage
United States - Retail Stores
—
(1)
—
380
United States - Outlet Stores
—
—
—
214
Total
—
(1)
—
594
5.0 million
Second Quarter 2020 -
Projected
August 1, 2020 -
Projected
Company-Operated
Stores
Opened
Closed
Conversion
Store Count
Gross Square Footage
United States - Retail Stores
—
—
—
380
United States - Outlet Stores
1
—
—
215
Total
1
—
—
595
5.0 million
Full Year 2020 -
Projected
January 30, 2021 -
Projected
Company-Operated
Stores
Opened
Closed
Conversion
Store Count
Gross Square Footage
United States - Retail Stores
1
(26)
—
356
United States - Outlet Stores
1
(9)
—
206
Total
2
(35)
—
562
4.8 million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200603005219/en/
Investors: Dan Aldridge VP,
Investor Relations Express (614) 474-4890
Media: Alysa Spittle Director,
Communications Express (614) 474-4745
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