Express, Inc. Reports First Quarter 2013 Results; Introduces Second Quarter Outlook and Raises Full Year Guidance - First quarter net sales rise 3%; comparable sales are flat

- First quarter diluted EPS reaches $0.38, at upper end of guidance

- Full year guidance raised to reflect first quarter results and positive second quarter outlook

COLUMBUS, Ohio, May 30, 2013 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating 620 stores, today announced its first quarter 2013 financial results for the thirteen week period ended May 4, 2013, compared to the thirteen week period ended April 28, 2012. 

Michael Weiss, Express, Inc.'s Chairman and Chief Executive Officer commented, "Much has been written about the macro-economic events and difficult retail environment that made the first quarter so challenging.  We successfully overcame those hurdles to deliver results that were at the high end of our guidance.  It's always about the product, and our customers responded enthusiastically to our spring merchandise, which we consider to be fresh and on-trend.  While we promoted more heavily in the face of a highly promotional environment, we managed our expenses tightly and ended the quarter well-positioned to achieve our annual goals."

During the quarter, progress was made on each of our growth pillars.  Mr. Weiss noted that, "The direction the business is heading is positive.  As we start the second quarter, momentum in the business is on the upswing, and conversion, which we often cite as a leading indicator of the business, has been building since relatively early in the first quarter.  We are opening several new or remodeled stores in key malls that reflect our intensified focus on prime "hub" locations.  Our e-commerce business continued to grow rapidly, and our international presence expanded, as we added three additional franchise locations."

He went on to add that, "In March, we announced that we have been exploring another growth opportunity, namely outlet stores.  I'm very pleased to announce that our search for someone to head this business has concluded successfully.  This ensures that we will have the necessary expertise in-house to fully develop this strategy."

First Quarter 2013 Operating Results:

  • Net sales increased 3% to $508.5 million from $496.0 million in the first quarter of 2012.
  • Comparable sales were flat following a 4% comparable sales increase in last year's first quarter.  This includes e-commerce sales, which increased 48% to $70.7 million.  In last year's first quarter, e-commerce sales grew 28% to $47.9 million.
  • Gross margin declined to 33.6% of net sales compared to 38.1% in the first quarter of 2012.  Merchandise margin declined 240 basis points driven by increased promotional activity.  Buying and occupancy expenses as a percentage of sales increased 210 basis points, in-line with expectations.
  • Disciplined expense management led to lower selling, general, and administrative (SG&A) expenses of $112.6 million versus $114.2 million in last year's first quarter. As a percent of sales, SG&A expenses improved 90 basis points to 22.1% of net sales compared to 23.0% in the same period last year.
  • Operating income was $58.7 million, or 11.5% of net sales, compared to $74.6 million, or 15.0% of net sales, in the first quarter of 2012.
  • The effective tax rate declined to 39.6% compared to 39.9% in last year's first quarter.
  • Net income was $32.4 million, or $0.38 per diluted share, compared to net income of $42.1 million, or $0.47 per diluted share, in the first quarter of 2012. 
  • Capital expenditures totaled $16.9 million, consistent with the first quarter of 2012.
  • Real estate activity for the first quarter of 2013 is detailed in Schedule 4.

First Quarter 2013 Balance Sheet:

  • Cash and cash equivalents totaled $244.2 million versus $180.4 million at the end of the first quarter of 2012.
  • As expected, inventory rose to $226.3 million, an increase of 12.8%, compared to $200.6 million at the end of the first quarter of 2012.  The calendar shift due to last year's 53rd week accounted for approximately 4.0% of the increase.  Inventory per square foot increased 6.0% compared to the comparable period in 2012. 
  • Long-term debt was relatively unchanged at $198.9 million, with no borrowings outstanding under the Revolving Credit Facility. 

2013 Guidance:
The table below compares the Company's projected results for the 13 week period ended August 3, 2013 to the actual results for the thirteen week period ended July 28, 2012.       

 


Second Quarter 2013 Guidance


Second Quarter 2012 Actual Results

Comparable Sales

+Mid Single Digits


+1%

Effective Tax Rate

Approximately 40%


39.6%

Interest Expense

$5 million


$4.8 million

Net Income

$15 - $18 million


$15.8 million

Diluted EPS

$0.17 - $0.21


$0.18

Weighted Average Diluted Shares Outstanding

85.6 million


88.0 million

See Schedule 4 for projected real estate activity.

 

The table below compares the Company's projected results for the fifty-two week period ended February 1, 2014 to the actual results for the fifty-three week period ended February 2, 2013.

 


Revised

Full Year 2013

Guidance


Full Year 2012

Actual Results

Comparable Sales

+Low to Mid Single Digits


Flat

Effective Tax Rate

39.3% - 39.8%


40%

Interest Expense

$20 million


$19.6 million

Net Income

$127 - $135 million


$139.3 million (1)

Diluted EPS

$1.48 - $1.58


$1.60 (2)

Weighted Average Diluted Shares Outstanding    

85.7 million


87.2 million

Capital Expenditures

$110 - $115 million


$99.7 million

(1) Includes approximately $3.0 million related to the 53rd week

(2) Includes approximately $0.04 related to the 53rd week


See Schedule 4 for projected real estate activity.

 

Consistent with previous years, the quarterly and full year guidance excludes any non-core operating items that may occur, as well as any costs associated with the new outlet strategy.

Conference Call Information:
A conference call to discuss first quarter results is scheduled for May 30, 2013, at 9:00 a.m. Eastern Time (ET).  Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 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 May 30, 2013 until 11:59 p.m. ET on June 6, 2013 and can be accessed by dialing (877) 870-5176 and entering replay pin number 414518.

About Express: 
Express is a specialty apparel and accessories retailer of women's and men's merchandise, targeting the 20 to 30 year old customer. The Company has over 30 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 620 retail stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States, in Canada, and in Puerto Rico. Express merchandise is also available at franchise stores in the Middle East and Latin America. The Company also markets and sells its products through the Company's e-commerce website, 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 for the second quarter and full year 2013, including statements regarding expected comparable sales, effective tax rates, interest expense, net income and earnings per diluted share, (2) statements regarding expected store openings, store closures, and gross square footage, and (3) statements regarding growth strategies and plans. 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. 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) our ability to identify and respond to new and changing fashion trends, customer preferences and other related factors; (3) fluctuations in our sales and results of operations on a seasonal basis and due to store events, promotions and a variety of other factors; (4) increased competition from other retailers; (5) changes in customer traffic at malls and shopping centers; (6) our dependence upon independent third parties to manufacture all of our merchandise; (7) changes in the cost of raw materials, labor, and freight; (8) supply chain disruption; (9) our growth strategy, including our international expansion plan; (10) our dependence on a strong brand image; (11) our dependence upon key executive management; (12) our reliance on third parties to provide us with certain key services for our business; and (13) our substantial indebtedness and lease obligations. 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 otherwise required by law.

 

Schedule 1


Express, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)



May 4, 2013


February 2, 2013


April 28, 2012

ASSETS






CURRENT ASSETS:






Cash and cash equivalents

$

244,214



$

256,297



$

180,439


Receivables, net

10,773



11,024



9,303


Inventories

226,329



215,082



200,643


Prepaid minimum rent

25,362



25,166



23,417


Other

9,850



8,293



18,360


      Total current assets

516,528



515,862



432,162








PROPERTY AND EQUIPMENT

650,899



625,344



537,692


Less: accumulated depreciation

(354,879)



(346,975)



(307,821)


Property and equipment, net

296,020



278,369



229,871








TRADENAME/DOMAIN NAME

197,734



197,719



197,694


DEFERRED TAX ASSETS

16,808



16,808



12,650


OTHER ASSETS

9,773



10,441



12,187


      Total assets

$

1,036,863



$

1,019,199



$

884,564








LIABILITIES AND STOCKHOLDERS' EQUITY






CURRENT LIABILITIES:






Accounts payable

$

158,394



$

176,125



$

140,525


Deferred revenue

22,117



27,851



21,616


Accrued bonus

468



336



3,727


Accrued expenses

94,857



108,464



95,019


Accounts payable and accrued expenses – related parties





3,605


      Total current liabilities

275,836



312,776



264,492








LONG-TERM DEBT

198,923



198,843



198,611


OTHER LONG-TERM LIABILITIES

154,497



136,418



94,921


      Total liabilities

629,256



648,037



558,024








COMMITMENTS AND CONTINGENCIES












      Total stockholders' equity

407,607



371,162



326,540


      Total liabilities and stockholders' equity

$

1,036,863



$

1,019,199



$

884,564


Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation.

 

Schedule 2


Express, Inc.

Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)



Thirteen Weeks Ended


May 4,
2013


April 28,
2012

NET SALES

$

508,524



$

495,952


COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS

337,747



307,185


                        Gross profit

170,777



188,767


OPERATING EXPENSES:




Selling, general, and administrative expenses

112,623



114,195


Other operating (income) expense, net

(540)



15


                        Total operating expenses

112,083



114,210






OPERATING INCOME

58,694



74,557






INTEREST EXPENSE, NET

4,805



4,782


OTHER EXPENSE (INCOME), NET

229



(208)


INCOME BEFORE INCOME TAXES

53,660



69,983


INCOME TAX EXPENSE

21,223



27,910


NET INCOME

$

32,437



$

42,073






OTHER COMPREHENSIVE INCOME:




Foreign currency translation

70



(78)


COMPREHENSIVE INCOME

$

32,507



$

41,995






EARNINGS PER SHARE:




Basic

$

0.38



$

0.47


Diluted

$

0.38



$

0.47






WEIGHTED AVERAGE SHARES OUTSTANDING:




Basic

85,095



88,846


Diluted

85,490



89,310


 

Schedule 3


Express, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Thirteen Weeks Ended


May 4, 2013


April 28, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:




      Net income

$

32,437



$

42,073


      Adjustments to reconcile net income to net cash provided by operating activities:




            Depreciation and amortization

17,441



17,049


            Loss on disposal of property and equipment

64



17


            Excess tax benefit from share-based compensation

(1)



(273)


            Share-based compensation

5,011



3,856


            Deferred taxes



(188)


            Changes in operating assets and liabilities:




                  Receivables, net

287



(263)


                  Inventories

(11,296)



12,468


                  Accounts payable, deferred revenue, and accrued expenses

(44,776)



(32,333)


                  Other assets and liabilities

6,194



3,216


                        Net cash provided by operating activities

5,361



45,622






CASH FLOWS FROM INVESTING ACTIVITIES:




      Capital expenditures

(16,853)



(16,932)


      Purchase of intangible assets



(185)


                        Net cash used in investing activities

(16,853)



(17,117)






CASH FLOWS FROM FINANCING ACTIVITIES:




      Payments on capital lease obligation

(15)



(13)


      Excess tax benefit from share-based compensation

1



273


      Proceeds from share-based compensation

1,082



623


      Repurchase of common stock

(1,785)



(1,349)


                        Net cash used in financing activities

(717)



(466)






EFFECT OF EXCHANGE RATE ON CASH

126



38






NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(12,083)



28,077


CASH AND CASH EQUIVALENTS, Beginning of period

256,297



152,362


CASH AND CASH EQUIVALENTS, End of period

$

244,214



$

180,439


Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation.

 

Schedule 4


Express, Inc.

Real Estate Activity

(Unaudited)


First Quarter 2013 - Actual


May 4, 2013

Company-Operated Stores

Open

Close


Store Count

Gross Square

Footage

United States

2

8


608


Canada

1


12


Total

3

8


620

5.4 million







Second Quarter 2013 - Projected


August 3, 2013

Company-Operated Stores

Open

Close


Store Count

Gross Square

Footage

United States

2

1


609


Canada

1


13


Total

3

1


622

5.4 million







Full Year 2013 - Projected


February 1, 2014

Company-Operated Stores

Open

Close


Store Count

Gross Square

Footage

United States

12

9


617


Canada

4


15


Total

16

9


632

5.5 million

 

SOURCE Express, Inc.



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