Express, Inc. Reports First Quarter 2015 Results Exceeding Guidance; Introduces Second Quarter Guidance And Raises Full Year 2015 Outlook

COLUMBUS, Ohio, May 28, 2015 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating approximately 630 stores, announced its financial results for the first quarter of 2015. These results cover the thirteen week period ended May 2, 2015.

David Kornberg, the Company's President and Chief Executive Officer, noted that, "2015 is off to a strong start. In the first quarter, comparable sales rose by 7% and our merchandise margin expanded by 200 basis points, driving earnings above our initial expectations. Our customers responded with enthusiasm to our assortment while we intensified our inventory discipline and scaled back our promotional activity. We also continued to execute against our growth pillars and our 2015 priorities. I am particularly pleased that the growth we delivered resulted from our balanced approach to running the business."

First Quarter 2015 Operating Results:

• Net sales increased 9% to $502.4 million from $460.7 million in the first quarter of 2014.
• Comparable sales (including e-commerce sales) increased 7%.
• E-commerce sales rose 12% to $77.6 million.
• Merchandise margin grew by 200 basis points, primarily attributable to better acceptance of our product assortment as well as a more restrained use of promotions compared to last year's first quarter. Buying and occupancy as a percent of net sales improved by 130 basis points as costs were leveraged against a larger revenue base. In combination, this resulted in a gross margin improvement of 330 basis points, with gross margin of 33.1% compared to 29.8% in last year's first quarter.
• Selling, general, and administrative (SG&A) expenses were $133.2 million versus $122.9 million in last year's first quarter, primarily due to the timing of certain marketing activities and various payroll related expenses. As a percentage of net sales, SG&A expenses decreased by 20 basis points to 26.5% compared to 26.7% in last year's first quarter.
• Operating income was $33.9 million, or 6.8% of net sales, compared to $15.0 million, or 3.3% of net sales in the first quarter of 2014.
• Income tax expense was $8.9 million, at an effective tax rate of 40.6%, compared to $4.0 million, at an effective tax rate of 44.3% in last year's first quarter.
• Net income was $13.1 million, or $0.15 per diluted share. This compares to net income of $5.1 million, or $0.06 per diluted share, in the first quarter of 2014. After considering approximately $9.7 million of pre-tax non-core operating expenses incurred in connection with the full redemption of our Senior Notes due 2018, adjusted net income was $19.0 million, or $0.22 per diluted share. Refer to Schedule 4 for a reconciliation of GAAP to Non-GAAP financial measures.
• Real estate activity for the first quarter of 2015 is presented in Schedule 5.

First Quarter 2015 Balance Sheet Highlights:

• Cash and cash equivalents totaled $127.7 million versus $250.2 million at the end of the first quarter of 2014. The lower cash balance reflects the redemption of the remaining $200.9 million of our 8.75% Senior Notes using approximately $215 million of cash for the payment of principal, accrued interest, and the call premium. This redemption eliminates approximately $19 million of interest expense annually.
• Capital expenditures totaled $23.1 million compared to $26.9 million in the prior year's first quarter.
• Inventory was $265.9 million compared to $235.0 million at the end of the prior year's first quarter and includes approximately $35.4 million related to Express Factory Outlet stores this year compared to approximately $10.6 million in the prior year's first quarter.

Asset-Based Loan Facility:
On May 20, 2015, the Company amended and restated its existing asset-based loan facility. The amendment increased the borrowing capacity under the facility from $200 million to $250 million and extended the term of the facility to May 20, 2020. As of May 27, 2015, there were no borrowings outstanding under the facility. Further details regarding changes to the facility are available on the Form 8-K filed by the Company with the SEC on May 27, 2015.

2015 Guidance:
The table below compares the Company's projected results for the thirteen week period ended August 1, 2015 to the actual results for the thirteen week period ended August 2, 2014.

This guidance does not take into account any additional non-core operating items that may occur.

The table below compares the Company's projected results for the 52 week period ended January 30, 2016 to the actual results for the 52 week period ended January 31, 2015.

This guidance does not take into account any additional non-core operating items that may occur.

See Schedule 5 for a discussion of projected real estate activity.

Conference Call Information:
A conference call to discuss first quarter 2015 results is scheduled for Thursday, May 28, 2015, 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 from 12:00 p.m. ET on May 28, 2015 until 11:59 p.m. ET on June 4, 2015 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13607482.

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 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 more than 600 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 in the Middle East, Latin America, and South Africa. Express also markets and sells its products through its e-commerce website, www.express.com, as well as its mobile app for iOS.

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 2015, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, adjusted net income, earnings per diluted share, adjusted earnings per diluted share, and capital expenditures, (2) statements regarding expected store openings, store closures, and gross square footage, and (3) statements regarding the Company's future plans and initiatives, including, but not limited to, objectives for 2015 and the Company's growth pillars. 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) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (3) 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, and promotions; (4) competition from other retailers; (5) customer traffic at malls, shopping centers, and at our stores and customer traffic to our website; (6) our dependence on a strong brand image; (7) our ability to develop and maintain a reliable omni-channel experience for our customers; (8) the failure or breach of information systems upon which we rely; (9) our ability to protect customer data from fraud and theft; (10) our dependence upon third parties to manufacture all of our merchandise; (11) changes in the cost of raw materials, labor, and freight; (12) supply chain disruption; (13) our dependence upon key executive management; (14) our growth strategy, including our new store, e-commerce, and international expansion plans; (15) our reliance on third parties to provide us with certain key services for our business; (16) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (17) 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; (18) impairment charges on long-lived assets; (19) substantial lease obligations; (20) changes in tax requirements, results of tax audits, and other factors that may cause fluctuations in our effective tax rates; and (21) restrictions imposed on us under the terms of our asset-based loan facility. 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.

SOURCE Express, Inc.