Express, Inc. Reports Fourth Quarter 2014 Results Exceeding Increased Guidance; Introduces First Quarter And Full Year 2015 Outlook

COLUMBUS, Ohio, March 11, 2015 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating approximately 640 stores, announced its financial results for the fourth quarter and full year 2014. These results cover the 13 and 52 week periods ended January 31, 2015 and compare to the 13 and 52 week periods ended February 1, 2014.

David Kornberg, the Company's President and Chief Executive Officer, noted that, "Our fourth quarter comparable sales and earnings performance exceeded the increased guidance that we issued in January. Sales picked up substantially during the final two weeks of December and remained strong throughout the balance of the quarter. I'm particularly pleased that as we reduced all-store promotional activity in January versus the prior year, we drove merchandise margin gains and positioned ourselves to begin 2015 with a better composition of spring inventory than at this time last year."

Mr. Kornberg went on to note that, "For 2015, our efforts will revolve around five key priorities. First and foremost is increasing our profitability through a balanced approach to managing the business. We will execute against our growth pillars to drive predictable, sustainable, and profitable growth through a combination of top line improvement, margin expansion, and expense leverage. Our remaining priorities will center on elevating our customer experience, sharpening our brand position, investing in systems that enable us to better support our customer centric focus, and continuing to support and develop our people. This brief summary encapsulates an expansive plan that is designed to position Express for many years of profitable growth."

Fourth Quarter 2014 Operating Results:

• Net sales increased to $725.8 million from $715.9 million in the fourth quarter of 2014, an increase of 1%.
• Comparable sales during the quarter (including e-commerce sales) decreased 2% against a comparable sales increase of 1% in last year's fourth quarter. E-commerce sales rose 4% to $144.3 million.
• Merchandise margins grew by 70 basis points as the Company benefited from more targeted promotional activity compared to the prior year. Our buying and occupancy deleverage of 100 basis points, driven by higher rent and depreciation expense, resulted in a gross margin of 31.7% of net sales compared to 32.0% in last year's fourth quarter.
• Selling, general, and administrative (SG&A) expenses were $152.7 million versus $144.1 million in last year's fourth quarter, primarily due to incremental marketing activities. As a percentage of net sales, SG&A expenses increased by 90 basis points to 21.0% compared to 20.1% in last year's fourth quarter.
• Operating income was $76.5 million, or 10.5% of net sales, compared to $85.4 million, or 11.9% of net sales in the fourth quarter of 2013.
• Income tax expense was $27.7 million, at an effective tax rate of 39.8%, compared to $31.8 million, at an effective tax rate of 39.9% in last year's fourth quarter.
• Net income was $41.8 million, or $0.49 per diluted share. This compares to net income of $47.9 million, or $0.57 per diluted share, in the fourth quarter of 2013.
• Real estate activity for the fourth quarter of 2014 is detailed in Schedule 4.

Fifty-Two Week Period Operating Results:

• Net sales decreased 2% to $2.17 billion from $2.22 billion in the prior year period.
• Comparable sales (including e-commerce sales) decreased 5%, compared to a 3% increase in 2013. E-commerce sales rose 4% to $354.2 million.
• Gross margin was 30.5% of sales compared to 32.3% in the prior year period. Merchandise margin was flat for the year and buying and occupancy costs as a percentage of sales increased 180 basis points.
• SG&A expenses were $524.0 million versus $504.3 million in the prior year period. This represented 24.2% of net sales, compared to 22.7% in 2013.
• Operating income was $136.6 million, or 6.3% of net sales, compared to $214.3 million, or 9.7% of net sales in 2013.
• The effective tax rate declined to 38.8% compared to 39.7% in 2013. The overall tax rate for 2014 was reduced as a result of the completion of a multi-year tax examination.
• Net income was $68.3 million, or $0.81 per diluted share, compared to net income of $116.5 million, or $1.37 per diluted share, in 2013.

 2014 Balance Sheet Highlights:

• Cash and cash equivalents totaled $346.2 million versus $311.9 million at the end of 2013.
• Capital expenditures totaled $115.1 million in 2014 compared to $105.4 million in the prior year.
• Inventory was $241.1 million, an increase of 13%, compared to $212.5 million at the end of 2013. This includes approximately $26 million of inventory related to Express Factory Outlet stores.

Redemption of Senior Notes and Share Repurchases:

The Company redeemed the remaining $200.9 million of its 8 ¾% Senior Notes due 2018 (the "Senior Notes") on March 1, 2015 at 102.188% of the principal amount, with total payments equal to $1,021.88 per $1,000 principal amount, plus accrued and unpaid interest to, but not including, the redemption date. During the fourth quarter, the Company did not repurchase any shares of its common stock.

2015 Guidance:

The table below compares the Company's projected results for the 13 week period ended May 2, 2015 to the actual results for the 13 week period ended May 3, 2014.

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.

Conference Call Information:

A conference call to discuss fourth quarter 2014 results is scheduled for Wednesday, March 11, 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 March 11, 2015 until 11:59 p.m. ET on March 18, 2015 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13601809.

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. 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 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. 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 first 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. 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 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 our use our trademarks 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 revolving credit 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.

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SOURCE Express, Inc.