Express, Inc. Reports Second Quarter 2013 Results; Introduces Third Quarter Outlook And Raises Full Year Guidance

- Second quarter net sales rise 7%; comparable sales increase 6%

- Second quarter diluted EPS increases 11% to $0.20

- Full year guidance raised to reflect strong second quarter and positive third quarter outlook

28 Aug, 2013, 07:22 ET from Express, Inc.

COLUMBUS, Ohio, Aug. 28, 2013 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating over 620 stores, today announced its financial results for the second quarter and first six months of 2013.  These results cover the thirteen and twenty-six week periods ended August 3, 2013 and compare to the thirteen and twenty-six week periods ended July 28, 2012. 

Michael Weiss, Express, Inc.'s Chairman and Chief Executive Officer commented, "We delivered a very solid second quarter.  Financial highlights include high single digit sales growth, comparable sales that represent a return to mid-single digit growth and earnings per share that came near the upper end of our guidance. These results were driven by improved execution of our Go-to-Market strategy and by our ability to react quickly as the competitive environment evolved."

In terms of product offering, Mr. Weiss noted that, "Our customers are responding enthusiastically to our assortments, which are trend-right, differentiated and well-edited.  We are seeing this reflected in improved conversion rates.  As we move into the second half of the year, we are confident in our product and marketing strategies, and believe we are well positioned for the fall and holiday seasons."

He went on to add that, "We made progress on each of our four growth pillars during the second quarter.  At the same time, we took concrete steps to prepare for the launch of our outlet business in the second quarter of 2014, which represents another opportunity to drive significant top and bottom line growth." 

Second Quarter 2013 Operating Results:

  • Net sales increased 7% to $486.2 million from $454.9 million in the second quarter of 2012.
  • Comparable sales increased 6%, following a 1% comparable sales increase in last year's second quarter.  This includes e-commerce sales, which increased 27% to $59.9 million.  In last year's second quarter, e-commerce sales grew 24% to $47.2 million.
  • Gross margin declined to 31.4% of net sales compared to 32.2% in the second quarter of 2012.  Merchandise margin was down 40 basis points driven by increased promotional activity late in the second quarter in response to the competitive environment.  Buying and occupancy costs as a percentage of sales increased 40 basis points, driven primarily by the incremental non-cash rent expense associated with the New York City and San Francisco flagship stores.
  • Selling, general, and administrative (SG&A) expenses were $119.2 million versus $115.3 million in last year's second quarter.  As a percentage of net sales, SG&A expenses improved 80 basis points to 24.5% compared to 25.3% in the same period last year.  This improvement reflects continued discipline in managing these expenses.
  • Operating income was $33.4 million, or 6.9% of net sales, compared to $31.2 million, or 6.9% of net sales, in the second quarter of 2012.
  • The effective tax rate was 39.7% compared to 39.6% in last year's second quarter.
  • Net income was $16.9 million, or $0.20 per diluted share, compared to net income of $15.8 million, or $0.18 per diluted share, in the second quarter of 2012. 
  • Real estate activity for the second quarter of 2013 is detailed in Schedule 4.

Twenty-Six Week Operating Results:

  • Net sales increased 5% to $994.7 million from $950.8 million in the prior year period.
  • Comparable sales increased 3%, following a 2% comparable sales increase in the prior year period.  This includes e-commerce sales, which increased 37% to $130.6 million.  In the prior year period, e-commerce sales grew 26% to $95.1 million.
  • Gross margin declined to 32.5% of net sales compared to 35.3% in the prior year period.  Merchandise margin declined 150 basis points and buying and occupancy costs as a percentage of sales increased 130 basis points.
  • SG&A expenses were $231.8 million versus $229.5 million in the prior year period. As a percentage of net sales, SG&A expenses improved 80 basis points to 23.3% compared to 24.1% in the same period last year. 
  • Operating income was $92.1 million, or 9.3% of net sales, compared to $105.8 million, or 11.1% of net sales, in the prior year period.
  • The effective tax rate declined to 39.6% compared to 39.8% in the prior year period.
  • Net income was $49.3 million, or $0.58 per diluted share, compared to net income of $57.9 million, or $0.65 per diluted share, in the prior year period. 
  • Capital expenditures totaled $45.5 million, compared to $45.7 million in the prior year period.

Second Quarter 2013 Balance Sheet:

  • Cash and cash equivalents totaled $234.3 million versus $130.2 million at the end of the second quarter of 2012.
  • As expected, inventory rose to $241.9 million, an increase of 13.4%, compared to $213.3 million at the end of the second quarter of 2012.  The calendar shift due to last year's 53rd week accounted for approximately 4% of the increase.  Inventory per square foot increased 8.8% compared to the same period in 2012. 
  • Long-term debt was relatively unchanged at $199.0 million, with no borrowings outstanding under the Revolving Credit Facility. 
  • During the quarter the Company purchased approximately 0.6 million shares of its common stock at an aggregate cost of $13.9 million, to end the second quarter with approximately $21.1 million of its $100 million repurchase authorization still outstanding. Repurchases of an additional 1.0 million shares during the third quarter have completed the repurchase program.

2013 Guidance: The table below compares the Company's projected results for the thirteen week period ended November 2, 2013 to the actual results for the thirteen week period ended October 27, 2012.           

Third Quarter 2013 Guidance

Third Quarter 2012

Actual Results

Comparable Sales

+Mid Single Digits

(5)%

Effective Tax Rate

Approximately 40%

41.4%

Interest Expense

$4.8 million

$4.8 million

Net Income

$18 - $22 million

$17.4 million

Diluted EPS

$0.21 - $0.26

$0.20

Weighted Average Diluted Shares Outstanding

85.1 million

86.2 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.

Updated

Full Year 2013

Guidance

Full Year 2012

Actual Results

Comparable Sales

+Low to mid single digits (1)

Flat

Effective Tax Rate

39.3% - 39.8%

40%

Interest Expense

$19.4 million

$19.6 million

Net Income

$130 - $137 million

$139.3 million (2)

Diluted EPS

$1.52 - $1.60

$1.60 (3)

Weighted Average Diluted Shares Outstanding

85.4 million

87.2 million

Capital Expenditures

$110 - $115 million

$99.7 million

(1) Compares the 52-week period ended February 1, 2014 to the 52-week period     ended February 2, 2013.

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

(3)  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.

Conference Call Information: A conference call to discuss second quarter results is scheduled for Wednesday August 28, 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 from 12:00 p.m. ET on August 28, 2013 until 11:59 p.m. ET on September 4, 2013 and can be accessed by dialing (877) 870-5176 and entering replay pin number 418777.

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 over 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 third 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)

August 3, 2013

February 2, 2013

July 28, 2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

234,250

$

256,297

$

130,174

Receivables, net

13,510

11,024

13,825

Inventories

241,933

215,082

213,275

Prepaid minimum rent

26,030

25,166

23,543

Other

32,172

8,293

24,978

Total current assets

547,895

515,862

405,795

PROPERTY AND EQUIPMENT

686,777

625,344

569,534

Less: accumulated depreciation

(364,576)

(346,975)

(317,829)

Property and equipment, net

322,201

278,369

251,705

TRADENAME/DOMAIN NAME

197,787

197,719

197,694

DEFERRED TAX ASSETS

16,808

16,808

12,650

OTHER ASSETS

9,100

10,441

11,970

Total assets

$

1,093,791

$

1,019,199

$

879,814

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

197,050

$

176,125

$

163,325

Deferred revenue

19,459

27,851

19,188

Accrued bonus

893

336

4,118

Accrued expenses

84,197

108,464

89,239

Accounts payable and accrued expenses – related             parties

Total current liabilities

301,599

312,776

275,870

LONG-TERM DEBT

199,003

198,843

198,685

OTHER LONG-TERM LIABILITIES

174,928

136,418

107,960

Total liabilities

675,530

648,037

582,515

COMMITMENTS AND CONTINGENCIES

Total stockholders' equity

418,261

371,162

297,299

Total liabilities and stockholders' equity

$

1,093,791

$

1,019,199

$

879,814

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

Twenty-Six Weeks Ended

August 3, 2013

July 28, 2012

August 3, 2013

July 28, 2012

NET SALES

$

486,158

$

454,879

$

994,682

$

950,831

COST OF GOODS SOLD, BUYING AND OCCUPANCY       COSTS

333,611

308,358

671,358

615,543

Gross profit

152,547

146,521

323,324

335,288

OPERATING EXPENSES:

Selling, general, and administrative expenses

119,176

115,307

231,799

229,502

Other operating (income) expense, net

(44)

18

(584)

33

Total operating expenses

119,132

115,325

231,215

229,535

OPERATING INCOME

33,415

31,196

92,109

105,753

INTEREST EXPENSE, NET

4,776

4,773

9,581

9,555

OTHER EXPENSE, NET

576

220

805

12

INCOME BEFORE INCOME TAXES

28,063

26,203

81,723

96,186

INCOME TAX EXPENSE

11,154

10,374

32,377

38,284

NET INCOME

$

16,909

$

15,829

$

49,346

$

57,902

OTHER COMPREHENSIVE INCOME:

Foreign currency translation

146

81

216

3

COMPREHENSIVE INCOME

$

17,055

$

15,910

$

49,562

$

57,905

EARNINGS PER SHARE:

Basic

$

0.20

$

0.18

$

0.58

$

0.66

Diluted

$

0.20

$

0.18

$

0.58

$

0.65

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

85,001

87,640

85,048

88,243

Diluted

85,572

87,979

85,531

88,645

 

 

Schedule 3

Express, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)

Twenty-Six Weeks Ended

August 3, 2013

July 28, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

49,346

$

57,902

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

Depreciation and amortization

34,754

33,937

Loss on disposal of property and equipment

286

35

Excess tax benefit from share-based compensation

(64)

(277)

Share-based compensation

10,837

8,856

Deferred taxes

(188)

Changes in operating assets and liabilities:

Receivables, net

(2,408)

(4,802)

Inventories

(27,103)

(204)

Accounts payable, deferred revenue, and accrued expenses

(20,533)

(25,982)

Other assets and liabilities

(8,582)

5,005

Net cash provided by operating activities

36,533

74,282

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(45,538)

(45,661)

Purchase of intangible assets

(69)

(185)

Net cash used in investing activities

(45,607)

(45,846)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on capital lease obligation

(29)

(27)

Excess tax benefit from share-based compensation

64

277

Proceeds from share-based compensation

2,828

623

Repurchase of common stock

(15,756)

(51,497)

Net cash used in financing activities

(12,893)

(50,624)

EFFECT OF EXCHANGE RATE ON CASH

(80)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(22,047)

(22,188)

CASH AND CASH EQUIVALENTS, Beginning of period

256,297

152,362

CASH AND CASH EQUIVALENTS, End of period

$

234,250

$

130,174

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

 

Schedule 4

Express, Inc. Real Estate Activity (Unaudited)

Second Quarter 2013 - Actual

August 3, 2013 - Actual

Company-Operated Stores

Opened

Closed

Store Count

Gross Square Footage

United States

2

1

609

Canada

12

Total

2

1

621

5.4 million

Third Quarter 2013 - Projected

November 2, 2013 - Projected

Company-Operated Stores

Open

Close

Store Count

 Gross Square Footage

United States

5

614

Canada

2

14

Total

7

628

5.5 million

Full Year 2013 - Projected

February 1, 2014 - Projected

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.



RELATED LINKS

http://www.express.com