Express Inc.’s first quarter results reflects progress on its strategic plan, including a 21 percent jump in e-commerce demand that puts it on track to $1 billion in sales by 2024.
In a Nutshell: “We’ve gotten our fashion right,” Matt Moellering, president and chief operating officer, told investors during a conference call this week.
“And when you get the fashion right, there’s very little price sensitivity. Secondly, we have added significant quality back into our products. And because we have done that, we’re able to compete on value and not simply price with commodity-type items,” he said.
First-quarter comps highlights in men’s include suits, up 78 percent, and polos, while women’s jackets were up 117 percent and denim posted a 23 percent comp increase in the quarter, with the women’s offerings particularly strong among customers, CEO Tim Baxter said. The women’s Express Essentials body contour collection generated $20 million in sales.
Core basics such as body contour garments and polos and denim turned slower, while fashion items sold at a “very fast clip in both men’s and women’s, and had sell-outs on some of our best product” enabling Express to reduce promotions, Baxter said.
“In fact, in the first quarter, we had zero storewide and sitewide promotions, which is the first time in years that we have come through an entire quarter that way,” he said. Targeted promotions will focus on customer acquisition or growing category market share.
Express delivered first-quarter “positive comparable sales of 31 percent and drove double-digit positive comps in every major category and in every channel,” Baxter said. “These incredible results and the continued acceleration of our business were driven by a combination of factors: outstanding product, a compelling brand purpose, the power of our styling community, stronger connections with our customers and consistent, exceptional execution.”
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Express has updated 20 stores and has 70 more on deck by the end of the year. It’s also looking at reworking the in-store customer experience. “The initial results are encouraging, and these stores are significantly outperforming the rest of our fleet with higher sales and a better customer experience,” Baxter said.
Third-party data indicates that Express Edit stores in high-traffic locations outperform the mall apparel average by more than 20 percent on footfall. The stores are also boosting digital sales in the surrounding zip codes. Express recently opened a women’s-only Edit store in St. Louis, and it will open more Edit stores in SoHo and Flatiron in Manhattan and on Newberry St. in Boston, as well as a men’s-only Edit store later this year.
UpWest sales grew 68 percent in the quarter, with digital sales continuing to accelerate. Four new UpWest stores opened this year, bringing the total to 11 and there are plans to open four more in 2022. Baxter said Express will unveil a partnership with a national retailer to grow awareness for UpWest.
Inventory was up 40 percent over a year ago. Express decided to pack and hold late-arriving holiday products for its outlet channel, for which “we are confident it will sell-through at regular prices in fall 2022,” chief financial officer Jason Judd said.
Net Sales: For the three months ended April 30, net sales rose 30 percent to $450.8 million from $345.8 million. Comparable retail sales for Express stores and e-commerce rose 32 percent from year-ago levels. Comparable outlet store sales were up 30 percent from last year’s figures.
“We drove a 21 percent increase in e-commerce demand, including higher traffic and an increase in average order value and are on track to achieve our goal of $1 billion in e-commerce demand by 2024,” Baxter said.
Gross margin for the quarter was 29.2 percent of net sales, versus 22.8 percent in the year-ago period. Merchandise margin expanded by 20 basis points, despite the negative impact of $6.0 million of expense associated with ongoing supply chain challenges, the company said.
Earnings: The net loss narrowed to $11.9 million, or 18 cents a diluted share, from a net loss of $45.7 million, or 70 cents, in the year-ago period. On an adjusted basis, the loss was 10 cents a diluted share.
For the second quarter, the company guided comparable sales to increase in the mid-single digits. For Full Year 2022, Express is forecasting diluted earnings per share between 24 cents to 34 cents, on a comparable sales increase of 8 percent to 10 percent.
CEO’s Take: “In a very difficult apparel retail environment, Express is winning,” Baxter said. “We are selling more elevated product to more loyal customers at higher margins. And our performance in the quarter is tangible evidence of the momentum that the right strategy, the right product and the right team all working in concert can create.”