Express Inc. saw sales fall and net losses widen in the second quarter, though the retailer has reopened about half of its store fleet.
In a Nutshell: The company on Wednesday said it cut second-quarter inventory receipts by more than $100 million. It previously accessed $165 million from its $250 million asset-based credit facility shortly after nonessential retailers temporarily closed stores following the coronavirus outbreak in mid-March. Express also identified cost savings of $75 million for 2020 and lowered expected annual capital expenditures by $25 million. The anticipated cash benefits from the CARES Act in 2020 are pegged at $20 million, which includes employer payroll tax credit, deferral provisions and an expansion in operating loss carry back. It also expects additional cash benefits from the CARES Act in 2021.
The total liquidity benefits in 2020 are expected to be $385 million, of which $195 million was realized in the first quarter, the company said. The company ended the quarter with cash and cash equivalents of $236.2 million versus $144.2 million in the same year-ago quarter.
Express began reopening stores on May 1, with 303 locations now operations—representing about half of its total store base. It expects to reopen another 58 locations this week.
“The company is taking a phased approach to reopening stores, with the pace and staffing calibrated to mall traffic and consumer demand. Plans will be accelerated or modified based on the learnings as well as any updated associate and customer safety measures,” Express said.
The retailer has determined what the maximum capacity should be for each store, installed plexiglass shields at all checkout counters, trained associates on new health and safety protocols, provided contact-free customer service and payment options, and offered curbside pickup at its Easton store in Columbus as a test site, with plans to expand to more doors. Express also offers buy online pick-up in stores at select reopened locations and plans to roll out BOPIS to the entire store base by the end of October, when its third quarter comes to a close.
Net Sales: For the three months ended May 2, net sales fell 53.4 percent to $210.3 million from $451.3 million.
Inventory was down 6 percent to $268.8 million at the end of the quarter, versus $285.6 million a year ago.
The company has been working on the EXPRESSway Forward transformation plan, which includes a new design and merchandising vision focusing on versatility and value.
“The teams made a smooth transition to working from home, kept a sharp focus on our key initiatives and hit every milestone in our product development cycle and new ‘Go to Market’ process…. I am confident that with the decisive actions we have taken and the strategy we have implemented, we will achieve our long-term objectives,” CEO Tim Baxter said.
Earnings: The net loss widened to $154.1 million, or $2.41 a diluted share, from the $9.9 million loss, or 15 cents, posted a year ago. On an adjusted basis, the loss was $1.55 a diluted share.
The company said it was not providing second-quarter guidance, except that capital expenditures are expected in the range of $20 million to $25 million for the full year 2020.
CEO’s Take: “The impact of the COVID-19 pandemic on our industry, economy, communities, associates and customers over the last few months is unlike anything we have experienced before; and the protests and demonstrations across the country over the last week create even more uncertainty. As a company, our efforts have been focused on protecting the safety of our associates and customers, and ensuring sufficient liquidity to continue the important work of our transformation,” Baxter said.