Express could close up to 100 stores in the next two years, adding to the thousands of brick and mortars that have gone dark since digital began redrawing the retail landscape in the last decade.
Following job cuts at headquarters and its New York City studio announced last week, on Wednesday, the fashion retail chain unveiled a new corporate restructuring plan that has up to 100 stores on the chopping block by 2022.
The fleet rationalization component includes the nine stores closed in 2019 and the 31 targeted to go dark by the end of January. Another 35 doors are set for closure by the end of January 2021.
The closures will trim sales by $90 million, Express said, though certain fixed operating costs set to be eliminated will offset that hit to sales.
Express expects to see a $15 million annualized increase in EBITDA (earnings before interest, taxes, depreciation and amortization) by 2022 as a result of leveraging remaining stores and online infrastructure to drive additional sales.
“Today we are unveiling our new corporate strategy, called The EXPRESSway Forward, and we are focused on profitable growth,” said CEO Tim Baxter, who expects the company “will return to a a mid-single-digit operating margin through a combination of low-single-digit comp sales growth, margin expansion and cost reductions.”
The new corporate strategy has four pillars. Using the company’s stock ticker symbol EXPR, E represents engagement of customers and the acquisition of new ones; X is for precise execution to accelerate sales and profitability; P stands for the company’s new product approach called “The Express Edit,” a curated assortment reflecting versatility and consistent newness; and R is connected to the retailer’s reinvigoration of its brand purpose, which is to create confidence and inspire self-expression.
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The motto across all communication touchpoints is “Dream Big. Dress Accordingly.”
The new strategy is aimed at increasing free cash flow over the long haul from $50 million in 2019 to between $90 million and $110 million by 2022. Express plans on achieving this goal by boosting its operating cash flow by $60 million to $80 million, supported by growth in net income and improved working capital. That will foster $50 million to $60 million in annual capital expenditures over the next three years to fund technology investments and revamp stores.
Express said it will save $55 million in expense reductions by paring the workforce, including the job cuts from last week. Another $25 million will be driven by process improvements and inventory optimization, bringing the expected annualized cost reduction to total $80 million over the next three years.
Separately, Express also updated fourth-quarter guidance, with comparable sales now expected to be down 3 percent and adjusted net income in the range of $11 million to $12.5 million. Express also expects to have about $200 million in cash on hand by the end of fiscal 2019. The company plans to report on fourth quarter and full year 2019 results the week of March 9, 2020.
“Our expected results show the third consecutive quarter of sequential improvement in our comp sales trends,” Baxter said. “I am encouraged that the new initiatives we have put in place are resonating with our customers.”