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Express Inc. Posts Q4 Beat, But There’s a Problem With Q1 Outlook

Even though Express Inc. managed to beat Wall Street’s estimates for the fourth quarter and it’s now in the early stages of executing on its new strategic plan, the company disappointed with a first-quarter per-share earnings outlook below Wall Street expectations.

In a Nutshell: The dual-gender fashion chain’s “strategic transformation has begun, including implementation of a new go-to market process,” Express said Wednesday.

In January, the company began restructuring its corporate workforce to align with a new go-forward strategy. About 10 percent of positions at company headquarters in Columbus, Ohio, and a New York City design studio were eliminated. The company said it would also reorganize its field leadership team. A week later, Express disclosed plans to shutter 100 doors by 2022 as part of a store fleet rationalization plan. The full strategic plan includes four pillars: engage customers and acquire new ones; execute to accelerate sales and profitability; product-first focus, and reinvigorate the Express brand.

“Our results show the third consecutive quarter of sequential improvement in our comp sales trends, as the actions we have taken in the early stages of our transformation are resonating with customers,” CEO Tim Baxter said.

Net Sales: Net sales for the three-month period ended Feb. 1 slipped 3.5 percent to $606.7 million from $628.4 million. Comparable sales were down 3 percent, while comparable store sales at Express stores and e-commerce fell 5 percent.

The company said merchandise margin fell by 60 basis points due to increased promotions.

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At the end of the fourth quarter, the company operated a total of 595 stores, comprised of 381 retail stores and 214 outlet locations.

Earnings: The company posted a substantially wider net loss to $141.6 million, or $2.21 a diluted share, from $1.1 million, or 2 cents, in the year-ago quarter. Excluding certain items such as costs connected to restructuring and executive departures, the adjusted diluted earnings per share (EPS) came in at 19 cents.

Wall Street was expecting adjusted diluted EPS of 18 cents on revenue of $604.8 million.

For the first quarter ending May 2, the company expects a net loss of between $11.5 million to $14 million, or a loss of 18 cents to 22 cents, which is wider than the net loss of $9.9 million in the same year-ago quarter. Comparable sales are forecasted at a negative mid-single digits.

Wall Street had been projecting a narrower net loss in the range of 11 cents a share, on revenue of $447.3 million. Analysts were also expecting comps to be up slightly at 1.5 percent, instead of down in the mid-single digits. It wasn’t immediately clear from the retailer’s earnings release what impact the company was projecting on a possible impact from the coronavirus pandemic.

CEO’s Take: “While there is certainly volatility surrounding the coronavirus, our lean inventory position gives us the flexibility to invest appropriately in new product in response to business trends in the coming months,” Baxter said.