Express’ Strong Q4 Overshadowed By Weak Forecast

St. Patrick's Day styles at Express

St. Patrick’s Day styles at Express

Columbus, OH—Express today reported a rise in its fourth quarter profit and sales, but forecast its first quarter and full year sales below Wall Street expectations.

For the quarter ended Feb. 2, the youth-oriented retailer posted a 5.9% increase in net income to $63.9 million, or 75 cents a share, compared to a year-earlier profit of $60.4 million, or 68 cents a share. (Excluding debt-extinguishment losses and other items, earnings for the year-ago quarter were 70 cents). Analysts’ average estimate expected 74 cents a share.

Net revenue increased 8.3% to $728.7 million, helped by $27 million in revenue from the extra week. That was ahead of analysts’ estimate for $722 million.

Comparable store sales rose 1.5% after a 5% increase in the year-earlier period.

Gross margin narrowed to 35.1% from 37.2% as input costs climbed.

“We ended the year positively, with the initiatives we implemented in our women’s business driving improved results,” Michael Weiss, chief executive, said, noting lower prices, communicating promotions and rebalancing the company’s sweater assortment.

New Express Outlet Stores Planned

“We attribute our improved performance over the third quarter to the strength of our products, specifically sweaters and cut-and-sew knitwear, which we had previously identified as categories for improvement,” Weiss said.

Despite its fourth quarter report, Express saw its shares more than 13% in early trading today due to its first quarter and full year forecasts.

For its first quarter, Express projected earnings between 34 cents to 38 cents, which fell below analysts’ consensus for 46 cents. Comparable store sales were forecast flat to down in low single digits.

For its full fiscal year, Express sees earnings of $1.40 to $1.54, compared with far more optimistic estimates from analysts for $1.72. The store’s management expects comparable store sales to increase in the low single digits, including e-commerce sales.

The lower guidance was attributed to expenses associated with opening new stores, including new Express Outlet stores, and “some degradation of merchandise margin” in the first quarter.

“While our guidance anticipates a softer start to the year, reflecting the impact of reduced traffic levels and consumer spending in the month of February, our spring merchandise has been received favorably by our customers, resulting in an improvement in conversion, which we do consider to be a leading indicator, early in the first quarter,” Weiss said.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com