Columbus, OH—In an retail earnings season that has largely proved disappointing, Express Inc. today reported a 6.8% rise in its second quarter profits and a promising start of back to school. As a result the retailer raised its full year earnings forecast.
For the quarter ended August 3, the teen specialty retailer posted a net profit of $16.9 million, or 20 cents a share, compared with a net profit of $15.8 million, or 18 cents a share, a year ago.
Analysts’ average estimate had expected 20 cents a share earnings after Express issued an upbeat forecast in May for earnings per share between 17 cents to 21 cents.
Net sales rose 6.9% to $486.2 million, in line with analysts’ forecast for $485 million in sales. Comparable store sales rose 6%. The rise included a 27% increase in online sales, an area in which Express expects to continue to grow.
Gross margins narrowed to 31.4% from 32.2% due to higher promotional activity late in the quarter amid increased competition.
“Our customers are responding enthusiastically to our assortments, which are trend-right, differentiated and well-edited. We are seeing this reflected in improved conversion rates,” Express CEO Michael Weiss said.
Outlet Store Group Planned
Express plans expansion into other areas, too, namely outlet stores. The company hopes to launch about 15 outlet stores next spring. The stores would consist of converting some regular stores and existing outlets into a new group of outlet stores that offer merchandise specifically produced for them.
“We’re one of the few in retail that have not taken advantage of this opportunity,” said Matthew Moellering, chief financial officer. “We think there’s a big upside for us.”
The company believes it can add at least 100 outlet stores, “if not more,” Moellering said.
Looking ahead, for the second time this year, Express raised its third quarter and fiscal full year forecast.
The retailer now predicts third quarter profits of 21 cents to 26 cents a share. Analysts’ consensus calls for 25 cents a share in earnings.
For the full year, Express forecast profits of $1.52 to $1.60 a share with comparable store sales increasing in the low- to mid-single digits.
Analysts’ estimate predicts $1.59 a share earnings for the year.
“As we move into the second half of the year, we are confident in our product and marketing strategies, and believe we are well positioned for the fall and holiday seasons,” Weiss added.