Columbus, OH—Express Inc. reported today that although its third quarter profit halved from last year, the specialty apparel retailer added that its turnaround strategy was in place and forecast full year earnings ahead of analysts’ estimates.
For the quarter ended Oct. 29., the 600-unit retailer posted quarterly net income of $17.4 million, or 20 cents a share, compared with a profit of $32.7 million, or 37 cents a share, a year ago. That still beat analysts’ average estimate for 17 cents a share.
Total net revenue rose 4% to $468.5 million, which was in line with analysts’ estimate for $469 million in sales. Comparable store sales fell 5% compared to a 5% gain in the same quarter a year ago.
Gross margin narrowed to 32.3%, driven by a 240 basis point increase in occupancy costs and a 150 basis point decline in merchandise margin.
Sales gains were also offset by higher selling, general and administrative expenses, which grew to $117.7 million, comprising 25.1% of sales, compared with $115.1 million a year ago, when they made up about 23.6% in total revenue.
Reports ‘Record Black Friday Performance’
“We were disappointed with our results, which included a net sales decrease of 4% and a comparable sales decrease of 5% compared to the prior year third quarter,” said Michael Weiss, chairman/ceo. “However, we believe we have identified the issues impacting our performance and have developed, and begun to execute, a plan to fix them.”
Those improvements include re-balancing its sweater assortment and introducing entry pricepoint fashion items in key categories as well as “began to set and communicate clearer pricing and promotional strategies to our customers,” Weiss said.
Several bright spots included the store’s men’s business, double digit growth in e-commerce sales, the addition of eight new stores including one in Canada and continued international expansion with the opening of four new franchises in the Middle East.
“As we begin the fourth quarter, we are pleased to report that our clear promotional messaging contributed to a record Black Friday performance that exceeded our expectations,” Weiss added. “However, we remain cautious on the overall performance of the fourth quarter given that the majority of the holiday season lies ahead. We expect to make sequential improvement as our corrective measures get further underway.”
As for its fourth quarter, Express cut its earnings forecast to 62 to 68 cents a share, down from 77 to 82 cents a share. Comp store sales are estimated to decrease to the low single digits. But that’s still better than analysts’ consensus for 57 cents a share.
For its full fiscal year 2012, Express also lowered its forecast to the range of $1.47 to $1.53 a share, down from its previous estimate for $1.69 to $1.79 a share. Comparable store sales are expected to grow in the low-single digits. Analysts’ average estimate is for $1.40 a share in earnings.