Columbus, OH—Express Inc. today revealed a worse-than-expected 25% drop in its fourth quarter earnings along with a weak forecast ahead citing “an extremely difficult” start to this year.
For its quarter ended Feb. 1, the young adult specialty retailer posted net income of $47.9 million, or 57 cents a share, compared with $63.9 million, or 75 cents a share, a year earlier. That was on the lower end of the retailer’s forecast and below analysts’ average estimate for 59 cents.
Net revenue was down 2% to $715.9 million, missing analysts’ expectation for $722 million in sales. Comparable store sales rose 1%.
‘Heavier Than Planned Promotions’
For the year, net income fell 16% to $116.5 million, or $1.37 a share. That compares with net income of $139.3 million, or $1.60 a share, in the prior year. Revenue rose 3% to $2.22 billion.
Gross margins narrowed to 32% from 35%, missing forecasts from analysts for 32.9%.
Shares of Express fell as much as 12% in early trading today upon the results and the companies forecast.
Unlike many retailers reporting earnings recently, Express didn’t blame winter storms and the polar vortex for sales troubles. Instead the company blamed heavier-than-planned promotions that hurt revenue and margins.
“Our fourth quarter results were within the range of our revised guidance but disappointing nonetheless given the strength of our collection across both genders. We delivered positive comps for the quarter, but the heavier than planned pace of promotions impacted both top-line and margins,” said Michael Weiss, chairman/ceo.
“The start of 2014 has nevertheless been extremely difficult, with traffic down significantly, negative comparable sales and the promotional environment remaining intense,” he said. “Our first-quarter guidance reflects year-to-date traffic and comparable sales as well as our belief that a material uptick in traffic is not necessarily imminent.”
Speaking of that guidance, Express forecast first quarter earnings at 12 cent to 18 cents a share, about half of the 42 cents a share that analysts expect. Comp store sales are expected to decline in the low double to high-single digits. For the full year 2014, Express projected earnings per share of $1.03 to $1.23, compared with estimates from analysts for $1.59. Comp store sales sales are expected to decline in the low single digits or come in flat.
Kate Upton Named Brand Ambassador
“On the plus side, we ended the quarter with lean inventories heading into Spring,” Weiss noted. “We also made advances in terms of three of our growth pillars. Specifically, we continued to grow our e-commerce business; opened new North American stores, including our San Francisco flagship; and continued our international expansion. We also laid the groundwork for our outlet initiative and plan to open the first of these outlet stores in the beginning of May 2014.”
In other news, Express announced that supermodel and actress Kate Upton would be the new brand ambassador, making her the first celebrity spokesperson to grace the brand’scampaigns in the last decade.
To kick off the partnership, Upton will host the Express Spring Summer 2014 Runway Show at The Raleigh Hotel in Miami Beach, on Thursday, March 13. The retailer will then debut Upton in advertising campaigns beginning in fall 2014.
“I’m very excited to join Express as brand ambassador,” said Upton.” I grew up with Express and always appreciated their commitment to offering great fashion with great value that every young woman and man can relate to. It is truly an iconic American brand that exemplifies sexy, modern cool.”