Express closed out 2020 nonetheless struggling to get again on its ft, with fourth-quarter gross sales lowering 29 p.c to $430.3 million, falling wanting FactSet’s estimates for $490 million. The firm did handle to trim its backside line losses although, with a web lack of $53.3 million in comparison with year-ago losses reaching $141.6 million. The adjusted lack of 66 cents a share surpassed the FactSet consensus, which projected a per-share dip of 83 cents.
With e-commerce visitors, transactions and conversions all constructive within the quarter, Express unveiled it’s finalizing a technique with the intent to develop its digital channel to $1 billion in 2024. The attire retailer will reveal the main points of the technique within the second quarter of 2021.
In a Nutshell: Express is adjusting its floorset timing—the rearranging of product in its shops—to make sure that its “Express Edit” of common, curated attire is appropriately mirrored in step with port delays and freight price will increase.
The firm is monitoring the delays, with Express CEO Tim Baxter indicating in an earnings name that he feels good about his stock combine going ahead, however doesn’t really feel pretty much as good concerning the stability within the quick time period.
“Our first spring deliveries have been delayed. And so we have not executed our March product launch yet,” Baxter stated. “We are executing that next week, which is two weeks later than a year ago and three weeks later than 2019. So the percentage of our inventory right now that’s in new fresh spring fashion product is lower than I’d like it to be, but that will correct itself over the next couple of weeks.”
Inventory was $264.4 million on the finish of 2020, up 20 p.c in comparison with $220.3 million on the finish of 2019. The improve was primarily pushed by continued stress on gross sales from the pandemic and better than deliberate stock in core, seasonless product, a lot of the surplus merchandise in in fundamentals, not trend attire.
Further inflating the retailer’s year-over-year stock bump, Express says it made the choice in late 2019 to liquidate underperforming product, which considerably decreased the year-end 2019 stock stability. Year-end 2020 stock is down barely (1 p.c) when in comparison with the year-end 2018 stock stability.
Baxter stated denim bottoms and Express important tops have gotten the retailer’s “new core,” noting that denim prospects typically spend thrice extra total, with a 22 p.c increased spend per transaction in comparison with a non-denim buyer. One in 4 Express prospects is shopping for denim, a report excessive for the retailer. Express offered over 1.6 million denim items within the fourth quarter, having launched new Supersoft and 4-Way Hyper Stretch materials within the interval and debuting new leg shapes within the spring and summer time.
Gross margin for Express was 16.6 p.c of web gross sales in comparison with 27 p.c in final yr’s fourth quarter. The lower was pushed by the gross sales impression of Covid-19 and a $4.5 million impairment cost taken in opposition to sure long-lived retailer belongings.
Express expects to shut 25 shops, a part of the 100 already introduced to shut by 2022. Including these closures, the retailer can have closed 93 shops because the starting of 2019. But the corporate is diversifying its retailer fleet, with the opening of two Express Edit ideas in Columbus, Ohio, and Nashville.
These shops are avenue areas as a substitute of mall-based shops and have a smaller footprint at 1,400 to 4,000 sq. ft, with a product combine curated to mirror native types and tendencies inside a selected market and even neighborhood. The firm plans so as to add eight extra Express Edit idea shops this yr.
In February, Express revealed that it had regained compliance with the New York Stock Exchange’s continued itemizing requirements after sustaining a median closing share value of not less than $1.00 over the 30 trading-day interval ending on Jan. 29. The retailer had acquired formal discover from the NYSE of the potential delisting in September.
As the attire firm goals to maintain its liquidity place afloat, it introduced in a further $140 million in a definitive mortgage settlement with Sycamore Partners. The new financing features a $90 million FILO time period mortgage with a maturity date of May 24, 2024 and a $50 million delayed draw time period mortgage, to be repaid upon receipt of a CARES Act tax refund anticipated to be acquired within the second quarter of 2021.
This financing is on prime of Express’ present $250 million asset-based mortgage facility, of which it had beforehand drawn $165 million.
Cash and money equivalents totaled $55.9 million on the finish of 2020, versus $207.1 million on the finish of 2019. Long-term debt was $192.0 million on the finish of 2020.
Express didn’t embrace many specifics for its 2021 outlook, however expects sequential comparable gross sales enchancment all year long in addition to “significant” gross margin enchancment, whilst gross margin is predicted to incorporate transport and dealing with fee will increase and surcharges which are persevering with from the fourth quarter of 2020. The retailer expects constructive working money stream for the complete yr, and constructive earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) for the second half.
Express’ shopping for and occupancy bills are anticipated to lower by double digits from 2019, whereas promoting, basic, and administrative (SG&A) bills will proceed to dip by “high single digits” from two years in the past. Capital expenditures ought to complete roughly $35 million, doubling the $16.9 million spent in 2020.
Net Sales: Consolidated web gross sales at Express for the fourth quarter decreased 29 p.c to $430.3 million from $606.7 million within the fourth quarter of 2019, whereas consolidated comparable gross sales declined 27 p.c.
Comparable retail gross sales, which embrace each Express shops and e-commerce and drive 74 p.c of the enterprise, decreased 28 p.c yr over yr, whereas comparable outlet gross sales dipped 27 p.c versus the year-prior quarter.
For 2020, consolidated web gross sales plummeted 40 p.c to $1.2 billion from roughly $2 billion in 2019, with consolidated comparable gross sales sliding 27 p.c. Comparable retail gross sales for the complete yr decreased 29 p.c in comparison with 2019, whereas comparable outlet gross sales noticed a softer 21 p.c slip.
Net Earnings: Fourth-quarter web loss was $53.3 million, or a lack of 82 cents per diluted share, and tightened up significantly from a lack of $141.6 million within the year-ago quarter. On an adjusted foundation, the web loss was $43.1 million, or a lack of 66 cents per diluted share for the quarter.
Operating loss was $62.7 million in comparison with a lack of $189.9 million within the fourth quarter of 2019. The loss from the prior yr consists of roughly $205 million in intangible asset impairment and restructuring expenses.
For the yr, web loss was $405.4 million, or a lack of $6.27 per diluted share. On an adjusted foundation, web loss was $314.3 million, or a lack of $4.86 per diluted share.
CEO’s Take: “Almost 40 percent of our assortment consisted of wear-to-work and occasion-based categories, which were disproportionately impacted by the pandemic,” Baxter advised analysts. “However, the majority of this inventory is where we consider core items with low markdown risk. And as we move through the year, we expect our inventory to be more in line with our sales expectations.”