Why Fashion Apparel Retailer Express Shares Are Surging Today

Express, Inc. EXPR reported Q2 FY23 sales decline of 6% Y/Y to $435.34 million, missing the consensus of $440.72 million.

Express and UpWest Brands' comparable retail sales, including Express stores and eCommerce, were down 13%, and comparable outlet sales fell 17%.

Gross margin stood at 23.1% vs. 33.1% of net sales a year ago. Merchandise margin contracted by 680 basis points Y/Y on higher promotional activity and 310 basis points of royalty expense related to the joint venture with WHP. 

EBITDA was negative $(24.7) million, compared to $25.6 million last year same quarter.

Adjusted loss per share of $(9.05) beat the consensus of $(11.06).

As of Q2 2023-end, cash and cash equivalents stood at $58.6 million, and operating cash flow reached $60.8 million.

Stock split: The company implemented a reverse stock split, which decreased shares outstanding to 3.7 million from 74.9 million. 

Expense Reduction Initiatives: EXPR expects to garner over $200 million in annualized savings by 2025 vs. 2022.

In August 2023, the company announced an additional savings of $15 million for $80 million in annualized cost reductions identified and implemented for FY23. 

The annualized cost reductions of $120 million for FY24 include a workforce reduction expected to generate savings of approximately $30 million.

Q3 Outlook: Express sees net sales of $460 million-$490 million, including $50 million in Bonobos net sales (consensus of $495.72 million) and EPS of $(5.50)-$(7.50) vs. estimate of $(6.19).

FY23 Outlook: EXPR continues to expect net sales of $1.9 billion-$2.0 billion versus the consensus of $1.93 billion. It sees a loss per share of $(30.0)-$(34.0) vs. consensus of $(30.14).

New Term Loan: On September 5, 2023, the company entered into a definitive loan agreement with ReStore Capital for a $65 million first-in-last-out asset-based term loan. 

Price Action: EXPR shares are trading higher by 20.20% at $9.86 on the last check Wednesday.