Express, Inc. (NYSE:EXPR) on Wednesday reported mixed fourth-quarter results and while management's first-quarter guidance came in short of expectations.

The Analyst

Wedbush's Jen Redding maintains a Neutral rating on Express with a price target lowered from $6 to $5.

MKM Partners' Roxanne Meyer maintains at Neutral, price target lowered from $5 to $4.50.

'Bleak' Outlook

Express reported an EPS beat but gross margin of 27.6 percent missed expectations as merchandise margin dipped by 150 basis points due to increased promotional activity, Redding said in a research report. Comps also disappointed at -6 percent versus expectations of -5.63 percent. Inventories per square foot grew 3.7 percent year over year, which outpaced a 9.42-percent decline in revenue.

Looking forward, Wedbush's proprietary data analytics points to a "meaningful" deterioration in average discounts that implies minimal upside to first quarter revenue guidance. The "bleak outlook" could extend beyond the first quarter if a new CEO sets a low bar for the second quarter.

A 'Repositioning Year At Best'

Expectations for any significant improvement at Express is unlikely to be seen until a new CEO takes over the top ranks and is able to examine the business, Meyer said in a research report. Aside from filling the vacant job, the company is likely to hire a Chief Merchant and Chief Customer Experience Officer.

Express also faces brand-related issues, including a large outlet presence which may be diluting the brand so a new CEO may take action in rebalancing the portfolio, the analyst wrote. Management could also narrow its merchandise offering away from a "complete lifestyle" offering towards a focus on "wear-to-work and dressy," which would better differentiate the company against its peers.

Price Action

Express traded around $4.50 per share Thursday afternoon.

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