Express to close some stores after poor quarter
May 30, 2014
Express will close about 50 of its more than 600 stores as part of an effort to rebound from a poor first-quarter earnings report.
The Columbus-based fashion retailer reported net income of $5.1 million, or 6 cents per share, for the first quarter, down from $32.4 million, or 38 cents per share, during the same time last year.
Wall Street analysts had expected the retailer to report earnings of 14 cents per share. The news sent Express' stock price down by more than 9 percent in after-hours trading.
"We had anticipated a very challenging first quarter, but our actual results were weaker than planned," said Michael Weiss, the company's chairman and CEO. "Our business strengthened in April, but not to the degree that we anticipated when we formulated our first-quarter guidance.
"While external challenges contributed to the decline in our first-quarter performance, we also did not execute as well as we could have."
Express sales decreased to $460.7 million during the quarter, down from $509.4 million from the same period a year ago. Wall Street analysts had expected sales of $464 million.
In an attempt to reduce costs, Express will close the roughly 50 stores over the next three years, most of them as leases end. The store closings are expected to save $5 million to $8 million. Locations were not identified.
The company also announced that it plans to buy back as much as $100 million in common stock over the next 18 months.
Even as the retailer looks to cut costs, it will continue to invest in its online business, Weiss said.
"The e-commerce (sales) trend has been very, very good, much better than the store trend," Weiss said.
"We're seeing a real radical shift in the growth of online," said David Kornberg, president of Express. "Our (customer) demographic is quickly migrating to mobile traffic. Online is now 17 percent of the business. We believe it can be 25 percent."
Looking ahead to the second quarter, Weiss offered little optimism, saying the retailer needs to "move through slow-selling spring inventory and a Memorial Day event that did not drive traffic as successfully as last year."
For the full year, Express is predicting net income of between $63 million and $76 million, or between 74 cents and 90 cents per share.
The full-year prediction "incorporates the impact of a very challenging first half," Weiss said, while also anticipating improvement in sales "as we deliver new product. ... We also expect to benefit from cost saving initiatives and, upon completion of our debt refinancing, lower interest expense."
Weiss also announced that Express now has 17 outlet stores in operation, "exceeding our plans."
The outlet stores are "being met with great enthusiasm," prompting Express to accelerate future openings to as many as 35 locations.
"We believe there's a potential to take our outlets to 150 stores," Kornberg said.