Express, Inc. Reports Third Quarter 2022 Results
"The third quarter was tougher than we anticipated and that is reflected in our results. The macroeconomic, consumer and competitive environments were extremely challenging, and became more acute as the quarter progressed," said
Third Quarter 2022 Results
-
Comparable sales declined by
8% - Gross margin decreased by 540 basis points
-
Operating loss of
and negative EBITDA of$30 million $14 million -
Inventory increase of
10% ; down from a30% increase in the second quarter of 2022 - Continued to operate with the highest number of active Express Insider loyalty members in the Company's history
-
Subsequent to the third quarter, strengthened balance sheet through refinancing transactions, increased Amended Asset-Backed Revolving Credit Facility by
to$40 million , refinanced$290 million First-In-Last-Out Term Loan and terminated$90 million Direct Draw Term Loan$50 million
"Despite these results, we remain confident in our ability to achieve our stated goal of long-term, profitable growth in the Express brand. We are in the midst of a large-scale transformation which we expect to be further accelerated by the strategic partnership with WHP Global that we announced today," Baxter concluded.
Third Quarter 2022 Operating Results |
-
Consolidated net sales decreased
8% to from$434.1 million in the third quarter of 2021, with consolidated comparable sales down$472.0 million 8% -
Comparable retail sales, which includes both Express stores and eCommerce, were down
11% compared to the third quarter of 2021. Retail stores decreased6% while eCommerce demand declined17% . - Comparable outlet store sales remained flat versus the third quarter of 2021
-
Comparable retail sales, which includes both Express stores and eCommerce, were down
-
Gross margin was
27.8% of net sales compared to33.2% in last year's third quarter, a decrease of approximately 540 basis points- Merchandise margin contracted by 360 basis points primarily driven by the challenging macroeconomic and highly promotional retail environments
- Buying and occupancy expenses deleveraged approximately 180 basis points due to the decline in comparable sales
-
Selling, general and administrative (SG&A) expenses were
,$150.1 million 34.6% of net sales, versus ,$141.1 million 29.9% of net sales, in last year's third quarter. The deleverage in the SG&A rate was driven by an increase in labor expenses and by the decline in comparable sales -
Operating loss was
compared to income of$29.5 million in the third quarter of 2021$16.3 million -
Income tax expense was
at an effective tax rate of (2.3)%. Income tax expense was$0.8 million at an effective tax rate of$0.3 million 2.2% during the third quarter of 2021 -
Net loss was
, or$34.4 million per diluted share. This compares to net income of$0.50 , or$13.1 million per diluted share, for the third quarter of 2021$0.19 -
Earnings before interest, taxes, depreciation, and amortization (EBITDA) was negative
compared to EBITDA of$14.5 million in the third quarter of 2021$31.9 million
Balance Sheet and Cash Flow Highlights |
-
Cash and cash equivalents totaled
at the end of the third quarter of 2022 versus$24.6 million at the end of the third quarter of 2021$36.8 million -
Inventory was
at the end of the third quarter, up$422.7 million 10% compared to at the end of the prior year’s third quarter$383.6 million -
Short-term debt was
and long-term debt was$4.5 million at the end of the third quarter of 2022 compared to short-term debt of$230.9 million and long-term debt of$10.1 million at the end of the prior year’s third quarter$108.4 million -
At the end of the third quarter of 2022,
remained available for borrowing under the revolving credit facility$47.0 million -
Operating cash flow was negative
for the thirty-nine weeks ended$95.9 million October 29, 2022 , compared to for the thirty-nine weeks ended$78.3 million October 30, 2021 -
Capital expenditures totaled
for the thirty-nine weeks ended$24.3 million October 29, 2022 , compared to for the thirty-nine weeks ended$18.1 million October 30, 2021
Refinancing Transactions |
Subsequent to the third quarter, the Company completed the following transactions:
-
Senior Secured Asset-Based Revolving Credit Facility (the "Amended Revolving Credit Facility"), jointly led by$250 million Wells Fargo Bank, N.A. (“Wells Fargo”) andBank of America, N.A . (“Bank of America”), was amended and increased by to$40 million with Wells Fargo serving as administrative agent and collateral agent. The interest rate has been reduced by replacing the London Interbank Offered Rate (“LIBOR”) interest rate benchmark, which had an applicable margin of$290 million 2.00% to2.25% , with the Secured Overnight Financing Rate (“SOFR”) interest rate benchmark, which has an applicable margin of1.60% to1.85% . The Amended Revolving Credit Facility will mature onNovember 26, 2027 . -
Senior Secured Asset-Based Term Loan Credit Facility (the "Term Loan Facility") was amended by refinancing its$140 million First-In-Last-Out ("FILO") Term Loan and terminating its$90 million Delayed Draw Term Loan ("DDTL"). Wells Fargo will serve as administrative agent and collateral agent for the Amended Term Loan Facility.$50 million ReStore Capital acted as lead lender, withWells Fargo and Bank of America also participating as lenders. The interest rate has been reduced by replacing LIBOR, which had an applicable margin of7.00% to8.25% , as the interest rate benchmark with SOFR, which has an applicable margin of7.50% . The Amended Term Loan Facility will mature onNovember 26, 2027 .
Full Year 2022 Outlook |
This outlook is based on our year-to-date performance and the advancements we have made in each of the four foundational pillars of our EXPRESSway Forward strategy (Product, Brand, Customer, Execution), balanced against the increasingly challenging macroeconomic and retail apparel environment, ongoing uncertainty of the supply chain and geopolitical events and other uncertainties that may impact our business.
The Company expects the following for the full year 2022 compared to the full year 2021:
-
Comparable sales of flat to up
1% - Gross margin rate to decrease approximately 150 basis points
- SG&A expenses as a percent of sales to delever approximately 200 basis points
-
Net interest expense of
$17 million - Effective tax rate essentially zero percent
-
Diluted loss per share of
to$1.12 $1.22 -
Capital expenditures of approximately
$50 million - Inventory to move closer to parity with sales trends by the end of the year
Assumptions in the Company's outlook may be affected by the continued uncertainty of the pandemic and geopolitical events and their impacts throughout the supply chain.
This outlook does not reflect the expected benefits of the transaction or the strategic partnership with WHP Global announced today.
See Schedule 5 for a discussion of projected real estate activity.
Conference Call Information |
In a separate press release issued today, Express announced that it has entered into a strategic partnership with WHP Global. The press release is available at www.express.com/investor.
A conference call to discuss third quarter 2022 results is scheduled for
About |
Express is a modern, multichannel apparel and accessories brand grounded in versatility, guided by its purpose - We Create Confidence. We Inspire Self-Expression. - and powered by a styling community. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a part of some of the most important and culture-defining fashion trends. The Express Edit design philosophy ensures that the brand is always ‘of the now’ so people can get dressed for every day and any occasion knowing that Express can help them look the way they want to look and feel the way they want to feel.
The Company operates over 550 retail and outlet stores in
Forward-Looking Statements |
Certain statements are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and include, but are not limited to (1) guidance and expectations, including statements regarding expected operating margins, comparable sales, effective tax rates, interest income, net income, diluted earnings per share, cash tax refunds, liquidity, EBITDA, free cash flow, eCommerce demand, and capital expenditures, (2) statements regarding expected store openings, store closures, store conversions, and gross square footage, and (3) statements regarding the Company's strategy, plans, and initiatives, including, but not limited to, results expected from such strategy, plans, and initiatives. You can identify these forward-looking statements by the use of words in the future tense and statements accompanied by words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “scheduled,” “estimates,” “anticipates,” “opportunity,” “leads” or the negative version of these words or other comparable words. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict, and significant contingencies, many of which are beyond the Company's control. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) the COVID-19 pandemic and its continued impact on our business operations, store traffic, employee availability, financial condition, liquidity and cash flow; (3) geopolitical risks, including impacts from the ongoing conflict between
Schedule 1 |
|||||||||||
|
|||||||||||
Consolidated Balance Sheets |
|||||||||||
(In thousands) |
|||||||||||
(Unaudited) |
|||||||||||
|
|
|
|
|
|
||||||
ASSETS |
|
|
|
|
|
||||||
Current Assets: |
|
|
|
|
|
||||||
Cash and cash equivalents |
$ |
24,592 |
|
|
$ |
41,176 |
|
|
$ |
36,795 |
|
Receivables, net |
|
16,669 |
|
|
|
11,744 |
|
|
|
14,033 |
|
Income tax receivable |
|
1,532 |
|
|
|
53,665 |
|
|
|
53,350 |
|
Inventories |
|
422,666 |
|
|
|
358,795 |
|
|
|
383,588 |
|
Prepaid rent |
|
5,964 |
|
|
|
5,602 |
|
|
|
4,309 |
|
Other |
|
26,100 |
|
|
|
19,755 |
|
|
|
19,464 |
|
Total current assets |
|
497,523 |
|
|
|
490,737 |
|
|
|
511,539 |
|
|
|
|
|
|
|
||||||
Right of Use Asset, Net |
|
533,506 |
|
|
|
615,462 |
|
|
|
656,995 |
|
|
|
|
|
|
|
||||||
Property and Equipment |
|
1,002,902 |
|
|
|
975,802 |
|
|
|
971,230 |
|
Less: accumulated depreciation |
|
(869,910 |
) |
|
|
(827,820 |
) |
|
|
(820,728 |
) |
Property and equipment, net |
|
132,992 |
|
|
|
147,982 |
|
|
|
150,502 |
|
|
|
|
|
|
|
||||||
Non-Current Income Tax Receivable |
|
52,278 |
|
|
|
— |
|
|
|
— |
|
Other Assets |
|
4,672 |
|
|
|
5,273 |
|
|
|
5,092 |
|
TOTAL ASSETS |
$ |
1,220,971 |
|
|
$ |
1,259,454 |
|
|
$ |
1,324,128 |
|
|
|
|
|
|
|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
||||||
Current Liabilities: |
|
|
|
|
|
||||||
Short-term lease liability |
$ |
190,874 |
|
|
$ |
196,628 |
|
|
$ |
204,827 |
|
Accounts payable |
|
229,661 |
|
|
|
231,974 |
|
|
|
252,752 |
|
Deferred revenue |
|
31,947 |
|
|
|
35,985 |
|
|
|
30,412 |
|
Short-term debt |
|
4,500 |
|
|
|
11,216 |
|
|
|
10,091 |
|
Accrued expenses |
|
118,984 |
|
|
|
110,850 |
|
|
|
126,151 |
|
Total current liabilities |
|
575,966 |
|
|
|
586,653 |
|
|
|
624,233 |
|
|
|
|
|
|
|
||||||
Long-Term Lease Liability |
|
437,091 |
|
|
|
536,905 |
|
|
|
579,117 |
|
Long-Term Debt |
|
230,861 |
|
|
|
117,581 |
|
|
|
108,394 |
|
Other Long-Term Liabilities |
|
9,454 |
|
|
|
17,007 |
|
|
|
20,553 |
|
Total Liabilities |
|
1,253,372 |
|
|
|
1,258,146 |
|
|
|
1,332,297 |
|
|
|
|
|
|
|
||||||
Commitments and Contingencies |
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Total Stockholders’ (Deficit)/Equity |
|
(32,401 |
) |
|
|
1,308 |
|
|
|
(8,169 |
) |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
1,220,971 |
|
|
$ |
1,259,454 |
|
|
$ |
1,324,128 |
|
Schedule 2 |
|||||||||||||||
|
|||||||||||||||
Consolidated Statements of Income |
|||||||||||||||
(In thousands, except per share amounts) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
$ |
434,145 |
|
|
$ |
471,981 |
|
|
$ |
1,349,849 |
|
|
$ |
1,275,367 |
|
Cost of Goods Sold, Buying and Occupancy Costs |
|
313,528 |
|
|
|
315,173 |
|
|
|
944,031 |
|
|
|
890,448 |
|
GROSS PROFIT |
|
120,617 |
|
|
|
156,808 |
|
|
|
405,818 |
|
|
|
384,919 |
|
Operating Expenses: |
|
|
|
|
|
|
|
||||||||
Selling, general, and administrative expenses |
|
150,090 |
|
|
|
141,055 |
|
|
|
434,461 |
|
|
|
395,010 |
|
Other operating expense/(income), net |
|
36 |
|
|
|
(501 |
) |
|
|
(443 |
) |
|
|
(565 |
) |
TOTAL OPERATING EXPENSES |
|
150,126 |
|
|
|
140,554 |
|
|
|
434,018 |
|
|
|
394,445 |
|
|
|
|
|
|
|
|
|
||||||||
OPERATING (LOSS)/INCOME |
|
(29,509 |
) |
|
|
16,254 |
|
|
|
(28,200 |
) |
|
|
(9,526 |
) |
Interest Expense, Net |
|
4,668 |
|
|
|
2,879 |
|
|
|
11,962 |
|
|
|
12,246 |
|
Other Income, Net |
|
(509 |
) |
|
|
— |
|
|
|
(1,385 |
) |
|
|
— |
|
(LOSS)/INCOME BEFORE INCOME TAXES |
|
(33,668 |
) |
|
|
13,375 |
|
|
|
(38,777 |
) |
|
|
(21,772 |
) |
Income Tax Expense |
|
780 |
|
|
|
289 |
|
|
|
549 |
|
|
|
227 |
|
NET (LOSS)/INCOME |
$ |
(34,448 |
) |
|
$ |
13,086 |
|
|
$ |
(39,326 |
) |
|
$ |
(21,999 |
) |
|
|
|
|
|
|
|
|
||||||||
EARNINGS PER SHARE: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
(0.50 |
) |
|
$ |
0.20 |
|
|
$ |
(0.58 |
) |
|
$ |
(0.33 |
) |
Diluted |
$ |
(0.50 |
) |
|
$ |
0.19 |
|
|
$ |
(0.58 |
) |
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
||||||||
Basic |
|
68,272 |
|
|
|
67,006 |
|
|
|
67,878 |
|
|
|
66,244 |
|
Diluted |
|
68,272 |
|
|
|
69,856 |
|
|
|
67,878 |
|
|
|
66,244 |
|
Schedule 3 |
|||||||
|
|||||||
Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
(Unaudited) |
|||||||
|
Thirty-Nine Weeks Ended |
||||||
|
|
|
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
||||
Net loss |
$ |
(39,326 |
) |
|
$ |
(21,999 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
45,076 |
|
|
|
51,964 |
|
Loss on disposal of property and equipment |
|
57 |
|
|
|
74 |
|
Share-based compensation |
|
7,617 |
|
|
|
7,856 |
|
Landlord allowance amortization |
|
(310 |
) |
|
|
(319 |
) |
Changes in operating assets and liabilities: |
|
|
|
||||
Receivables, net |
|
(4,925 |
) |
|
|
523 |
|
Income tax receivable |
|
(145 |
) |
|
|
57,992 |
|
Inventories |
|
(63,871 |
) |
|
|
(119,228 |
) |
Accounts payable, deferred revenue, and accrued expenses |
|
(4,865 |
) |
|
|
95,621 |
|
Other assets and liabilities |
|
(35,177 |
) |
|
|
5,800 |
|
|
|
(95,869 |
) |
|
|
78,284 |
|
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
||||
Capital expenditures |
|
(24,340 |
) |
|
|
(18,095 |
) |
|
|
(24,340 |
) |
|
|
(18,095 |
) |
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
||||
Proceeds from borrowings under the revolving credit facility |
|
252,000 |
|
|
|
73,000 |
|
Repayment of borrowings under the revolving credit facility |
|
(143,000 |
) |
|
|
(154,050 |
) |
Proceeds from borrowings under the term loan facility |
|
— |
|
|
|
50,000 |
|
Repayment of borrowings under the term loan facility |
|
(3,375 |
) |
|
|
(43,263 |
) |
Repayments of financing arrangements |
|
— |
|
|
|
(769 |
) |
Costs incurred in connection with debt arrangements |
|
— |
|
|
|
(471 |
) |
Repurchase of common stock for tax withholding obligations |
|
(2,000 |
) |
|
|
(3,715 |
) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
103,625 |
|
|
|
(79,268 |
) |
|
|
|
|
||||
|
|
(16,584 |
) |
|
|
(19,079 |
) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
41,176 |
|
|
|
55,874 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
24,592 |
|
|
$ |
36,795 |
|
Schedule 4 |
|
Supplemental Information - Consolidated Statements of Income |
Reconciliation of GAAP to Non-GAAP Financial Measures |
(Unaudited) |
The Company supplements the reporting of its financial information determined under
EBITDA |
EBITDA is defined as net (loss)/income before interest expense (net of interest income), income tax expense and depreciation and amortization expense.
How This Measure Is Useful
When used in conjunction with GAAP financial measures, EBITDA is a supplemental measure of operating performance that the Company believes is a useful measure to facilitate comparisons to historical performance. EBITDA is used as a performance measure in the Company's long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned and is also a metric used in our short-term cash incentive compensation plan.
Limitations of the Usefulness of This Measure
Because non-GAAP financial measures are not standardized, EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. EBITDA excludes certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the GAAP financial measures. A reconciliation of EBITDA to the most directly comparable GAAP measures, is set forth below:
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
|||||||||||
(in thousands) |
|
|
|
|
|
|
|
|||||||
Net (loss)/income |
$ |
(34,448 |
) |
|
$ |
13,086 |
|
$ |
(39,326 |
) |
|
$ |
(21,999 |
) |
Interest expense, net |
|
4,668 |
|
|
|
2,879 |
|
|
11,962 |
|
|
|
12,246 |
|
Income tax expense |
|
780 |
|
|
|
289 |
|
|
549 |
|
|
|
227 |
|
Depreciation and amortization |
|
14,550 |
|
|
|
15,662 |
|
|
43,763 |
|
|
|
48,418 |
|
EBITDA (Non-GAAP Measure) |
$ |
(14,450 |
) |
|
$ |
31,916 |
|
$ |
16,948 |
|
|
$ |
38,892 |
|
|
|
Schedule 5 |
|||
|
|||||
Real Estate Activity |
|||||
(Unaudited) |
|||||
|
|
|
|
||
Third Quarter 2022 - Actual |
|
|
|||
Company-Operated Stores |
Opened |
Closed |
|
Store Count |
Gross Square Footage |
Retail Stores |
— |
(1) |
|
342 |
|
Outlet Stores |
— |
— |
|
202 |
|
Express Edit Stores |
4 |
— |
|
9 |
|
UpWest Stores |
1 |
(2) |
|
13 |
|
TOTAL |
5 |
(3) |
|
566 |
4.7 million |
|
|
|
|
|
|
Fourth Quarter 2022 - Projected |
|
|
|||
Company-Operated Stores |
Opened |
Closed |
|
Store Count |
Gross Square Footage |
Retail Stores |
— |
(8) |
|
334 |
|
Outlet Stores |
— |
(2) |
|
200 |
|
Express Edit Stores |
2 |
(1) |
|
10 |
|
UpWest Stores |
2 |
(1) |
|
14 |
|
TOTAL |
4 |
(12) |
|
558 |
4.6 million |
|
|
|
|
|
|
Full Year 2022 - Projected |
|
|
|||
Company-Operated Stores |
Opened |
Closed |
|
Store Count |
Gross Square Footage |
Retail Stores |
— |
(12) |
|
334 |
|
Outlet Stores |
— |
(3) |
|
200 |
|
Express Edit Stores |
7 |
(2) |
|
10 |
|
UpWest Stores |
10 |
(3) |
|
14 |
|
TOTAL |
17 |
(20) |
|
558 |
4.6 million |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221207005932/en/
INVESTOR CONTACT
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