Express, Inc. Reports Second Quarter 2013 Results; Introduces Third Quarter Outlook And Raises Full Year Guidance - Second quarter net sales rise 7%; comparable sales increase 6% - Second quarter diluted EPS increases 11% to $0.20 - Full year guidance raised to reflect strong second quarter and positive third quarter outlook PR Newswire COLUMBUS, Ohio, Aug. 28, 2013 COLUMBUS, Ohio, Aug. 28, 2013 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating over 620 stores, today announced its financial results for the second quarter and first six months of 2013. These results cover the thirteen and twenty-six week periods ended August 3, 2013 and compare to the thirteen and twenty-six week periods ended July 28, 2012. Michael Weiss, Express, Inc.'s Chairman and Chief Executive Officer commented, "We delivered a very solid second quarter. Financial highlights include high single digit sales growth, comparable sales that represent a return to mid-single digit growth and earnings per share that came near the upper end of our guidance. These results were driven by improved execution of our Go-to-Market strategy and by our ability to react quickly as the competitive environment evolved." In terms of product offering, Mr. Weiss noted that, "Our customers are responding enthusiastically to our assortments, which are trend-right, differentiated and well-edited. We are seeing this reflected in improved conversion rates. As we move into the second half of the year, we are confident in our product and marketing strategies, and believe we are well positioned for the fall and holiday seasons." He went on to add that, "We made progress on each of our four growth pillars during the second quarter. At the same time, we took concrete steps to prepare for the launch of our outlet business in the second quarter of 2014, which represents another opportunity to drive significant top and bottom line growth." Second Quarter 2013 Operating Results: oNet sales increased 7% to $486.2 million from $454.9 million in the second quarter of 2012. oComparable sales increased 6%, following a 1% comparable sales increase in last year's second quarter. This includes e-commerce sales, which increased 27% to $59.9 million. In last year's second quarter, e-commerce sales grew 24% to $47.2 million. oGross margin declined to 31.4% of net sales compared to 32.2% in the second quarter of 2012. Merchandise margin was down 40 basis points driven by increased promotional activity late in the second quarter in response to the competitive environment. Buying and occupancy costs as a percentage of sales increased 40 basis points, driven primarily by the incremental non-cash rent expense associated with the New York City and San Francisco flagship stores. oSelling, general, and administrative (SG&A) expenses were $119.2 million versus $115.3 million in last year's second quarter. As a percentage of net sales, SG&A expenses improved 80 basis points to 24.5% compared to 25.3% in the same period last year. This improvement reflects continued discipline in managing these expenses. oOperating income was $33.4 million, or 6.9% of net sales, compared to $31.2 million, or 6.9% of net sales, in the second quarter of 2012. oThe effective tax rate was 39.7% compared to 39.6% in last year's second quarter. oNet income was $16.9 million, or $0.20 per diluted share, compared to net income of $15.8 million, or $0.18 per diluted share, in the second quarter of 2012. oReal estate activity for the second quarter of 2013 is detailed in Schedule 4. Twenty-Six Week Operating Results: oNet sales increased 5% to $994.7 million from $950.8 million in the prior year period. oComparable sales increased 3%, following a 2% comparable sales increase in the prior year period. This includes e-commerce sales, which increased 37% to $130.6 million. In the prior year period, e-commerce sales grew 26% to $95.1 million. oGross margin declined to 32.5% of net sales compared to 35.3% in the prior year period. Merchandise margin declined 150 basis points and buying and occupancy costs as a percentage of sales increased 130 basis points. oSG&A expenses were $231.8 million versus $229.5 million in the prior year period. As a percentage of net sales, SG&A expenses improved 80 basis points to 23.3% compared to 24.1% in the same period last year. oOperating income was $92.1 million, or 9.3% of net sales, compared to $105.8 million, or 11.1% of net sales, in the prior year period. oThe effective tax rate declined to 39.6% compared to 39.8% in the prior year period. oNet income was $49.3 million, or $0.58 per diluted share, compared to net income of $57.9 million, or $0.65 per diluted share, in the prior year period. oCapital expenditures totaled $45.5 million, compared to $45.7 million in the prior year period. Second Quarter 2013 Balance Sheet: oCash and cash equivalents totaled $234.3 million versus $130.2 million at the end of the second quarter of 2012. oAs expected, inventory rose to $241.9 million, an increase of 13.4%, compared to $213.3 million at the end of the second quarter of 2012. The calendar shift due to last year's 53rd week accounted for approximately 4% of the increase. Inventory per square foot increased 8.8% compared to the same period in 2012. oLong-term debt was relatively unchanged at $199.0 million, with no borrowings outstanding under the Revolving Credit Facility. oDuring the quarter the Company purchased approximately 0.6 million shares of its common stock at an aggregate cost of $13.9 million, to end the second quarter with approximately $21.1 million of its $100 million repurchase authorization still outstanding. Repurchases of an additional 1.0 million shares during the third quarter have completed the repurchase program. 2013 Guidance: The table below compares the Company's projected results for the thirteen week period ended November 2, 2013 to the actual results for the thirteen week period ended October 27, 2012. Third Quarter 2013 Third Quarter 2012 Guidance Actual Results Comparable Sales +Mid Single Digits (5)% Effective Tax Rate Approximately 40% 41.4% Interest Expense $4.8 million $4.8 million Net Income $18 - $22 million $17.4 million Diluted EPS $0.21 - $0.26 $0.20 Weighted Average Diluted Shares 85.1 million 86.2 million Outstanding See Schedule 4 for projected real estate activity. The table below compares the Company's projected results for the fifty-two week period ended February 1, 2014 to the actual results for the fifty-three week period ended February 2, 2013. Updated Full Year 2012 Full Year 2013 Actual Results Guidance Comparable Sales +Low to mid single Flat digits ^(1) Effective Tax Rate 39.3% - 39.8% 40% Interest Expense $19.4 million $19.6 million Net Income $130 - $137 million $139.3 million ^(2) Diluted EPS $1.52 - $1.60 $1.60 ^(3) Weighted Average Diluted Shares 85.4 million 87.2 million Outstanding Capital Expenditures $110 - $115 million $99.7 million ^(1) Compares the 52-week period ended February 1, 2014 to the 52-week period ended February 2, 2013. ^(2) Includes approximately $3.0 million related to the 53rd week. ^(3) Includes approximately $0.04 related to the 53rd week. See Schedule 4 for projected real estate activity. Consistent with previous years, the quarterly and full year guidance excludes any non-core operating items that may occur. Conference Call Information: A conference call to discuss second quarter results is scheduled for Wednesday August 28, 2013, at 9:00 a.m. Eastern Time (ET). Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at: http://www.express.com/investor and remain available for 90 days. A telephone replay of this call will be available from 12:00 p.m. ET on August 28, 2013 until 11:59 p.m. ET on September 4, 2013 and can be accessed by dialing (877) 870-5176 and entering replay pin number 418777. About Express: Express is a specialty apparel and accessories retailer of women's and men's merchandise, targeting the 20 to 30 year old customer. The Company has over 30 years of experience offering a distinct combination of fashion and quality for multiple lifestyle occasions at an attractive value addressing fashion needs across work, casual, jeanswear, and going-out occasions. The Company currently operates over 620 retail stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States, in Canada, and in Puerto Rico. Express merchandise is also available at franchise stores in the Middle East and Latin America. The Company also markets and sells its products through the Company's e-commerce website, www.express.com. 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 for the third quarter and full year 2013, including statements regarding expected comparable sales, effective tax rates, interest expense, net income and earnings per diluted share, (2) statements regarding expected store openings, store closures, and gross square footage, and (3) statements regarding growth strategies and plans. 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. 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) our ability to identify and respond to new and changing fashion trends, customer preferences and other related factors; (3) fluctuations in our sales and results of operations on a seasonal basis and due to store events, promotions and a variety of other factors; (4) increased competition from other retailers; (5) changes in customer traffic at malls and shopping centers; (6) our dependence upon independent third parties to manufacture all of our merchandise; (7) changes in the cost of raw materials, labor, and freight; (8) supply chain disruption; (9) our growth strategy, including our international expansion plan; (10) our dependence on a strong brand image; (11) our dependence upon key executive management; (12) our reliance on third parties to provide us with certain key services for our business; and (13) our substantial indebtedness and lease obligations. Additional information concerning these and other factors can be found in Express, Inc.'s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Schedule 1 Express, Inc. Consolidated Balance Sheets (In thousands) (Unaudited) August3, 2013 February 2, 2013 July28, 2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 234,250 $ 256,297 $ 130,174 Receivables, net 13,510 11,024 13,825 Inventories 241,933 215,082 213,275 Prepaid minimum rent 26,030 25,166 23,543 Other 32,172 8,293 24,978 Total current assets 547,895 515,862 405,795 PROPERTY AND EQUIPMENT 686,777 625,344 569,534 Less: accumulated depreciation (364,576) (346,975) (317,829) Property and equipment, net 322,201 278,369 251,705 TRADENAME/DOMAIN NAME 197,787 197,719 197,694 DEFERRED TAX ASSETS 16,808 16,808 12,650 OTHER ASSETS 9,100 10,441 11,970 Total assets $ 1,093,791 $ 1,019,199 $ 879,814 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 197,050 $ 176,125 $ 163,325 Deferred revenue 19,459 27,851 19,188 Accrued bonus 893 336 4,118 Accrued expenses 84,197 108,464 89,239 Accounts payable and accrued expenses – related — — — parties Total current liabilities 301,599 312,776 275,870 LONG-TERM DEBT 199,003 198,843 198,685 OTHER LONG-TERM LIABILITIES 174,928 136,418 107,960 Total liabilities 675,530 648,037 582,515 COMMITMENTS AND CONTINGENCIES Total stockholders' equity 418,261 371,162 297,299 Total liabilities and $ 1,093,791 $ 1,019,199 $ 879,814 stockholders' equity Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation. Schedule 2 Express, Inc. Consolidated Statements of Income and Comprehensive Income (In thousands, except per share amounts) (Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended August3,2013 July28,2012 August3,2013 July28,2012 NET SALES $ 486,158 $ 454,879 $ 994,682 $ 950,831 COST OF GOODS SOLD, BUYING AND 333,611 308,358 671,358 615,543 OCCUPANCY COSTS Gross profit 152,547 146,521 323,324 335,288 OPERATING EXPENSES: Selling, general, and 119,176 115,307 231,799 229,502 administrative expenses Other operating (income) expense, (44) 18 (584) 33 net Total operating 119,132 115,325 231,215 229,535 expenses OPERATING INCOME 33,415 31,196 92,109 105,753 INTEREST EXPENSE, 4,776 4,773 9,581 9,555 NET OTHER EXPENSE, 576 220 805 12 NET INCOME BEFORE 28,063 26,203 81,723 96,186 INCOME TAXES INCOME TAX 11,154 10,374 32,377 38,284 EXPENSE NET INCOME $ 16,909 $ 15,829 $ 49,346 $ 57,902 OTHER COMPREHENSIVE INCOME: Foreign currency 146 81 216 3 translation COMPREHENSIVE $ 17,055 $ 15,910 $ 49,562 $ 57,905 INCOME EARNINGS PER SHARE: Basic $ 0.20 $ 0.18 $ 0.58 $ 0.66 Diluted $ 0.20 $ 0.18 $ 0.58 $ 0.65 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 85,001 87,640 85,048 88,243 Diluted 85,572 87,979 85,531 88,645 Schedule 3 Express, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Twenty-Six Weeks Ended August3, 2013 July28, 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 49,346 $ 57,902 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,754 33,937 Loss on disposal of property and equipment 286 35 Excess tax benefit from share-based compensation (64) (277) Share-based compensation 10,837 8,856 Deferred taxes — (188) Changes in operating assets and liabilities: Receivables, net (2,408) (4,802) Inventories (27,103) (204) Accounts payable, deferred revenue, and accrued (20,533) (25,982) expenses Other assets and liabilities (8,582) 5,005 Net cash provided by operating activities 36,533 74,282 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (45,538) (45,661) Purchase of intangible assets (69) (185) Net cash used in investing activities (45,607) (45,846) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease obligation (29) (27) Excess tax benefit from share-based compensation 64 277 Proceeds from share-based compensation 2,828 623 Repurchase of common stock (15,756) (51,497) Net cash used in financing activities (12,893) (50,624) EFFECT OF EXCHANGE RATE ON CASH (80) — NET DECREASE IN CASH AND CASH EQUIVALENTS (22,047) (22,188) CASH AND CASH EQUIVALENTS, Beginning of period 256,297 152,362 CASH AND CASH EQUIVALENTS, End of period $ 234,250 $ 130,174 Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation. Schedule 4 Express, Inc. Real Estate Activity (Unaudited) Second Quarter 2013 - Actual August 3, 2013 - Actual Company-Operated Stores Opened Closed Store Count Gross Square Footage United States 2 1 609 Canada — — 12 Total 2 1 621 5.4 million Third Quarter 2013 - Projected November 2, 2013 - Projected Company-Operated Stores Open Close Store Count Gross Square Footage United States 5 — 614 Canada 2 — 14 Total 7 — 628 5.5 million Full Year 2013 - Projected February 1, 2014 - Projected Company-Operated Stores Open Close Store Count Gross Square Footage United States 12 9 617 Canada 4 — 15 Total 16 9 632 5.5 million SOURCE Express, Inc. Website: http://www.express.com Contact: Investor Contacts, Marisa Jacobs, Express, Inc., Vice President Investor Relations, (614) 474-4465; or Allison Malkin / Anne Rakunas, ICR, Inc., (203) 682-8225 / (310) 954-1113; or Media Contact, Amy Hughes, Express, Inc., Corporate Communications & Events, (614) 474-4325
Express, Inc. Reports Second Quarter 2013 Results; Introduces Third Quarter Outlook And Raises Full Year Guidance
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