Express, Inc. Reports Third Quarter 2013 Results In Line With Guidance -- Third quarter net sales rose 7% to $503 million; comparable sales rose 5% -- Third quarter diluted EPS increased 15% to $0.23 -- Full year guidance updated PR Newswire COLUMBUS, Ohio, Dec. 4, 2013 COLUMBUS, Ohio, Dec. 4, 2013 /PRNewswire/ --Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating approximately 630 stores, today announced its financial results for the third quarter and first nine months of 2013. These results cover the 13 and 39 week periods ended November 2, 2013 and compare to the 13 and 39 week periods ended October 27, 2012. Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that, "We delivered a solid third quarter, in line with our guidance and highlighted by a 5% increase in comparable sales and 15% EPS growth. These results were achieved against the backdrop of an extremely challenging and promotional retail environment. Our carefully edited assortment, spanning our four end uses, constituted a differentiated and compelling offering that resonated with our customers." Commenting on the fourth quarter, Mr. Weiss noted that, "Our current product line consists of a well balanced mix of cold weather and spring merchandise, with styles that tested well and are on-trend. Thanksgiving week sales exceeded last year's, however results did not meet our expectations. We had been planning for a promotional holiday season but we now expect the intensity of those promotions to reach heightened levels and we are updating our full year guidance accordingly. Our overarching goal is to continue presenting Express as a premier fashion authority for our demographic, and we believe that our current and go-forward assortments demonstrate that standing." Third Quarter 2013 Operating Results: oNet sales increased 7% to $503.0 million from $468.5 million in the third quarter of 2012. oComparable sales increased 5%. In last year's third quarter, comparable sales declined by 5%. Both numbers include e-commerce sales, which increased 29% to $71.2 million in the third quarter of 2013. In last year's third quarter, e-commerce sales grew 21% to $55.1 million. oGross margin improved 60 basis points over last year's third quarter and represented 32.9% of net sales. Merchandise margin improved by 40 basis points. Despite the promotional environment, we were able to recover some of the margin lost in last year's third quarter by delivering a stronger product assortment, especially on the women's side of the business. Buying and occupancy costs as a percentage of sales improved by 20 basis points, primarily due to the leverage associated with our comparable sales growth. oSelling, general, and administrative (SG&A) expenses were $128.4 million versus $117.7 million in last year's third quarter. As a percentage of net sales, SG&A expenses rose by 40 basis points to 25.5% compared to 25.1% in the same period last year, primarily reflecting payroll increases and an increase in marketing expense, which includes certain costs associated with our preparations to open the Times Square store. oOperating income was $36.7 million, or 7.3% of net sales, compared to $34.4 million, or 7.3% of net sales, in the third quarter of 2012. oThe effective tax rate was 39.2% compared to 41.4% in last year's third quarter. The effective rate was lower than the comparable prior year period primarily due to a discrete tax charge related to the rate applied to deferred tax balance sheet accounts incurred during the third quarter of 2012. oNet income was $19.3 million, or $0.23 per diluted share, compared to net income of $17.4 million, or $0.20 per diluted share, in the third quarter of 2012. oReal estate activity for the third quarter of 2013, which includes the opening of our Union Square flagship store in San Francisco, is detailed in Schedule 4. Thirty-Nine Week Operating Results: oNet sales increased 6% to $1,497.7 million from $1,419.4 million in the prior year period. oComparable sales increased 3% while comparable sales in the prior year period were flat. oGross margin was 32.6% of net sales compared to 34.3% in the prior year period. Merchandise margin declined 90 basis points and buying and occupancy costs as a percentage of sales increased 80 basis points. oSG&A expenses were $360.2 million versus $347.2 million in the prior year period. As a percentage of net sales, SG&A expenses improved 50 basis points to 24.0% compared to 24.5% in the same period last year. oOperating income was $128.8 million, or 8.6% of net sales, compared to $140.2 million, or 9.9% of net sales, in the prior year period. oThe effective tax rate was 39.5% compared to 40.2% in the prior year period. oNet income was $68.6 million, or $0.81 per diluted share, compared to net income of $75.3 million, or $0.86 per diluted share, in the prior year period. oCapital expenditures totaled $78.8 million, compared to $73.4 million in the prior year period. Third Quarter 2013 Balance Sheet: oCash and cash equivalents totaled $181.6 million versus $102.4 million at the end of the third quarter of 2012. oInventory rose to $343.0 million, an increase of 18.1%, compared to $290.4 million at the end of the third quarter of 2012. The calendar shift due to last year's 53rd week accounted for approximately 36% of the increase. We also took receipt of certain holiday goods earlier than last year in an effort to improve the flow of goods through our distribution center during the holiday period. Inventory per square foot increased 9.8% compared to the same period in 2012. oLong-term debt was relatively unchanged at $199.1 million, with no borrowings outstanding under the Revolving Credit Facility. 2013 Guidance: The table below compares the Company's projected results for the thirteen week period ended February 1, 2014 to the actual results for the fourteen week period ended February 2, 2013. Fourth Quarter 2013 Fourth Quarter 2012 Guidance Actual Results Comparable Sales +Low single digits ^(1) 1.5% Effective Tax Rate Approximately 40% 39.7% Interest Expense $4.9 million $5.2 million Net Income $56 - $60 million $63.9 million ^(2) Diluted EPS $0.66 - $0.71 $0.75 ^ ^(3) Weighted Average Diluted Shares 84.8 million 85.3 million Outstanding ^(1) Compares the 13-week period ended February 1, 2014 to the 13-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. 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 single digits ^(1) Flat Effective Tax Rate 39.3% - 39.8% 40% Interest Expense $19.4 million $19.6 million Net Income $124 - $128 million $139.3 million ^(2) Diluted EPS $1.46 - $1.51 $1.60 ^(3) Weighted Average Diluted Shares 85.1 million 87.2 million Outstanding Capital Expenditures $108 - $113 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, December 4, 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 December 4, 2013 until 11:59 p.m. ET on December 11, 2013 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13572522. 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 approximately 630 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 fourth quarter and full year 2013, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, earnings per diluted share, and capital expenditures, and (2) statements regarding expected store openings, store closures, and gross square footage. 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) November 2, 2013 February 2, October 27, 2013 2012 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 181,553 $ 256,297 $ 102,438 Receivables, net 17,433 11,024 11,014 Inventories 343,020 215,082 290,368 Prepaid minimum rent 26,125 25,166 24,233 Other 24,807 8,293 28,949 Total current assets 592,938 515,862 457,002 PROPERTY AND EQUIPMENT 730,157 625,344 614,145 Less: accumulated (374,869) (346,975) (333,279) depreciation Property and equipment, 355,288 278,369 280,866 net TRADENAME/DOMAIN NAME 197,812 197,719 197,719 DEFERRED TAX ASSETS 14,275 16,808 9,640 OTHER ASSETS 8,413 10,441 11,216 Total assets $ 1,168,726 $ 1,019,199 $ 956,443 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 244,906 $ 176,125 $ 209,070 Deferred revenue 19,725 27,851 18,524 Accrued bonus 1,742 336 85 Accrued expenses 84,745 108,464 91,129 Total current liabilities 351,118 312,776 318,808 LONG-TERM DEBT 199,086 198,843 198,760 OTHER LONG-TERM 196,339 136,418 135,780 LIABILITIES Total liabilities 746,543 648,037 653,348 COMMITMENTS AND CONTINGENCIES Total stockholders' equity 422,183 371,162 303,095 Total liabilities and $ 1,168,726 $ 1,019,199 $ 956,443 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 Thirty-Nine Weeks Ended November 2, October 27, November 2, October 27, 2013 2012 2013 2012 NET SALES $ 502,992 $ 468,527 $ 1,497,674 $ 1,419,358 COST OF GOODS SOLD, BUYING AND OCCUPANCY 337,727 316,989 1,009,085 932,532 COSTS Gross profit 165,265 151,538 488,589 486,826 OPERATING EXPENSES: Selling, general, and 128,366 117,722 360,165 347,224 administrative expenses Other operating expense 169 (586) (415) (553) (income), net Total operating expenses 128,535 117,136 359,750 346,671 OPERATING INCOME 36,730 34,402 128,839 140,155 INTEREST EXPENSE, NET 4,876 4,782 14,457 14,337 OTHER EXPENSE (INCOME), 153 (116) 958 (104) NET INCOME BEFORE INCOME 31,701 29,736 113,424 125,922 TAXES INCOME TAX EXPENSE 12,434 12,314 44,811 50,598 NET INCOME $ 19,267 $ 17,422 $ 68,613 $ 75,324 OTHER COMPREHENSIVE INCOME: Foreign currency 26 (49) 242 (46) translation gain (loss) COMPREHENSIVE INCOME $ 19,293 $ 17,373 $ 68,855 $ 75,278 EARNINGS PER SHARE: Basic $ 0.23 $ 0.20 $ 0.81 $ 0.86 Diluted $ 0.23 $ 0.20 $ 0.81 $ 0.86 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 83,929 85,980 84,675 87,489 Diluted 84,603 86,216 85,221 87,835 Schedule 3 Express, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Thirty-Nine Weeks Ended November 2, 2013 October 27, 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 68,613 $ 75,324 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52,000 50,733 Loss on disposal of property and 636 67 equipment Excess tax benefit from share-based (201) (409) compensation Share-based compensation 16,016 12,207 Deferred taxes 307 3,713 Changes in operating assets and liabilities: Receivables, net (6,420) (1,977) Inventories (128,334) (77,270) Accounts payable, deferred revenue, and 25,969 19,523 accrued expenses Other assets and liabilities 9,054 7,231 Net cash provided by operating activities 37,640 89,142 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (78,772) (73,354) Purchase of intangible assets (69) (210) Net cash used in investing activities (78,841) (73,564) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease obligation (45) (41) Excess tax benefit from share-based 201 409 compensation Proceeds from share-based compensation 4,426 623 Repurchase of common stock (37,905) (66,534) Net cash used in financing activities (33,323) (65,543) EFFECT OF EXCHANGE RATE ON CASH (220) 41 NET DECREASE IN CASH AND CASH EQUIVALENTS (74,744) (49,924) CASH AND CASH EQUIVALENTS, Beginning of 256,297 152,362 period CASH AND CASH EQUIVALENTS, End of period $ 181,553 $ 102,438 Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation. Schedule 4 Express, Inc. Real Estate Activity (Unaudited) Third Quarter 2013 - Actual November 2, 2013 - Actual Company-Operated Stores Opened Closed Store Count Gross Square Footage United States 5 — 614 Canada 2 — 14 Total 7 — 628 5.5 million Fourth Quarter 2013 - Projected February 1, 2014 - Projected Company-Operated Stores Open Close Store Count Gross Square Footage United States 3 — 617 Canada 1 — 15 Total 4 — 632 5.5 million SOURCE Express, Inc. Website: http://www.express.com Contact: Investors: 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: Amy Hughes, Express, Inc., Corporate Communications & Events, (614) 474-4325
Express, Inc. Reports Third Quarter 2013 Results In Line With Guidance
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