Express, Inc. Reports Fourth Quarter and Full Year 2013 Results; Introduces First Quarter and Full Year 2014 Guidance - Fourth quarter comparable sales rose 1% - Fourth quarter diluted EPS of $0.57 is within guidance range - Inventory down 1% on an absolute basis; down 5% on a per square foot basis - Introduces first quarter and full year 2014 EPS guidance ranges of $0.12 to $0.18 and $1.03 to $1.23, respectively PR Newswire COLUMBUS, Ohio, March 12, 2014 COLUMBUS, Ohio, March 12, 2014 /PRNewswire/ --Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating approximately 630 stores, today announced fourth quarter and full year 2013 financial results. These results cover the 13 and 52 week periods ended February 1, 2014 and compare to the 14 and 53 week periods ended February 2, 2013. Comparable sales for the fourth quarter and full year 2013 were calculated using the 13 and 52 week periods ended February 1, 2014 compared to the 13 and 52 week periods ended February 2, 2013, respectively. EXPRESS Logo. Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that, "Our fourth quarter results were within the range of our revised guidance but disappointing nonetheless given the strength of our collection across both genders. We delivered positive comps for the quarter, but the heavier than planned pace of promotions impacted both top-line and margins. On the plus side, we ended the quarter with lean inventories heading into Spring. We also made advances in terms of three of our growth pillars. Specifically, we continued to grow our E-Commerce business; opened new North American stores, including our San Francisco flagship; and continued our international expansion. We also laid the groundwork for our outlet initiative and plan to open the first of these outlet stores in the beginning of May 2014." Commenting on first quarter and full year 2014 guidance, Mr. Weiss noted that, "We transitioned to Spring with multiple key items that are turning quickly and an assortment that is highlighting important emerging trends. The start of 2014 has nevertheless been extremely difficult, with traffic down significantly, negative comparable sales and the promotional environment remaining intense. Our first quarter guidance reflects year to date traffic and comparable sales as well as our belief that a material uptick in traffic is not necessarily imminent. This in turn leads us to believe that the promotional environment will continue, and we have planned accordingly. Our full year projections anticipate a return to EPS growth in the back half of the year, but full year results will be impacted by a weak start to 2014 and de-leveraging associated with our buying and occupancy and SG&A expenses. We are working on a variety of initiatives to generate improved results and remain committed to driving long-term shareholder value." Fourth Quarter 2013 Operating Results (for the 13 week period ended February 1, 2014 compared to the 14 week period ended February 2, 2013): oNet sales for the fourth quarter were $715.9 million. Net sales for the fourth quarter of 2012 were $731.7 million, including approximately $27.0 million related to the fourteenth week in last year's fourth quarter. oComparable sales (including e-commerce sales) increased 1% compared to a 1.5% increase in last year's fourth quarter. E-commerce sales increased 14% to $138.8 million in the fourth quarter of 2013 (13 weeks) compared to last year's 14 week fourth quarter. oGross margin as a percentage of net sales declined 300 basis points over last year's fourth quarter and represented 32.0% of net sales. Merchandise margin declined by 220 basis points reflecting the intensely promotional nature of the holiday period and January. Buying and occupancy costs as a percentage of sales rose by 80 basis points. oSelling, general, and administrative (SG&A) expenses were $144.1 million versus $144.4 million in last year's fourth quarter. As a percentage of net sales, SG&A expenses rose by 40 basis points to 20.1% compared to 19.7% in last year's fourth quarter. oOperating income was $85.4 million, or 11.9% of net sales, compared to $111.4 million, or 15.2% of net sales, in the fourth quarter of 2012. Operating income in the fourth quarter of 2012 included approximately $5.2 million related to the fourteenth week. oIncome tax expense was $31.8 million, at an effective tax rate of 39.9%, compared to $42.1 million, at an effective tax rate of 39.7% in last year's fourth quarter. oNet income was $47.9 million, or $0.57 per diluted share. This compares to net income of $63.9 million, or $0.75 per diluted share, in the fourth quarter of 2012, with 2012's fourteenth week contributing approximately $0.04 per diluted share. oReal estate activity for the fourth quarter of 2014 is detailed in Schedule 4. Full Year 2013 Operating Results (for the 52 week period ended February 1, 2014 compared to the 53 week period ended February 2, 2013): oNet sales increased 3% to $2.2 billion. Prior year net sales included approximately $27.0 million associated with the 53^rd week. oComparable sales (including e-commerce sales) increased 3% while comparable sales in the prior year period were flat. E-commerce sales increased 25% to $340.6 million in 2013 (52 weeks) compared to last year's 53 week period. oGross margin was 32.3% of net sales compared to 34.4% in 2012. Merchandise margins declined 120 basis points and buying and occupancy costs as a percentage of sales increased 90 basis points. oSG&A expenses were $504.3 million versus $491.6 million in 2012. As a percentage of net sales, SG&A expenses improved 10 basis points to 22.7%. oOperating income was $214.3 million, or 9.7% of net sales, compared to $251.6 million, or 11.7% of net sales, in the prior year period. Prior year operating income included approximately $5.2 million associated with the 53rd week. oIncome tax expense was $76.6 million, at an effective tax rate of 39.7%, compared to $92.7 million, at an effective tax rate of 40.0% in the prior year period. oNet income was $116.5 million, or $1.37 per diluted share, compared to net income of $139.3 million, or $1.60 per diluted share, in 2012, with 2012's 53^rd week contributing approximately $0.04 per diluted share. 2013 Balance Sheet Highlights: oCash and cash equivalents totaled $311.9 million versus $256.3 million at the end of 2012. oCapital expenditures totaled $105.4 million, compared to $99.7 million in the prior year. oInventory was $212.5 million, a decrease of 1%, compared to $215.1 million at the end of 2012. Inventory per square foot decreased 5% compared to the end of 2012. Classification of Sell-Off Revenue: We have revised our presentation of revenue associated with the sell off of end of season product to third parties. This resulted in a minor impact to our previously reported revenue, cost of goods sold and gross profit percentage. Sell-off revenue is now recorded in net sales rather than being netted against our cost of goods sold, buying and occupancy costs. Gross profit dollars and net income were unaffected. Please refer to Schedule 5 for details regarding the impact of the reclassification in 2012 and 2013. 2014 Guidance: The table below compares the Company's projected results for the thirteen week period ended May 3, 2014 to the actual results for the thirteen week period ended May 4, 2013. These projections do not take into account any actions we will be taking with respect to our long-term debt, which we intend to refinance in the near term. First Quarter 2014 First Quarter 2013 Guidance Actual Results Negative low double to Comparable Sales Flat negative high single digits Effective Tax Rate 40.0 - 41.0% 39.6% Interest Expense, Net $5.5 - $6 million $4.8 million Net Income $10 - $15 million $32.4 million Diluted Earnings Per Share (EPS) $0.12 - $0.18 $0.38 Weighted Average Diluted Shares 84.5 million 85.5 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 January 31, 2015 to the actual results for the fifty-two week period ended February 1, 2014. Full Year 2014 Full Year 2013 Guidance Actual Results Negative low single Comparable Sales digits to 3% flat Effective Tax Rate Approximately 40% 39.7% Interest Expense, Net $23 - $25 million $19.5 million Net Income $88 - $105 million $116.5 million Diluted EPS $1.03 - $1.23 $1.37 Weighted Average Diluted 85.1 million 85.1 million Shares Outstanding Capital Expenditures $110 - $115 million $105.4 million 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 fourth quarter and 2014 results is scheduled for Wednesday March 12, 2014, 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 March 12, 2014 until 11:59 p.m. ET on March 19, 2014 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13576286. 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 first quarter and full year 2014, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, earnings per diluted share, and capital expenditures, (2) statements regarding expected store openings, store closures, and gross square footage, (3) statements regarding the Company's future plans and initiatives, including plans to refinance the Company's long-term debt, and (4) expectations regarding traffic and the promotional environment. 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) February1, 2014 February2, 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 311,884 $ 256,297 Receivables, net 17,384 11,024 Inventories 212,510 215,082 Prepaid minimum rent 28,554 25,166 Other 13,129 8,293 Total current assets 583,461 515,862 PROPERTY AND EQUIPMENT 767,661 625,344 Less: accumulated depreciation (391,539) (346,975) Property and equipment, net 376,122 278,369 TRADENAME/DOMAIN NAME 197,812 197,719 DEFERRED TAX ASSETS 17,558 16,808 OTHER ASSETS 7,717 10,441 Total assets $ 1,182,670 $ 1,019,199 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 154,736 $ 176,125 Deferred revenue 28,436 27,851 Accrued bonus 694 336 Accrued expenses 116,238 108,464 Total current liabilities 300,104 312,776 LONG-TERM DEBT 199,170 198,843 DEFERRED LEASE CREDITS 114,509 91,491 OTHER LONG-TERM LIABILITIES 94,318 44,927 Total liabilities 708,101 648,037 COMMITMENTS AND CONTINGENCIES Total stockholders' equity 474,569 371,162 Total liabilities and stockholders' equity $ 1,182,670 $ 1,019,199 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 Fourteen Weeks Fifty-Two Fifty-Three Ended Ended Weeks Ended Weeks Ended February1, February2, February 1, February 2, 2014 2013 2014 2013 NET SALES $ 715,880 $ 731,685 $ 2,219,125 $ 2,157,227 COST OF GOODS SOLD, BUYING AND 486,762 475,872 1,501,418 1,414,588 OCCUPANCY COSTS Gross profit 229,118 255,813 717,707 742,639 OPERATING EXPENSES: Selling, general, and administrative 144,112 144,375 504,277 491,599 expenses Other operating (income) expense, (414) 30 (829) (523) net Total operating 143,698 144,405 503,448 491,076 expenses OPERATING INCOME 85,420 111,408 214,259 251,563 INTEREST EXPENSE, 5,065 5,215 19,522 19,552 NET OTHER EXPENSE, NET 613 144 1,571 40 INCOME BEFORE 79,742 106,049 193,166 231,971 INCOME TAXES INCOME TAX EXPENSE 31,816 42,106 76,627 92,704 NET INCOME $ 47,926 $ 63,943 $ 116,539 $ 139,267 OTHER COMPREHENSIVE INCOME: Foreign currency translation (loss) (950) 33 (708) (13) gain COMPREHENSIVE $ 46,976 $ 63,976 $ 115,831 $ 139,254 INCOME EARNINGS PER SHARE: Basic $ 0.57 $ 0.75 $ 1.38 $ 1.60 Diluted $ 0.57 $ 0.75 $ 1.37 $ 1.60 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 83,837 84,944 84,466 86,852 Diluted 84,609 85,320 85,068 87,206 Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation. Schedule 3 Express, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 116,539 $ 139,267 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 69,810 67,727 Loss on disposal of property and equipment 670 124 Impairment charge 26 6 Excess tax benefit from share-based compensation (210) (422) Share-based compensation 21,174 16,308 Deferred taxes (807) 3,937 Landlord allowance amortization (9,342) (8,166) Changes in operating assets and liabilities: Receivables, net (6,508) (1,991) Inventories 2,133 (1,997) Accounts payable, deferred revenue, and accrued (28,973) 17,564 expenses Other assets and liabilities 30,563 37,007 Net cash provided by operating activities 195,075 269,364 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (105,368) (99,674) Purchase of intangible assets (94) (210) Net cash used in investing activities (105,462) (99,884) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease obligation (313) (55) Excess tax benefit from share-based compensation 210 422 Proceeds from share-based compensation 4,701 623 Repurchase of common stock (37,929) (66,541) Net cash used in financing activities (33,331) (65,551) EFFECT OF EXCHANGE RATE ON CASH (695) 6 NET DECREASE IN CASH AND CASH EQUIVALENTS 55,587 103,935 CASH AND CASH EQUIVALENTS, Beginning of period 256,297 152,362 CASH AND CASH EQUIVALENTS, End of period $ 311,884 $ 256,297 Note: Certain prior period amounts have been reclassified or adjusted to conform to current year presentation. Schedule 4 Express, Inc. Real Estate Activity (Unaudited) Fourth Quarter 2013 - Actual Company-Operated Stores Opened Closed United States 3 — Canada 1 — Total 4 — Full Year 2013 - Actual February 1, 2014 - Actual Gross Square Company-Operated Stores Opened Closed Store Count Footage United States 12 (9) 617 Canada 4 — 15 Total 16 (9) 632 5.5 million First Quarter 2014 - Projected May 3, 2014 - Projected Gross Square Company-Operated Stores Open Close Conversion Store Count Footage United States - Retail 2 (9) (15) 595 Stores United States - Outlet 2 15 17 Stores Canada 1 — — 16 Total 5 (9) — 628 5.5 million Full Year 2014 - Projected Full Year 2014 - Projected Gross Square Company-Operated Stores Open Close Conversion Store Count Footage United States - Retail 8 (15) (15) 595 Stores United States - Outlet 16 15 31 Stores Canada 2 — — 17 Total 26 (15) — 643 5.6 million Schedule 5 Express, Inc. Classification of Sell-Off Revenue (Unaudited) 2013 Quarter First Second Third (in thousands, except percentages) Net sales, as $508,524 $486,158 $502,992 previously reported Sell-off adjustment 838 3,917 816 Adjusted net sales $509,362 $490,075 $503,808 Cost of goods sold, buying and occupancy $337,747 $333,611 $337,727 costs, as previously reported Sell-off adjustment 838 3,917 816 Adjusted Cost of goods sold, buying $338,585 $337,528 $338,543 and occupancy costs Gross profit $170,777 $152,547 $165,265 Gross profit %, as 33.6% 31.4% 32.9% previously reported Adjusted gross 33.5% 31.1% 32.8% profit % 2012 Quarter First Second Third Fourth (in thousands, except percentages) Net sales, as $495,952 $454,879 $468,527 $728,711 previously reported Sell-off adjustment 1,269 3,984 931 2,974 Adjusted net sales $497,221 $458,863 $469,458 $731,685 Cost of goods sold, buying and $307,185 $308,358 $316,989 $472,898 occupancy costs, as previously reported Sell-off adjustment 1,269 3,984 931 2,974 Adjusted Cost of goods sold, buying $308,454 $312,342 $317,920 $475,872 and occupancy costs Gross profit $188,767 $146,521 $151,538 $255,813 Gross profit %, as 38.1% 32.2% 32.3% 35.1% previously reported Adjusted gross 38.0% 31.9% 32.3% 35.0% profit % The classification of sell-off revenue was revised during the fourth quarter of 2013, moving the income from cost of goods sold, buying and occupancy costs to net sales. Previous quarters have been adjusted as noted above to conform to current presentation. Logo: http://photos.prnewswire.com/prnh/20130910/NY76292LOGO 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; Media Contact: Amy Hughes, Express, Inc., Corporate Communications & Events, (614) 474-4325
Express, Inc. Reports Fourth Quarter and Full Year 2013 Results; Introduces First Quarter and Full Year 2014 Guidance
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