Express, Inc. Reports First Quarter Results And Updates Guidance

       Express, Inc. Reports First Quarter Results And Updates Guidance



PR Newswire

COLUMBUS, Ohio, May 29, 2014

COLUMBUS, Ohio, May 29, 2014 /PRNewswire/ --

  oFirst quarter comparable sales decline 11%; EPS totals $0.06 per diluted
  oCost reduction initiatives expected to result in approximately $18 million
    of annual savings

Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating
approximately 630 stores, today made several announcements.

First Quarter 2014:
The Company announced first quarter financial results covering the 13 week
period ended May 3, 2014 compared to the 13 week period ended May 4, 2013.

Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that,
"We had anticipated a very challenging first quarter, but our actual results
were weaker than planned. 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."

Commenting on second quarter and full year 2014 guidance, Mr. Weiss noted
that, "Our second quarter results will be impacted by the need to move through
slow selling Spring inventory and a Memorial Day event that did not drive
traffic as successfully as last year. Our full year guidance incorporates the
impact of a very challenging first half, while also anticipating sequential
improvements in comparable sales in quarters two through four as we deliver
new product we believe will be more in line with customer expectations. We
also expect to benefit from cost saving initiatives and, upon completion of
our debt refinancing, lower interest expense. I am also delighted to note that
the 17 Express Factory Outlet Stores now in operation are exceeding our plans
and being met with great enthusiasm; we expect them to contribute to a
stronger second half. In light of this performance, we are accelerating future
outlet store openings."

First Quarter 2014 Operating Results:

  oNet sales decreased to $460.7 million from $509.4 million in the first
    quarter of 2013, a decline of 10%.
  oComparable sales (including e-commerce sales) decreased 11%, following
    flat comparable sales in last year's first quarter. E-commerce sales
    declined 2% to $69.0 million following a 48% increase in last year's first
  oGross margin as a percentage of net sales declined 370 basis points over
    last year's first quarter and represented 29.8% of net sales. Merchandise
    margin declined by 30 basis points and buying and occupancy costs as a
    percentage of sales rose by 340 basis points compared to last year's first
    quarter. The lower merchandise margin is attributable to heightened
    promotional activity, while the buying and occupancy de-leverage was the
    result of the decline in sales together with increased depreciation
  oSelling, general, and administrative (SG&A) expenses were $122.9 million
    versus $112.6 million in last year's first quarter. As a percentage of net
    sales, SG&A expenses rose by 460 basis points to 26.7% compared to 22.1%
    in last year's first quarter. This de-leveraging is also attributable to
    lower sales, and increased marketing spend.
  oOperating income was $15.0 million, or 3.3% of net sales, compared to
    $58.7 million, or 11.5% of net sales, in the first quarter of 2013.
  oIncome tax expense was $4.0 million, at an effective tax rate of 44.3%,
    compared to $21.2 million, at an effective tax rate of 39.6% in last
    year's first quarter. The effective tax rate was adversely impacted by
    nondeductible stock based compensation expenses.
  oNet income was $5.1 million, or $0.06 per diluted share. This compares to
    net income of $32.4 million, or $0.38 per diluted share, in the first
    quarter of 2013.
  oReal estate activity for the first quarter of 2014 is detailed in Schedule

First Quarter 2014 Balance Sheet Highlights:

  oCash and cash equivalents totaled $250.2 million versus $244.2 million at
    the end of 2013's first quarter.
  oCapital expenditures totaled $26.9 million, compared to $16.9 million in
    the prior year's first quarter.
  oInventory was $235.0 million, an increase of 4%, compared to $226.3
    million at the end of the first quarter of 2013. Inventory per square foot
    was essentially flat compared to the comparable period in 2013. The
    inventory balance at the end of the first quarter of 2014 includes $10.6
    million related to the Express Factory Outlets.

2014 Guidance:
The second quarter and full year guidance takes into account the impact of
certain strategic cost reductions as discussed below. The guidance does not
take into account any actions the Company will be taking with respect to its
long-term debt, which the Company intends to refinance in the second quarter
of 2014, or any additional non-core operating items that may occur. The table
below compares the Company's projected results for the thirteen week period
ended August 2, 2014 to the actual results for the thirteen week period ended
August 3, 2013.

                                   Second Quarter 2014          Second Quarter
                                                                Actual Results
Comparable Sales                   Negative mid to high single  6%
Effective Tax Rate                 Approximately 42%            39.7%
Interest Expense, Net              $5.5 - $6.0 million          $4.8 million
Net Income                         ($2.5) - $2.5 million        $16.9 million
Diluted Earnings Per Share (EPS)   ($0.03) - $0.03              $0.20
Weighted Average Diluted Shares    84.4 million                 85.6 million
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
Comparable Sales                    Negative mid single digits  3%
Effective Tax Rate                  Approximately 40%           39.7%
Interest Expense, Net               $23 - $25 million           $19.5 million
Net Income                          $63 - $76 million           $116.5 million
Diluted EPS                         $0.74 - $0.90               $1.37
Weighted Average Diluted Shares     84.6 million                85.1 million
Capital Expenditures                $110 - $115 million         $105.4 million
See Schedule 4 for projected real estate activity.

Strategic Cost Reductions:
The Company has undertaken a comprehensive review of its operations and
expense structure and determined that certain changes can be implemented to
reduce costs without materially impacting business operations. Savings from
these reductions, as well as one time costs associated with their
implementation, have been incorporated into the Company's guidance. In total,
these actions represent approximately $18 million of annualized savings, with
the impact in 2014 being approximately $15 million.

Store Closures:
The Company has completed a review of its store fleet and has decided to close
approximately 50 stores over the next 36 months primarily at the natural
expiration of their leases. These store closures are expected to result
inprofit improvementof $5 to $8 million once all stores are closed. Because
these closures are expected to start at the end of this fiscal year or the
beginning of the next fiscal year, no costs or savings associated with planned
store closings have been included in the Company's guidance.

Refinancing of Long-Term Debt:
The Company had previously announced its plan to redeem all of its outstanding
8 ¾% Senior Notes due 2018, which total approximately $200 million, and to
refinance the Senior Notes using proceeds from a term loan bearing a
substantially lower interest rate. Both transactions are expected to be
completed in the second quarter of 2014. To take advantage of currently low
interest rates, the Company plans to enter into a $300 million term loan.
Details regarding the interest rate and the impact on the Company's annual
interest expense along with related costs will be provided after the
refinancing has been completed.

Share Repurchase Program:
The Company also announced today that its Board of Directors has authorized it
to repurchase up to $100 million of its common stock. The share repurchases
are expected to be made over the next 18 months and will be funded through the
Company's available cash.

The Company may repurchase shares of its outstanding common stock from time to
time on the open market, including through Rule 10b5-1 plans, in privately
negotiated transactions, through block purchases, or otherwise in compliance
with applicable laws, including Rule 10b-18 of the Securities Exchange Act of
1934, as amended. The timing and amount of stock repurchases will depend on a
variety of factors, including business and market conditions as well as
corporate and regulatory considerations. The share repurchase program may be
suspended, modified, or discontinued at any time and the Company has no
obligation to repurchase any amount of its common stock under the program.

Conference Call Information:
A conference call to discuss first quarter 2014 results is scheduled for
Thursday, May 29, 2014, at 5:00 p.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: and remain
available for 90 days. A telephone replay of this call will be available from
8:00 p.m. ET on May 29, 2014 until 11:59 p.m. ET on June 5, 2014 and can be
accessed by dialing (877) 870-5176 and entering replay pin number 13581956.

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 more than 600 retail and factory outlet stores, located primarily in
high-traffic shopping malls, lifestyle centers, and street locations across
the United States, Canada and 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

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 second 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 plans to reduce
expenses, (4) statements regarding expectations for the Company's outlet
stores and new product; and (5) statements regarding the Company's intention
to repurchase shares of common stock and the sources of funding for such
repurchases. 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)
competition from other retailers; (5) customer traffic at malls, shopping
centers, and our stores; (6) our dependence on a strong brand image; (7) our
ability to develop and maintain a reliable omni-channel experience for our
customers; (8) the failure or breach of information systems upon which we
rely; (9) our ability to protect customer data from fraud and theft; (10) our
dependence upon independent third parties to manufacture all of our
merchandise; (11) changes in the cost of raw materials, labor, and freight;
(12) supply chain disruption; (13) our dependence upon key executive
management; (14) our growth strategy, including our new store, e-commerce, and
international expansion plans; (15) our reliance on third parties to provide
us with certain key services for our business; (16) claims made against us
resulting in litigation or changes in laws and regulations applicable to our
business; (17) impairment charges on long-lived assets; and (18) lease
obligations and our substantial indebtedness, including restrictions imposed
by such indebtedness on current and future operations and our ability to
effect share repurchases. 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)
                                  May 3, 2014   February 1, 2014  May 4, 2013
Cash and cash equivalents         $ 250,208     $   311,884       $ 244,214
Receivables, net                  20,326        17,384            10,773
Inventories                       235,033       212,510           226,329
Prepaid minimum rent              28,389        28,554            25,362
Other                             20,302        13,129            9,850
Total current assets              554,258       583,461           516,528
PROPERTY AND EQUIPMENT            795,619       767,661           650,899
Less: accumulated depreciation    (400,256)     (391,539)         (354,879)
Property and equipment, net       395,363       376,122           296,020
TRADENAME/DOMAIN NAME             197,812       197,812           197,734
DEFERRED TAX ASSETS               17,558        17,558            16,808
OTHER ASSETS                      7,153         7,717             9,773
Total assets                      $ 1,172,144   $   1,182,670     $ 1,036,863
Accounts payable                  $ 151,861     $   154,736       $ 158,394
Deferred revenue                  23,278        28,436            22,117
Accrued bonus                     84            694               468
Accrued expenses                  89,487        115,341           94,857
Total current liabilities         264,710       299,207           275,836
LONG-TERM DEBT                    199,257       199,170           198,923
DEFERRED LEASE CREDITS            117,962       114,509           98,033
OTHER LONG-TERM LIABILITIES       107,120       95,215            56,464
Total liabilities                 689,049       708,101           629,256
Total stockholders' equity        483,095       474,569           407,607
Total liabilities and             $ 1,172,144   $   1,182,670     $ 1,036,863
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)
                                               Thirteen Weeks Ended
                                               May 3, 2014  May 4, 2013
NET SALES                                      $  460,652   $  509,362
Gross profit                                   137,373      170,777
Selling, general, and administrative expenses  122,860      112,623
Other operating income, net                    (478)        (540)
Total operating expenses                       122,382      112,083
OPERATING INCOME                               14,991       58,694
INTEREST EXPENSE, NET                          5,897        4,805
OTHER (INCOME) EXPENSE, NET                    (25)         229
INCOME BEFORE INCOME TAXES                     9,119        53,660
INCOME TAX EXPENSE                             4,036        21,223
NET INCOME                                     $  5,083     $  32,437
Foreign currency translation gain              382          70
COMPREHENSIVE INCOME                           $  5,465     $  32,507
Basic                                          $  0.06      $  0.38
Diluted                                        $  0.06      $  0.38
Basic                                          84,005       85,095
Diluted                                        84,424       85,490

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)
                                                        2014        2013
Net income                                              $ 5,083     $ 32,437
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Depreciation and amortization                           19,494      17,441
Loss on disposal of property and equipment              65          64
Impairment charge                                       785         —
Excess tax benefit from share-based compensation        —           (1)
Share-based compensation                                6,336       5,011
Landlord allowance amortization                         (3,047)     (2,212)
Changes in operating assets and liabilities:
Receivables, net                                        (2,923)     287
Inventories                                             (22,453)    (11,296)
Accounts payable, deferred revenue, and accrued         (33,371)    (44,776)
Other assets and liabilities                            (1,156)     8,406
Net cash (used in) provided by operating activities     (31,187)    5,361
Capital expenditures                                    (26,937)    (16,853)
Net cash used in investing activities                   (26,937)    (16,853)
Payments on capital lease obligation                    (402)       (15)
Excess tax benefit from share-based compensation        —           1
Proceeds from share-based compensation                  —           1,082
Repurchase of common stock                              (3,274)     (1,785)
Net cash used in financing activities                   (3,676)     (717)
EFFECT OF EXCHANGE RATE ON CASH                         124         126
NET DECREASE IN CASH AND CASH EQUIVALENTS               (61,676)    (12,083)
CASH AND CASH EQUIVALENTS, Beginning of period          311,884     256,297
CASH AND CASH EQUIVALENTS, End of period                $ 250,208   $ 244,214

Note: Certain prior period amounts have been reclassified or adjusted to
conform to current year presentation.

Schedule 4
Express, Inc.
Real Estate Activity
First Quarter 2014 - Actual                          May 3, 2014
Company-Operated Stores    Opened Closed Conversion  Store      Gross Square
                                                     Count      Footage
United States - Retail     2      (9)    (15)        595
United States - Outlet     2      —      15          17
Canada                     1      —      —           16
Total                      5      (9)    —           628        5.5 million
Second Quarter 2014 - Projected                      August 2, 2014
Company-Operated Stores    Opened Closed Conversion  Store      Gross Square
                                                     Count      Footage
United States - Retail     1      (4)    —           592
United States - Outlet     4      —      —           21
Canada                     1      —      —           17
Total                      6      (4)    —           630        5.5 million
Full Year 2014 - Projected                           January 31, 2015
Company-Operated Stores    Opened Closed Conversion  Store      Gross Square
                                                     Count      Footage
United States - Retail     7      (17)   (17)        590
United States - Outlet     18     —      17          35
Canada                     2      —      —           17
Total                      27     (17)   —           642        5.6 million

SOURCE Express, Inc.

Contact: Investor Contacts: Marisa Jacobs, Express, Inc., Vice President
Investor Relations, (614) 474-4465; Allison Malkin / Anne Rakunas, ICR, Inc.,
(203) 682-8225 / (310) 954-1113; Media Contact: Amy Hughes, Express, Inc.,
Corporate Communications & Events, (614) 474-4325
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