Express, Inc. Reports First Quarter Results And Updates Guidance

       Express, Inc. Reports First Quarter Results And Updates Guidance  BOARD APPROVES NEW $100 MILLION SHARE REPURCHASE PROGRAM  LONG TERM DEBT REFINANCING TO PROCEED AT $300 MILLION  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     share   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     quarter.   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     expense.   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     4.  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                                                                 2013                                    Guidance                                                                 Actual Results Comparable Sales                   Negative mid to high single  6%                                    digits 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 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 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 Outstanding 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: http://www.express.com/investor 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 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 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) (Unaudited)                                   May 3, 2014   February 1, 2014  May 4, 2013 ASSETS CURRENT ASSETS: 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 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: 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 COMMITMENTS AND CONTINGENCIES 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) (Unaudited)                                                Thirteen Weeks Ended                                                May 3, 2014  May 4, 2013 NET SALES                                      $  460,652   $  509,362 COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS 323,279      338,585 Gross profit                                   137,373      170,777 OPERATING EXPENSES: 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 OTHER COMPREHENSIVE INCOME: Foreign currency translation gain              382          70 COMPREHENSIVE INCOME                           $  5,465     $  32,507 EARNINGS PER SHARE: Basic                                          $  0.06      $  0.38 Diluted                                        $  0.06      $  0.38 WEIGHTED AVERAGE SHARES OUTSTANDING: 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) (Unaudited)                                                         2014        2013 CASH FLOWS FROM OPERATING ACTIVITIES: 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) expenses Other assets and liabilities                            (1,156)     8,406 Net cash (used in) provided by operating activities     (31,187)    5,361 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures                                    (26,937)    (16,853) Net cash used in investing activities                   (26,937)    (16,853) CASH FLOWS FROM FINANCING ACTIVITIES: 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 (Unaudited) 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 Stores United States - Outlet     2      —      15          17 Stores 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 Stores United States - Outlet     4      —      —           21 Stores 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 Stores United States - Outlet     18     —      17          35 Stores Canada                     2      —      —           17 Total                      27     (17)   —           642        5.6 million    SOURCE Express, Inc.  Website: http://www.express.com 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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