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Express swings to loss, guidance disappoints

Express Inc. swung to a loss in its second quarter but it still managed to beat the Street’s earnings and sales estimates.

The clothing retailer reported a net loss of $9.7 million, or $0.14 a share, in the quarter ended, compared to net income of $2.2 million, or $0.3 a share, in the year-age period. Adjusted per-share loss came to $0.13, less than the loss of $0.15 per share analysts had expected.

Net sales fell 4% to $472.7 million, beating Street estimates of $461 million. Comparable retail sales, which includes both Express stores and e-commerce, decreased 7%.

“Since joining Express in mid-June, I’ve been mainly focused on three key areas: developing a corporate strategy, building the right leadership team, and taking immediate action to change the trajectory of our business,” said CEO Jim Baxter, who joined Express on June 17. “Our second-quarter results are not indicative of what this company can deliver, and I am committed to returning Express to long-term, profitable growth.”

On a call with analysts, company executives said that Express is focused on updating its assortment in key categories, reducing promotions and strengthening its leadership team. (As previously announced,  on September, 9 Malissa Akay and Sara Tervo will join the retailer as executive VP and chief merchandising officer and executive VP and chief marketing officer, respectively.) In stores, it is moving from categorizing product into four lifestyles based on wearing occasion to one wardrobe with versatile pieces.

“Our floor sets will reflect a more modern approach and make it much easier for customers to see how to put outfits together,” Baxter said on the call. Early reads have shown improvement to sales and conversion, and sales associates tell us that customer feedback has been overwhelmingly positive.”

Baxter noted that the company expects to drive top-line sales improvements “over time” based on the changes it is making to product, merchandising and marketing.

“In addition, we are in the process of identifying cost savings and rightsizing our expenses,” he said. “And let me be clear: We will take the necessary action to significantly reduce our operating expense in 2020.”

In January, Express expects to reveal the details of its fleet rationalization plans.

“As a reminder, 60% of our stores have a lease action date over the next three years, giving us significant flexibility,” CFO Perry Pericleous said on the call.

The company is now expecting third-quarter same-store sales to fall 6% to 7%. It expects a loss per share of $0.8 to $0.10, compared with analysts’ estimates of earnings per share of $0.2.

Express operates more than 600 retail and factory outlet stores in the United States and Puerto Rico.
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