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August 31, 2022

Express, Inc. Reports Second Quarter 2022 Results

Delivers fifth consecutive quarter of positive comparable sales versus pre-pandemic levels

COLUMBUS, Ohio--(BUSINESS WIRE)-- Fashion apparel retailer Express, Inc. (NYSE: EXPR), announced its financial results for the second quarter of 2022. These results, which cover the thirteen weeks ended July 30, 2022, are compared to the thirteen weeks ended July 31, 2021.

"In the second quarter, we delivered our fifth consecutive quarter of positive comparable sales compared to pre-pandemic levels, drove gross margin expansion of 50 basis points and delivered operating income of $10 million," said Tim Baxter, Chief Executive Officer. "While our performance was below our outlook, we achieved solid results despite challenging macroeconomic conditions that worsened as the quarter progressed."

Second Quarter 2022 Highlights

  • Increased comparable sales by 1% compared to 2021, achieving the fifth consecutive quarter of positive comparable sales compared to pre-pandemic levels. Increased comparable sales by 4% compared to 2019
  • Drove record Express Factory Outlet stores revenue for a second quarter and increased comparable sales by 2%
  • Delivered gross margin expansion of 50 basis points compared to 2021, driven by net sales growth and lower compensation-related expenses. Delivered 630 basis point expansion compared 2019
  • Generated operating income of $10 million and EBITDA of $26 million
  • Continued to operate with the highest number of active Express Insider loyalty members in the Company's history

"While we have lowered our outlook for the back half of this year to reflect the uncertainty of macroeconomic conditions, we remain committed to our long-term objective of a mid-single digit operating margin. We have demonstrated our ability to stay focused on the fundamentals, control the controllables, and operate with both discipline and agility," Baxter concluded.

Second Quarter 2022 Operating Results

  • Consolidated net sales increased 2% to $464.9 million from $457.6 million in the second quarter of 2021, with consolidated comparable sales up 1%
    • Comparable retail sales, which includes both Express stores and eCommerce, were flat compared to the second quarter of 2021. Retail stores drove a 6% increase while eCommerce demand declined 6%. However, we remain committed to achieving our long-term goal of $1.0 billion in eCommerce demand
    • Comparable outlet store sales increased 2% versus the second quarter of 2021
  • Gross margin was 33.1% of net sales compared to 32.6% in last year's second quarter, an increase of approximately 50 basis points
    • Merchandise margin contracted by 70 basis points primarily driven by the impact of expense associated with supply chain costs
    • Buying and occupancy expenses leveraged approximately 120 basis points due to increased sales and lower compensation-related expenses
  • Selling, general and administrative (SG&A) expenses were $143.3 million, 30.8% of net sales, versus $134.6 million, 29.4% of net sales, in last year's second quarter. The deleverage in the SG&A rate was driven by incremental investments in technology and higher store staffing levels
  • Operating income was $10.4 million compared to $14.8 million in the second quarter of 2021
  • Income tax expense was $0.3 million at an effective tax rate of 3.5%. Income tax expense and the effective tax rate were approximately zero during the second quarter of 2021
  • Net income was $7.0 million, or $0.10 per diluted share. This compares to net income of $10.6 million, or $0.15 per diluted share, for the second quarter of 2021
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $25.6 million compared to EBITDA of $30.8 million in the second quarter of 2021

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents totaled $37.7 million at the end of the second quarter of 2022 versus $33.9 million at the end of the second quarter of 2021
  • Inventory was $346.2 million at the end of the second quarter, up 30% compared to $266.6 million at the end of the prior year’s second quarter, driven primarily by the pull-forward of purchases to mitigate supply chain challenges as well as pack-and-hold for late-arriving 2021 holiday inventory
  • Short-term debt was $4.5 million and long-term debt was $197.7 million at the end of the second quarter of 2022 compared to short-term debt of $9.0 million and long-term debt of $109.2 million at the end of the prior year’s second quarter
  • At the end of the second quarter of 2022, $70.9 million remained available for borrowing under the revolving credit facility
  • Operating cash flow was negative $60.8 million for the twenty-six weeks ended July 30, 2022, compared to $67.6 million for the twenty-six weeks ended July 31, 2021
  • Capital expenditures totaled $13.5 million for the twenty-six weeks ended July 30, 2022, compared to $10.6 million for the twenty-six weeks ended July 31, 2021

2022 Outlook

This outlook is based on our solid year-to-date performance and the advancements we have made in each of the four foundational pillars of our EXPRESSway Forward strategy (Product, Brand, Customer, Execution), balanced against the increasingly challenging macroeconomic environment, ongoing uncertainty of the supply chain, geopolitical events and other uncertainties that may impact our business.

Third Quarter 2022

The Company expects the following for the third quarter of 2022 compared to the third quarter of 2021:

  • Comparable sales to decrease mid-single digits
  • Gross margin rate to decrease approximately 350 basis points
  • SG&A expenses as a percent of sales to delever approximately 350 basis points, including incremental investments in technology and higher store labor expenses
  • Net interest expense of $4 million
  • Effective tax rate essentially zero percent

Full Year 2022

The Company expects the following for the full year 2022 compared to the full year 2021:

  • Comparable sales to increase mid-single digits
  • Gross margin rate to increase approximately 100 basis points
  • SG&A expenses as a percent of sales to delever approximately 100 basis points
  • Net interest expense of $16 million
  • Effective tax rate essentially zero percent
  • Diluted loss per share of $0.16 to $0.22
  • Capital expenditures of approximately $50 million
  • Inventory to move closer to parity with sales growth in the back half of the year

Assumptions in the Company's outlook may be affected by the continued uncertainty of the pandemic and geopolitical events and their impacts throughout the supply chain.

See Schedule 5 for a discussion of projected real estate activity.

Conference Call Information

A conference call to discuss second quarter 2022 results is scheduled for August 31, 2022 at 9:00 a.m. Eastern Time (ET). Investors and analysts interested in participating in the earnings call are invited to dial (888) 550-5723 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.express.com/investor and remain available for 90 days. A telephone replay of this call will be available beginning at 12:00 p.m. ET on August 31, 2022 until 11:59 p.m. ET on September 7, 2022 and can be accessed by dialing (800) 770-2030 and entering the replay pin number 1790468. In addition, an investor presentation of second quarter 2022 results will be available at www.express.com/investor at approximately 7:00 a.m. ET on August 31, 2022.

About Express, Inc.

Express is a modern, multichannel apparel and accessories brand grounded in versatility, guided by its purpose - We Create Confidence. We Inspire Self-Expression. - and powered by a styling community. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a part of some of the most important and culture-defining fashion trends. The Express Edit design philosophy ensures that the brand is always ‘of the now’ so people can get dressed for every day and any occasion knowing that Express can help them look the way they want to look and feel the way they want to feel.

The Company operates over 550 retail and outlet stores in the United States and Puerto Rico, the express.com online store and the Express mobile app. Express, Inc. is comprised of the brands Express and UpWest, and is traded on the NYSE under the symbol EXPR. For more information, please visit www.express.com or www.upwest.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 and expectations, including statements regarding expected operating margins, comparable sales, effective tax rates, interest income, net income, diluted earnings per share, cash tax refunds, liquidity, EBITDA, free cash flow, eCommerce demand, and capital expenditures, (2) statements regarding expected store openings, store closures, store conversions, and gross square footage, and (3) statements regarding the Company's strategy, plans, and initiatives, including, but not limited to, results expected from such strategy, plans, and initiatives. You can identify these forward-looking statements by the use of words in the future tense and statements accompanied by words such as “outlook,” “indicator,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “scheduled,” “estimates,” “anticipates,” “opportunity,” “leads” or the negative version of these words or other comparable words. 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, and significant contingencies, many of which are beyond the Company's control. 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) the COVID-19 pandemic and its continued impact on our business operations, store traffic, employee availability, financial condition, liquidity and cash flow; (3) geopolitical risks, including impacts from the ongoing conflict between Russia and Ukraine and increased tensions between China and Taiwan; (4) our ability to operate our business efficiently, manage capital expenditures and costs, and obtain financing when required; (5) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (6) fluctuations in our sales, results of operations, and cash levels on a seasonal basis and due to a variety of other factors, including our product offerings relative to customer demand, the mix of merchandise we sell, promotions, and inventory levels; (7) customer traffic at malls, shopping centers, and at our stores; (8) competition from other retailers; (9) our dependence on a strong brand image; (10) our ability to adapt to changing consumer behavior and develop and maintain a relevant and reliable omni-channel experience for our customers; (11) the failure or breach of information systems upon which we rely; (12) our ability to protect customer data from fraud and theft; (13) our dependence upon third parties to manufacture all of our merchandise; (14) changes in the cost of raw materials, labor, and freight; (15) supply chain or other business disruption, including as a result of the coronavirus; (16) our dependence upon key executive management; (17) our ability to execute our growth strategy, EXPRESSway Forward, including engaging our customers and acquiring new ones, executing with precision to accelerate sales and profitability, creating great product and reinvigorating our brand; (18) our substantial lease obligations; (19) our reliance on third parties to provide us with certain key services for our business; (20) impairment charges on long-lived assets; (21) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (22) our inability to protect our trademarks or other intellectual property rights which may preclude the use of our trademarks or other intellectual property around the world; (23) restrictions imposed on us under the terms of our asset-based loan facility, including restrictions on the ability to effect share repurchases; (24) changes in tax requirements, results of tax audits, and other factors that may cause fluctuations in our effective tax rate; (25) changes in tariff rates; and (26) natural disasters, extreme weather, public health issues, including pandemics, fire, acts of terrorism or war and other events that cause business interruption. These factors should not be construed as exhaustive and should be read in conjunction with the additional information concerning these and other factors 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 required by law.

Schedule 1

Express, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

July 30, 2022

 

January 29, 2022

 

July 31, 2021

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

$

37,667

 

 

$

41,176

 

 

$

33,852

 

Receivables, net

 

11,924

 

 

 

11,744

 

 

 

10,470

 

Income tax receivable

 

2,229

 

 

 

53,665

 

 

 

53,892

 

Inventories

 

346,229

 

 

 

358,795

 

 

 

266,593

 

Prepaid rent

 

6,321

 

 

 

5,602

 

 

 

4,891

 

Other

 

22,628

 

 

 

19,755

 

 

 

14,415

 

Total current assets

 

426,998

 

 

 

490,737

 

 

 

384,113

 

 

 

 

 

 

 

Right of Use Asset, Net

 

546,259

 

 

 

615,462

 

 

 

704,909

 

 

 

 

 

 

 

Property and Equipment

 

989,088

 

 

 

975,802

 

 

 

963,089

 

Less: accumulated depreciation

 

(856,324

)

 

 

(827,820

)

 

 

(806,040

)

Property and equipment, net

 

132,764

 

 

 

147,982

 

 

 

157,049

 

 

 

 

 

 

 

Non-Current Income Tax Receivable

 

52,278

 

 

 

 

 

 

 

Other Assets

 

4,656

 

 

 

5,273

 

 

 

4,309

 

TOTAL ASSETS

$

1,162,955

 

 

$

1,259,454

 

 

$

1,250,380

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Short-term lease liability

$

190,324

 

 

$

196,628

 

 

$

212,659

 

Accounts payable

 

166,378

 

 

 

231,974

 

 

 

156,896

 

Deferred revenue

 

31,632

 

 

 

35,985

 

 

 

29,674

 

Short-term debt

 

4,500

 

 

 

11,216

 

 

 

8,966

 

Accrued expenses

 

106,087

 

 

 

110,850

 

 

 

111,854

 

Total current liabilities

 

498,921

 

 

 

586,653

 

 

 

520,049

 

 

 

 

 

 

 

Long-Term Lease Liability

 

456,661

 

 

 

536,905

 

 

 

624,582

 

Long-Term Debt

 

197,673

 

 

 

117,581

 

 

 

109,207

 

Other Long-Term Liabilities

 

10,213

 

 

 

17,007

 

 

 

20,036

 

Total Liabilities

 

1,163,468

 

 

 

1,258,146

 

 

 

1,273,874

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Total Stockholders’ (Deficit)/Equity

 

(513

)

 

 

1,308

 

 

 

(23,494

)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,162,955

 

 

$

1,259,454

 

 

$

1,250,380

 

Schedule 2

Express, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

July 30, 2022

 

July 31, 2021

 

July 30, 2022

 

July 31, 2021

Net Sales

$

464,919

 

 

$

457,627

 

 

$

915,704

 

 

$

803,386

 

Cost of Goods Sold, Buying and Occupancy Costs

 

311,218

 

 

 

308,320

 

 

 

630,503

 

 

 

575,275

 

GROSS PROFIT

 

153,701

 

 

 

149,307

 

 

 

285,201

 

 

 

228,111

 

Operating Expenses:

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

143,278

 

 

 

134,562

 

 

 

284,371

 

 

 

253,955

 

Other operating expense/(income), net

 

11

 

 

 

(31

)

 

 

(479

)

 

 

(64

)

TOTAL OPERATING EXPENSES

 

143,289

 

 

 

134,531

 

 

 

283,892

 

 

 

253,891

 

 

 

 

 

 

 

 

 

OPERATING INCOME/(LOSS)

 

10,412

 

 

 

14,776

 

 

 

1,309

 

 

 

(25,780

)

Interest Expense, Net

 

3,800

 

 

 

4,115

 

 

 

7,294

 

 

 

9,367

 

Other Income, Net

 

(676

)

 

 

 

 

 

(876

)

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

7,288

 

 

 

10,661

 

 

 

(5,109

)

 

 

(35,147

)

Income Tax Expense/(Benefit)

 

252

 

 

 

22

 

 

 

(231

)

 

 

(62

)

NET INCOME/(LOSS)

$

7,036

 

 

$

10,639

 

 

$

(4,878

)

 

$

(35,085

)

 

 

 

 

 

 

 

 

EARNINGS PER SHARE:

 

 

 

 

 

 

 

Basic

$

0.10

 

 

$

0.16

 

 

$

(0.07

)

 

$

(0.53

)

Diluted

$

0.10

 

 

$

0.15

 

 

$

(0.07

)

 

$

(0.53

)

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

Basic

 

68,150

 

 

 

66,527

 

 

 

67,681

 

 

 

65,863

 

Diluted

 

68,747

 

 

 

69,565

 

 

 

67,681

 

 

 

65,863

 

Schedule 3

Express, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Twenty-Six Weeks Ended

 

July 30, 2022

 

July 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(4,878

)

 

$

(35,085

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

 

30,088

 

 

 

35,866

 

Loss on disposal of property and equipment

 

21

 

 

 

 

Share-based compensation

 

5,013

 

 

 

5,404

 

Landlord allowance amortization

 

(234

)

 

 

(172

)

Changes in operating assets and liabilities:

 

 

 

Receivables, net

 

(180

)

 

 

4,086

 

Income tax receivable

 

(842

)

 

 

57,450

 

Inventories

 

12,566

 

 

 

(2,233

)

Accounts payable, deferred revenue, and accrued expenses

 

(76,673

)

 

 

(12,896

)

Other assets and liabilities

 

(25,690

)

 

 

15,171

 

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

 

(60,809

)

 

 

67,591

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Capital expenditures

 

(13,494

)

 

 

(10,558

)

NET CASH USED IN INVESTING ACTIVITIES

 

(13,494

)

 

 

(10,558

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Proceeds from borrowings under the revolving credit facility

 

144,000

 

 

 

38,000

 

Repayment of borrowings under the revolving credit facility

 

(69,000

)

 

 

(119,050

)

Proceeds from borrowings under the term loan facility

 

 

 

 

50,000

 

Repayment of borrowings under the term loan facility

 

(2,250

)

 

 

(43,263

)

Repayments of financing arrangements

 

 

 

 

(769

)

Costs incurred in connection with debt arrangements

 

 

 

 

(471

)

Repurchase of common stock for tax withholding obligations

 

(1,956

)

 

 

(3,502

)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

70,794

 

 

 

(79,055

)

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(3,509

)

 

 

(22,022

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

41,176

 

 

 

55,874

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

37,667

 

 

$

33,852

 

Schedule 4

Express, Inc.
Supplemental Information - Consolidated Statements of Income
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)

The Company supplements the reporting of its financial information determined under United States generally accepted accounting principles (GAAP) with certain non-GAAP financial measures such as EBITDA. Management strongly encourages investors and stockholders to review the Company's financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

EBITDA

EBITDA is defined as net income/(loss) before interest expense (net of interest income), income tax expense/(benefit) and depreciation and amortization expense.

How This Measure Is Useful

When used in conjunction with GAAP financial measures, EBITDA is a supplemental measure of operating performance that the Company believes is a useful measure to facilitate comparisons to historical performance. EBITDA is used as a performance measure in the Company's long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned and is also a metric used in our short-term cash incentive compensation plan.

Limitations of the Usefulness of This Measure

Because non-GAAP financial measures are not standardized, EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. EBITDA excludes certain normal recurring expenses. Therefore, these measures may not provide a complete understanding of the Company's performance and should be reviewed in conjunction with the GAAP financial measures. A reconciliation of EBITDA to the most directly comparable GAAP measures, is set forth below:

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(in thousands)

July 30, 2022

 

July 31, 2021

 

July 30, 2022

 

July 31, 2021

Net income/(loss)

$

7,036

 

$

10,639

 

$

(4,878

)

 

$

(35,085

)

Interest expense, net

 

3,800

 

 

4,115

 

 

7,294

 

 

 

9,367

 

Income tax expense/(benefit)

 

252

 

 

22

 

 

(231

)

 

 

(62

)

Depreciation and amortization

 

14,477

 

 

16,002

 

 

29,213

 

 

 

32,756

 

EBITDA (Non-GAAP Measure)

$

25,565

 

$

30,778

 

$

31,398

 

 

$

6,976

 

Schedule 5

Express, Inc.

Real Estate Activity

(Unaudited)

 

Second Quarter 2022 - Actual

 

July 30, 2022 - Actual

Company-Operated Stores

Opened

Closed

 

Store Count

Gross Square Footage

Retail Stores

(1)

 

343

 

Outlet Stores

 

202

 

Express Edit Stores

 

5

 

UpWest Stores

4

 

14

 

TOTAL

4

(1)

 

564

4.7 million

 

 

 

 

 

 

Third Quarter 2022 - Projected

 

October 29, 2022 - Projected

Company-Operated Stores

Opened

Closed

 

Store Count

Gross Square Footage

Retail Stores

(1)

 

342

 

Outlet Stores

 

202

 

Express Edit Stores

4

 

9

 

UpWest Stores

2

(1)

 

15

 

TOTAL

6

(2)

 

568

4.7 million

 

 

 

 

 

 

Full Year 2022 - Projected

 

January 28, 2023 - Projected

Company-Operated Stores

Opened

Closed

 

Store Count

Gross Square Footage

Retail Stores

(13)

 

333

 

Outlet Stores

(3)

 

200

 

Express Edit Stores

7

(1)

 

11

 

UpWest Stores

9

(3)

 

13

 

TOTAL

16

(20)

 

557

4.6 million

 

INVESTOR CONTACT
Greg Johnson
VP, Investor Relations
gjohnson@express.com
(614) 474-4890

Source: Express, Inc.

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