Express Shares Slump on Low Projections for Q1 and Full-Year

Andrew Klips |

Express Inc. (EXPR) reported Wednesday that fourth-quarter earnings exceeded prior guidance, nipping past analyst expectations on the back of a growing e-commerce business and uptick in same-store-sales, although the company warned of a potentially soft start to the new year, sending shares lower to start the day.

The Columbus, Ohio-based specialty apparel retailer recorded an 8 percent increase in net sales to $728.7 million in the latest quarter, ended February 2, 2013, compared to $673.2 million in the year prior quarter. The sales included an extra week of $27.0 million in revenue versus Q4 2011. Net income for the quarter increased to $63.9 million, or 75 cents per share, compared to $60.4 million, or 68 cents per share, in the year earlier quarter.

Analysts were expecting earnings per share of 74 cents on revenue of $722.0 million.

In January, Express lifted its previous guidance of EPS in the range of 62 cents to 68 cents to a new range between 72 cents and 74 cents, citing a better holiday shopping season that originally anticipated.

Same-store-sales, in a 14-week to 14-week comparison for 2011 and 2012, increased 1.5 percent in the fourth quarter. Selling, general and administrative expenses were $144.4 million, or 19.8 percent of net sales, compared to $141.6 million, or 21 percent of net sales in the year ago quarter. Gross margin slipped to 35.1 percent of sales from 37.2 percent in Q4 2011. For the third straight year, e-commerce sales grew by double digits.

“We ended the year positively, with the initiatives we implemented in our women’s business driving improved results,” said Michael Weiss, Chairman and Chief Executive Officer at Express. Weiss added that the company was pleased on all fronts and that Express foresees advancements in it “four pillars of growth” going forward as well as being “excited to pursue a new growth opportunity in 2013 through the development of a new Express outlet business.”

Express ended the year with $256.3 million in cash and equivalents after repurchasing 4 million shares of its stock for an aggregate amount of $65.1 million in 2012.

For the full year, the company reported net sales of $2.15 billion, up from $2.07 billion in 2011, including the extra week of sales in the 53-week 2012, versus a 52-week 2011. Net income for 2012 was $139.3 million, compared to $140.7 million in 2011.

Because of lower traffic levels and consumer spending in February, Express sees the first quarter getting off to a slow start. Net income is anticipated in the range of $29.5 million to $32.5 million, or 34 cents to 38 cents per share. This is down sharply from $42.1 million, or 47 cents per share recorded in the first quarter of fiscal 2012.

For all of fiscal 2013, Express said it expects net income ranging from $120 million to $132 million, or $1.45 to $1.54 per share, again, down from the year prior.

Both quarterly and yearly forecasts were well short of analyst expectations of EPS of 46 cents and $1.72, respectively.
Across the past 52 weeks, shares of EXPR have been all over the place, with 52 week highs last March of $26.27 and lows of $10.47 in November before climbing back up in recent months to close Tuesday at $18.85. The weak forecast has crunched shares in pre-market activity on Wednesday with shares off by 15 percent and back down around $16 each.

Express was previously part of Limited Inc. (LTD) before being spun-out in 2007 and going public in 2010.

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