Express, Inc. : Reports Third Quarter 2013 Results In Line With Guidance

COLUMBUS, Ohio, Dec. 4, 2013 /PRNewswire/ -- Express, Inc. (NYSE: EXPR), a specialty retail apparel chain operating approximately 630 stores, today announced its financial results for the third quarter and first nine months of 2013.  These results cover the 13 and 39 week periods ended November 2, 2013 and compare to the 13 and 39 week periods ended October 27, 2012. 

Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that, "We delivered a solid third quarter, in line with our guidance and highlighted by a 5% increase in comparable sales and 15% EPS growth.  These results were achieved against the backdrop of an extremely challenging and promotional retail environment.  Our carefully edited assortment, spanning our four end uses, constituted a differentiated and compelling offering that resonated with our customers."  

Commenting on the fourth quarter, Mr. Weiss noted that, "Our current product line consists of a well balanced mix of cold weather and spring merchandise, with styles that tested well and are on-trend.  Thanksgiving week sales exceeded last year's, however results did not meet our expectations.  We had been planning for a promotional holiday season but we now expect the intensity of those promotions to reach heightened levels and we are updating our full year guidance accordingly.  Our overarching goal is to continue presenting Express as a premier fashion authority for our demographic, and we believe that our current and go-forward assortments demonstrate that standing."

Third Quarter 2013 Operating Results:

• Net sales increased 7% to $503.0 million from $468.5 million in the third quarter of 2012.
• Comparable sales increased 5%.  In last year's third quarter, comparable sales declined by 5%.  Both numbers include e-commerce sales, which increased 29% to $71.2 million in the third quarter of 2013.  In last year's third quarter, e-commerce sales grew 21% to $55.1 million.
• Gross margin improved 60 basis points over last year's third quarter and represented 32.9% of net sales.  Merchandise margin improved by 40 basis points.  Despite the promotional environment, we were able to recover some of the margin lost in last year's third quarter by delivering a stronger product assortment, especially on the women's side of the business.  Buying and occupancy costs as a percentage of sales improved by 20 basis points, primarily due to the leverage associated with our comparable sales growth.
• Selling, general, and administrative (SG&A) expenses were $128.4 million versus $117.7 million in last year's third quarter.  As a percentage of net sales, SG&A expenses rose by 40 basis points to 25.5% compared to 25.1% in the same period last year, primarily reflecting payroll increases and an increase in marketing expense,  which includes certain costs associated with our preparations to open the Times Square store.
• Operating income was $36.7 million, or 7.3% of net sales, compared to $34.4 million, or 7.3% of net sales, in the third quarter of 2012.
• The effective tax rate was 39.2% compared to 41.4% in last year's third quarter. The effective rate was lower than the comparable prior year period primarily due to a discrete tax charge related to the rate applied to deferred tax balance sheet accounts incurred during the third quarter of 2012.
• Net income was $19.3 million, or $0.23 per diluted share, compared to net income of $17.4 million, or $0.20 per diluted share, in the third quarter of 2012. 
• Real estate activity for the third quarter of 2013, which includes the opening of our Union Square flagship store in San Francisco, is detailed in Schedule 4.

Thirty-Nine Week Operating Results:

• Net sales increased 6% to $1,497.7 million from $1,419.4 million in the prior year period.
• Comparable sales increased 3% while comparable sales in the prior year period were flat. 
• Gross margin was 32.6% of net sales compared to 34.3% in the prior year period.  Merchandise margin declined 90 basis points and buying and occupancy costs as a percentage of sales increased 80 basis points.
• SG&A expenses were $360.2 million versus $347.2 million in the prior year period. As a percentage of net sales, SG&A expenses improved 50 basis points to 24.0% compared to 24.5% in the same period last year. 
• Operating income was $128.8 million, or 8.6% of net sales, compared to $140.2 million, or 9.9% of net sales, in the prior year period.
• The effective tax rate was 39.5% compared to 40.2% in the prior year period.
• Net income was $68.6 million, or $0.81 per diluted share, compared to net income of $75.3 million, or $0.86 per diluted share, in the prior year period. 
• Capital expenditures totaled $78.8 million, compared to $73.4 million in the prior year period.

Third Quarter 2013 Balance Sheet:

• Cash and cash equivalents totaled $181.6 million versus $102.4 million at the end of the third quarter of 2012.
• Inventory rose to $343.0 million, an increase of 18.1%, compared to $290.4 million at the end of the third quarter of 2012.  The calendar shift due to last year's 53rd week accounted for approximately 36% of the increase.  We also took receipt of certain holiday goods earlier than last year in an effort to improve the flow of goods through our distribution center during the holiday period.  Inventory per square foot increased 9.8% compared to the same period in 2012.
• Long-term debt was relatively unchanged at $199.1 million, with no borrowings outstanding under the Revolving Credit Facility. 

2013 Guidance:

The table below compares the Company's projected results for the thirteen week period ended February 1, 2014 to the actual results for the fourteen week period ended February 2, 2013.

The table below compares the Company's projected results for the fifty-two week period ended February 1, 2014 to the actual results for the fifty-three week period ended February 2, 2013.

Consistent with previous years, the quarterly and full year guidance excludes any non-core operating items that may occur.

Conference Call Information:

A conference call to discuss second quarter results is scheduled for Wednesday, December 4, 2013, at 9:00 a.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 12:00 p.m. ET on December 4, 2013 until 11:59 p.m. ET on December 11, 2013 and can be accessed by dialing (877) 870-5176 and entering replay pin number 13572522.

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 approximately 630 retail stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States, in Canada, and in 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 fourth quarter and full year 2013, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, earnings per diluted share, and capital expenditures, and (2) statements regarding expected store openings, store closures, and gross square footage. 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) increased competition from other retailers; (5) changes in customer traffic at malls and shopping centers; (6) our dependence upon independent third parties to manufacture all of our merchandise; (7) changes in the cost of raw materials, labor, and freight; (8) supply chain disruption; (9) our growth strategy, including our international expansion plan; (10) our dependence on a strong brand image; (11) our dependence upon key executive management; (12) our reliance on third parties to provide us with certain key services for our business; and (13) our substantial indebtedness and lease obligations. 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.

SOURCE Express, Inc.

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