Express (EXPR 7.76) is a specialty retailer of apparel and accessories for men and women. It has more than 650 stores, the majority of which can be found in shopping malls. Earlier today, Express reported its first quarter results, and it won't really surprise anyone at this juncture to hear that they were disappointing.
Mall-based apparel retailers have been a sad lot this reporting season. Their releases have been filled with mentions of sales declines, comparable sales decreases, margin pressures, and weak earnings results that have been the byproduct of heightened promotional activity, increased competition from online sources, and changing consumer buying preferences.
Express pretty much fit the reporting bill on all fronts.
First quarter net sales declined 7% to $467.0 million, comparable sales (including e-commerce sales) decreased 10% on top of a 3% decrease last year, and merchandise margins declined by 380 basis points. The sales weakness led to a loss of expense leverage, which contributed to an adjusted loss of $0.07 per diluted share versus a profit of $0.25 per diluted share on a comparable basis in the same period a year ago.
The adjusted loss includes $0.04 per diluted share of income tax expense for discrete items that were not included in the company's prior first quarter guidance, which was ($0.04)-$0.00.
Notwithstanding the first quarter struggles, Express management sounded an upbeat note, saying the retailer is pleased with the recent trends in its business and that it believes its initiatives are gaining traction in a challenging retail environment. The company was heartened by a 27% increase in e-commerce sales and the improvement in comparable sales as the quarter progressed.
Company CEO David Kornberg added that the retailer is excited by its summer and fall assortments and that it is increasingly optimistic about its ability to drive improved performance. Those remarks came in the press release just before the company issued disappointing second quarter guidance and lowered its fiscal 2017 guidance.
In other words, the company's optimistic tone rang a little hollow for investors.
With respect to the second quarter, Express expects comparable sales to decline mid-single digits on top of an 8% decline last year and adjusted diluted earnings to range from a loss of $0.03 per share to a profit of $0.01 per share, which is below analysts' average expectation.
The fiscal 2017 guidance calls for comparable sales to decline in the low-single digits, versus a 9% decline for fiscal 2016, and adjusted earnings per diluted share to be between $0.41 and $0.48. Following its fourth quarter report in March, Express said it was expecting fiscal 2017 earnings per share to be between $0.65 and $0.73.
Investors in this retailer are expressing their disappointment in the guidance. Shares of EXPR, which have plunged 47.1% over the last 52 weeks, are trading 23% lower in pre-market action.