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Express, Inc. Reports Third Quarter 2021 Results

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  • EXPR

Company provides improved outlook for fourth quarter and full year 2021 based on strength of third quarter results and momentum of EXPRESSway Forward strategy

  • Third quarter net sales increased 47% compared to 2020. Consolidated comparable sales increased 46% compared to 2020 and 3% compared to 2019

  • Strong growth in eCommerce demand of 26% versus 2020 and 21% versus 2019; well positioned to achieve goal of $1.0 billion in eCommerce demand by 2024

  • Diluted earnings per share of $0.19, $0.17 on an adjusted basis, and net income of $13 million or $12 million on an adjusted basis compared to losses in both 2020 and 2019

  • EBITDA of $32 million improved $125 million versus Q3 2020 and $18 million versus Q3 2019

  • Operating cash flow of $78 million for the first nine months of the year, improved $330 million versus 2020 and $45 million versus 2019

COLUMBUS, Ohio, December 02, 2021--(BUSINESS WIRE)--Fashion apparel retailer Express, Inc. (NYSE: EXPR), announced its financial results for the third quarter of 2021. These results, which cover the thirteen weeks ended October 30, 2021, are compared to the thirteen weeks ended October 31, 2020. Certain results are compared to the thirteen weeks ended November 2, 2019, as indicated.

"Our strong third quarter results reflect the second consecutive quarter of profitable growth and positive comparable sales versus 2019, and demonstrate the power of our EXPRESSway Forward strategy," said Tim Baxter, Chief Executive Officer. "Our results provide tangible evidence that the versatility, quality and value of our product is resonating with consumers. I am confident that we will continue to deliver positive comparable sales and gross margin expansion versus 2019 in the fourth quarter."

Third Quarter 2021 Operating Results

  • Consolidated net sales increased 47% to $472.0 million from $322.1 million in the third quarter of 2020, with consolidated comparable sales up 46%. Compared to 2019, consolidated comparable sales increased by 3%.

    • Comparable retail sales, which includes both Express stores and eCommerce, increased 52% compared to the third quarter of 2020.

    • Comparable outlet store sales increased 33% versus the third quarter of 2020.

Please note, comparable sales calculations are not consistent across all retailers. Our comparable sales exclude sales from stores that were closed for at least one full day, including during the pandemic, consistent with our historical policy.

  • Gross margin was 33.2% of net sales compared to 4.3% in last year's third quarter, an increase of approximately 2,890 basis points. Compared to 2019, gross margin increased by 500 basis points.

    • Merchandise margin improved approximately 1,350 basis points compared to 2020 driven by positive customer response to our new receipts and significant reduction in promotional activity.

    • Buying and occupancy expenses leveraged approximately 1,540 basis points compared to 2020 due to increased sales and rent reductions.

  • Selling, general, and administrative (SG&A) expenses were $141.1 million, 29.9% of net sales, versus $124.9 million, 38.8% of net sales, in last year's third quarter. The improvement in SG&A rate is driven by leveraging the increased sales and cost reductions from the previously announced corporate restructuring. The $16.2 million increase versus 2020 is mainly driven by last year's pandemic related store closures and current year incremental investments in marketing.

  • Operating income was $16.3 million compared to a loss of $110.9 million in the third quarter of 2020 and a loss of $6.7 million in the third quarter of 2019.

  • Income tax expense was $0.3 million at an effective tax rate of 2.2% and includes a $1.5 million partial release of the valuation allowance against the Company's deferred tax assets. This compares to a benefit of $21.5 million and an effective tax rate of 19.2% in the third quarter of 2020. Excluding the benefit of the valuation allowance release, the effective tax rate would have been approximately 13% driven by a true-up from the second quarter provision due to an improvement in forecasted pre-tax results.

  • Net income was $13.1 million, or $0.19 per diluted share. On an adjusted basis, net income was $11.6 million, or $0.17 per diluted share, excluding the benefit of the previously mentioned valuation allowance reversal. This compares to a net loss of $90.3 million, or a loss of $1.39 per diluted share, in the third quarter of 2020. On an adjusted basis, net loss was $76.2 million, or a loss of $1.17 per diluted share, in the third quarter of 2020.

  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $31.9 million compared to negative EBITDA of $92.6 million in the third quarter of 2020. EBITDA was $14.2 million in the third quarter of 2019.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents totaled $36.8 million versus $107.3 million at the end of the third quarter of 2020.

  • Inventory was $383.6 million at the end of the third quarter, up 9% compared to $350.6 million at the end of the prior year’s third quarter which reflected accelerated investments in core product with limited markdown risk to mitigate supply chain challenges. Compared to 2019, inventory increased 11%.

  • Short-term debt was $10.1 million and long-term debt was $108.4 million at the end of the third quarter of 2021 compared to long-term debt of $165.0 million at the end of the prior year’s third quarter.

  • At the end of the third quarter of 2021, $155.3 million remained available for borrowing under the revolving credit facility.

  • Operating cash flow was $78.3 million for the thirty-nine weeks ended October 30, 2021, compared to $(251.6) million for the thirty-nine weeks ended October 31, 2020, and $32.8 million for the thirty-nine weeks ended November 2, 2019.

  • Capital expenditures totaled $18.1 million for the thirty-nine weeks ended October 30, 2021, compared to $13.6 million for the thirty-nine weeks ended October 31, 2020, and $20.5 million for the thirty-nine weeks ended November 2, 2019.

  • Free cash flow was $60.2 million for the thirty-nine weeks ended October 30, 2021, compared to $(265.2) million for the thirty-nine weeks ended October 31, 2020, and $12.3 million for the thirty-nine weeks ended November 2, 2019.

2021 Outlook

Based on strong third quarter performance and the power of our product, brand, and customer strategies balanced against the ongoing supply chain constraints, tight labor market and other inflationary pressures, the Company expects the following compared to 2019:

  • Comparable sales to increase by low-single digits for the fourth quarter

    • Inventory level and composition well-positioned to deliver the fourth quarter sales outlook

  • Gross Margin rate to be approximately 100 basis points higher for the fourth quarter, including approximately $15 million of expenses related to mitigating supply chain challenges

  • Selling, General and Administrative expenses up 9% - 11%, driven by investments in marketing and higher labor expenses

  • Net interest expense of $3 million for the fourth quarter

  • Effective Tax rate essentially zero percent for the fourth quarter and full year

  • Positive free cash flow for the full year

  • Capital expenditures of approximately $35 million for the full year

  • Well positioned to achieve our long-term goals, including $1.0 billion in eCommerce demand and over $100 million in operating profit by 2024

Assumptions in the Company outlook may be affected by the continued uncertainty of the pandemic and its impacts throughout the supply chain.

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

Conference Call Information

A conference call to discuss third quarter 2021 results is scheduled for December 2, 2021 at 9:00 a.m. Eastern Time (ET). Investors and analysts interested in participating in the earnings call are invited to dial (877) 683-0508 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 December 2, 2021 until 11:59 p.m. ET on December 9, 2021 and can be accessed by dialing (800) 585-8367 and entering the replay pin number 1993518. In addition, an investor presentation of third quarter 2021 results will be available at www.express.com/investor at approximately 7:00 a.m. ET on December 2, 2021.

About Express, Inc.

Grounded in versatility and powered by a styling community, Express is a modern, multichannel apparel and accessories brand whose purpose is to Create Confidence & Inspire Self-Expression. 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.

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. 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) our ability to operate our business efficiently, manage capital expenditures and costs, and obtain financing when required; (4) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (5) 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; (6) customer traffic at malls, shopping centers, and at our stores; (7) competition from other retailers; (8) our dependence on a strong brand image; (9) our ability to adapt to changing consumer behavior and develop and maintain a relevant and reliable omni-channel experience for our customers; (10) the failure or breach of information systems upon which we rely; (11) our ability to protect customer data from fraud and theft; (12) our dependence upon third parties to manufacture all of our merchandise; (13) changes in the cost of raw materials, labor, and freight; (14) supply chain or other business disruption, including as a result of the coronavirus; (15) our dependence upon key executive management; (16) 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; (17) our substantial lease obligations; (18) our reliance on third parties to provide us with certain key services for our business; (19) impairment charges on long-lived assets; (20) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (21) 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; (22) restrictions imposed on us under the terms of our asset-based loan facility, including restrictions on the ability to effect share repurchases; (23) changes in tax requirements, results of tax audits, and other factors that may cause fluctuations in our effective tax rate; (24) changes in tariff rates; and (25) natural disasters, extreme weather, public health issues, including pandemics, fire, acts of terrorism or war and other events that cause business interruption. 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 required by law.

Schedule 1

Express, Inc.

Consolidated Balance Sheets

(In thousands)

(Unaudited)

October 30, 2021

January 30, 2021

October 31, 2020

ASSETS

Current Assets:

Cash and cash equivalents

$

36,795

$

55,874

$

107,347

Receivables, net

14,033

14,556

12,657

Income tax receivable

53,350

111,342

112,014

Inventories

383,588

264,360

350,643

Prepaid rent

4,309

7,883

6,683

Other

19,464

20,495

24,397

Total current assets

511,539

474,510

613,741

Right of Use Asset, Net

656,995

797,785

855,116

Property and Equipment

971,230

969,402

990,300

Less: accumulated depreciation

(820,728

)

(789,204

)

(791,036

)

Property and equipment, net

150,502

180,198

199,264

Other Assets

5,092

5,964

3,950

TOTAL ASSETS

$

1,324,128

$

1,458,457

$

1,672,071

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Short-term lease liability

$

204,827

$

203,441

$

208,375

Accounts payable

252,752

150,230

239,624

Deferred revenue

30,412

32,430

30,005

Short-term debt

10,091

Accrued expenses

126,151

128,952

158,597

Total current liabilities

624,233

515,053

636,601

Long-Term Lease Liability

579,117

722,949

776,838

Long-Term Debt

108,394

192,032

165,000

Other Long-Term Liabilities

20,553

18,734

32,812

Total Liabilities

1,332,297

1,448,768

1,611,251

Commitments and Contingencies

Total Stockholders’ (Deficit)/Equity

(8,169

)

9,689

60,820

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,324,128

$

1,458,457

$

1,672,071

Schedule 2

Express, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 30,
2021

October 31,
2020

October 30,
2021

October 31,
2020

Net Sales

$

471,981

$

322,061

$

1,275,367

$

778,039

Cost of Goods Sold, Buying and Occupancy Costs

315,173

308,115

890,448

854,357

GROSS PROFIT/(LOSS)

156,808

13,946

384,919

(76,318

)

Operating Expenses:

Selling, general, and administrative expenses

141,055

124,863

395,010

316,833

Other operating income, net

(501

)

(1

)

(565

)

(662

)

TOTAL OPERATING EXPENSES

140,554

124,862

394,445

316,171

OPERATING INCOME/(LOSS)

16,254

(110,916

)

(9,526

)

(392,489

)

Interest Expense, Net

2,879

936

12,246

2,015

Other Expense, Net

2,733

INCOME/(LOSS) BEFORE INCOME TAXES

13,375

(111,852

)

(21,772

)

(397,237

)

Income Tax Expense/(Benefit)

289

(21,503

)

227

(45,068

)

NET INCOME/(LOSS)

$

13,086

$

(90,349

)

$

(21,999

)

$

(352,169

)

EARNINGS PER SHARE:

Basic

$

0.20

$

(1.39

)

$

(0.33

)

$

(5.46

)

Diluted

$

0.19

$

(1.39

)

$

(0.33

)

$

(5.46

)

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

67,006

64,868

66,244

64,515

Diluted

69,856

64,868

66,244

64,515

Schedule 3

Express, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Thirty-Nine Weeks Ended

October 30, 2021

October 31, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(21,999

)

$

(352,169

)

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

Depreciation and amortization

51,964

55,699

Loss on disposal of property and equipment

74

1

Impairment of property, equipment and lease assets

29,853

Equity method investment impairment

3,233

Share-based compensation

7,856

7,286

Deferred taxes

65,358

Landlord allowance amortization

(319

)

(312

)

Other non-cash adjustments

(500

)

Changes in operating assets and liabilities:

Receivables, net

523

(1,833

)

Income tax receivable

57,992

(109,014

)

Inventories

(119,228

)

(130,340

)

Accounts payable, deferred revenue, and accrued expenses

95,621

183,129

Other assets and liabilities

5,800

(1,993

)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

78,284

(251,602

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(18,095

)

(13,550

)

NET CASH USED IN INVESTING ACTIVITIES

(18,095

)

(13,550

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from borrowings under the revolving credit facility

73,000

165,000

Repayment of borrowings under the revolving credit facility

(154,050

)

Proceeds from borrowings under the term loan facility

50,000

Repayment of borrowings under the term loan facility

(43,263

)

Proceeds on financing arrangements

2,634

Repayments of financing arrangements

(769

)

(1,293

)

Costs incurred in connection with debt arrangements

(471

)

(382

)

Repurchase of common stock for tax withholding obligations

(3,715

)

(599

)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(79,268

)

165,360

NET DECREASE IN CASH AND CASH EQUIVALENTS

(19,079

)

(99,792

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

55,874

207,139

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

36,795

$

107,347

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: adjusted net income/(loss), adjusted operating income/(loss), adjusted diluted earnings per share, EBITDA, and free cash flow.

How These Measures Are Useful

The Company believes that these non-GAAP measures provide additional useful information to assist stockholders in understanding its financial results and assessing its prospects for future performance. Management believes adjusted net income/(loss), adjusted operating income/(loss), adjusted diluted earnings per share, and EBITDA are important indicators of the Company's business performance because they exclude items that may not be indicative of, or are unrelated to, the Company's underlying operating results, and may provide a better baseline for analyzing trends in the business. In addition, adjusted diluted earnings per share and EBITDA are used as a performance measures in the Company's long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned and EBITDA is also a metric used in our short-term cash incentive compensation plan. Management believes that free cash flow provides useful information regarding liquidity as it shows our operating cash flows less cash reinvested in the business (capital expenditures).

Limitations of the Usefulness of These Measures

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported net income/(loss), operating loss, or diluted earnings per share. These non-GAAP financial measures reflect an additional way of viewing the Company's operations that, when viewed with the GAAP results and the below reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of the Company's business. 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.

Thirteen Weeks Ended October 30, 2021

(in thousands, except per share amounts)

Operating
Income

Income Tax
Impact

Net Income

Diluted
Earnings
per Share

Weighted
Average Diluted
Shares
Outstanding

Reported GAAP Measure

$

16,254

$

13,086

$

0.19

69,856

Valuation allowance on deferred taxes (a)

(1,485

)

(1,485

)

(0.02

)

Adjusted Non-GAAP Measure

$

16,254

$

11,601

$

0.17

Thirty-Nine Weeks Ended October 30, 2021

(in thousands, except per share amounts)

Operating
Loss

Income Tax
Impact

Net Loss

Diluted
Earnings
per Share

Weighted
Average Diluted
Shares
Outstanding

Reported GAAP Measure

$

(9,526

)

$

(21,999

)

$

(0.33

)

66,244

Valuation allowance on deferred taxes (a)

(490

)

(490

)

(0.01

)

Adjusted Non-GAAP Measure

$

(9,526

)

$

(22,489

)

$

(0.34

)

Thirteen Weeks Ended October 31, 2020

(in thousands, except per share amounts)

Operating
Loss

Income Tax
Impact

Net Loss

Diluted
Earnings
per Share

Weighted
Average Diluted
Shares
Outstanding

Reported GAAP Measure

$

(110,916

)

$

(90,349

)

$

(1.39

)

64,868

Impairment of property, equipment and lease assets

8,370

(2,215

)

(a)

6,155

0.09

Valuation allowance on deferred taxes (b)

15,998

15,998

0.25

Tax impact of the CARES Act (c)

(7,996

)

(7,996

)

(0.12

)

Adjusted Non-GAAP Measure

$

(102,546

)

$

(76,192

)

$

(1.17

)

Thirty-Nine Weeks Ended October 31, 2020

(in thousands, except per share amounts)

Operating
Loss

Income Tax
Impact

Net Loss

Diluted
Earnings
per Share

Weighted
Average Diluted
Shares
Outstanding

Reported GAAP Measure

$

(392,489

)

$

(352,169

)

$

(5.46

)

64,515

Impairment of property, equipment and lease assets

29,853

(7,901

)

(a)

21,952

0.34

Equity method investment impairment (b)

(642

)

2,091

0.03

Valuation allowance on deferred taxes (c)

93,317

93,317

1.45

Tax impact of the CARES Act (d)

(36,553

)

(36,553

)

(0.57

)

Tax impact of executive departures (e)

111

111

Adjusted Non-GAAP Measure

$

(362,636

)

$

(271,251

)

$

(4.20

)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in thousands)

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Net income/(loss)

$

13,086

$

(90,349

)

$

(21,999

)

$

(352,169

)

Interest expense, net

2,879

936

12,246

2,015

Income tax expense/(benefit)

289

(21,503

)

227

(45,068

)

Depreciation and amortization

15,662

18,316

48,418

55,519

EBITDA (Non-GAAP Measure)

$

31,916

$

(92,600

)

$

38,892

$

(339,703

)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in thousands)

November 2, 2019

Net loss

$

(3,105

)

$

(22,742

)

Interest income, net

(690

)

(2,185

)

Income tax benefit

(2,880

)

(3,062

)

Depreciation and amortization

20,831

63,898

EBITDA (Non-GAAP Measure)

$

14,156

$

35,909

Thirty-Nine Weeks Ended

(in thousands)

October 30, 2021

October 31, 2020

November 2, 2019

Net cash provided by (used in) operating activities

$

78,284

$

(251,602

)

$

32,834

Less:

Capital expenditures

(18,095

)

(13,550

)

(20,503

)

Free Cash Flow (Non-GAAP Measure)

$

60,189

$

(265,152

)

$

12,331

Schedule 5

Express, Inc.

Real Estate Activity

(Unaudited)

Third Quarter 2021 - Actual

October 30, 2021 - Actual

Company-Operated Stores

Opened

Closed

Store Count

Gross Square Footage

Retail Stores

351

Outlet Stores

1

207

Express Edit Concept Stores1

2

(1)

5

UpWest Stores

1

7

TOTAL

4

(1)

570

4.7 million

Fourth Quarter 2021 - Projected

January 29, 2022 - Projected

Company-Operated Stores

Opened

Closed

Store Count

Gross Square Footage

Retail Stores

(5)

346

Outlet Stores

(4)

203

Express Edit Concept Stores1

5

UpWest Stores

1

(1)

7

TOTAL

1

(10)

561

4.7 million

Full Year 2021 - Projected

January 29, 2022 - Projected

Company-Operated Stores

Opened

Closed

Store Count

Gross Square Footage

Retail Stores

(13)

346

Outlet Stores

1

(8)

203

Express Edit Concept Stores1

6

(2)

5

UpWest Stores

8

(1)

7

TOTAL

15

(24)

561

4.7 million

View source version on businesswire.com: https://www.businesswire.com/news/home/20211202005166/en/

Contacts

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

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