Golden Gate, Limited Brands to Sell More Express Shares

Retailer's quarterly earnings and first-quarter guidance exceeded Wall Street’s expectations.

Golden Gate Capital will continue to lighten its fashion portfolio when it sells a portion of its remaining stake in Express Inc.

This story first appeared in the March 23, 2011 issue of WWD.  Subscribe Today.

According to a regulatory filing by Express on Tuesday with the Securities and Exchange Commission, Golden Gate Private Equity and Limited Brands, which together own 57.2 percent of the retailer’s outstanding shares, will join with members of Express’ management to offer 16.5 million shares to the public.

Golden Gate, Express’ largest shareholder, and Limited Brands together owned 73.3 percent of Express in December. Through a previous share offering and other sales, they reduced their holdings to 42.9 percent and 14.3 percent, respectively.

Golden Gate, which last week sold a majority stake in J. Jill to Arcapita and in January sought to restructure its Orchard Brands direct marketing unit through a prepackaged bankruptcy filing, owns more than 38 million shares of Express, and Limited Brands holds 12.7 million shares. Michael Weiss, president and chief executive officer, owns 2.1 million Express shares, or 3.5 percent of those outstanding.

The pricing of the shares has not been set; nor has the number to be offered or the timing of the offer. Express will receive no proceeds from the sales.

The SEC filing coincided with disclosure of Express’s fourth-quarter and full-year financial results. Both quarterly earnings and first-quarter guidance exceeded Wall Street’s expectations, pushing Express shares up $1.02, or 5.8 percent, to $18.42, and valuing the shares to be sold at $303.9 million.

In the three months ended Jan. 29, the Columbus, Ohio-based firm posted net income of $48.4 million, or 55 cents a diluted share, 5.3 percent ahead of the year-ago level of $46 million, or 60 cents a share. EPS for the most recent quarter was 6 cents better than projected, on average, by analysts but declined in comparison to the 2009 figure because of a greater number of shares outstanding.

Revenues moved up 13.7 percent, to $621.5 million from $546.8 million, and rose 12 percent on a comparable-store basis. Gross margin advanced to 36.5 percent of sales from 34 percent a year ago.

On a morning conference call, Weiss said the company expects to open the first store in Canada in September. The firm projects five to seven stores in Canada by yearend and a total of up to 50. It expects up to open 20 U.S. stores this year.

Through a franchising arrangement with Alshaya Trading Co., Express operates stores in Saudi Arabia, the United Arab Emirates and Kuwait and is investigating similar arrangements elsewhere. Weiss said the company is “beginning to explore opportunities to expand in such geographies” as Central and South America, Asia, Europe and Russia. The company said previously that, although it will own and operate its Canadian stores, other initiatives outside the U.S. will be operated through franchises or other arrangements.

Weiss cited dresses and men’s and women’s sweaters as strong holiday performers and noted that a more assertive approach to fashion had helped the retailer withstand price and promotional pressures. “We also capitalized on the increasing pricing power we have with consumers by strategically raising price points in certain categories, which were accepted very favorably,” he told analysts.

Express projected first-quarter EPS of 38 cents to 41 cents and a midsingle-digit increase in comps.