Express Inc. took a big step away from knit tops in the first quarter but wasn’t able to offset the sales decline, and the retailer paid the price — with a 27.4 percent drop in its stock price Monday.

The stock shellacking, which sent the company’s shares down $6.33 to $16.76, came despite stronger, albeit disappointing first-quarter results. Net income rose 20.2 percent to $42.1 million, or 47 cents a diluted share, from $35 million, or 39 cents, a year earlier. Earnings per share came in 2 cents shy of the 49 cents analysts anticipated.

Sales for the three months ended April 28 increased 6.1 percent to $496 million from $467.4 million with a 4 percent comparable-store sales rise.

Express has been moving away from low-margin basic knit tops in favor more fashionable offerings in an effort to bolster its style authority.

“We reduced our styles of opening price point knit tops, and, in hindsight, we did not follow some of our own guiding principles when planning this department this spring,” said Michael Weiss, chairman, president and chief executive officer, on a conference call with analysts. “We didn’t take a balanced approach to this category. Sales were planned down double digits as we transitioned from the commodity items. This was much steeper than we should have planned for one of our largest departments.”

Sales in other product categories rose, but the increases weren’t enough to offset the knit shortfall.

“We have course-corrected this category as we move into the back half of the year by introducing compelling fashion tops at opening price points and strong margins,” Weiss said.

The retailer was planning to open flagships in San Francisco and New York ahead of Christmas this year, but pushed those plans into fall next year. There was a delay from the landlord in San Francisco and a change of venue in New York, where the flagship will now be situated on Broadway at Times Square.

For the full year, Express is expecting earnings per share of $1.79 to $1.89 — down from the $1.84 to $1.97 previously projected and below the $1.95 Wall Street had penciled in. Comp sales are projected to increase in the low- to midsingle digits.

Express provided most of the retail fireworks in the market today.

The S&P Retail Index gained 0.3 percent, or 1.91 points, to 597.28 as the Dow Jones Industrial Average dipped 1.67 points to 12,502.81.

Among the gainers were Urban Outfitters Inc., which rose 7.4 percent to $28.10 even though first-quarter profits slipped, and Ralph Lauren Corp., which gained 2.7 percent to $150.27 after its fourth-quarter profits increased 29 percent.

In Europe, markets ended on the upswing, buoyed by hopes that a summit of European leaders Wednesday will help to drum up euro zone growth initiatives.

The FTSE MIB in Milan led the rally, rising 3.4 percent to close at 13,456.03, followed by the CAC 40 in Paris and the FTSE 100 in London, which both climbed 1.9 percent, to 3,084.09 and to 5,403.28, respectively.

The DAX in Frankfurt advanced 1.7 percent to 6,435.60.

The day’s biggest gainers included, up 3.5 percent to 15.37 pounds; Safilo Group, 4.7 percent to 4.66 euros; Mulberry Group, 3.3 percent to 21.27 pounds, and Hugo Boss, 2.2 percent to 79.05 euros.
The euro traded at $1.28, while the pound went for $1.58.

The informal meeting of euro zone leaders will include some new faces. The recently elected French president François Hollande is set to reiterate his call for euro zone bonds, which would be jointly underwritten by all the euro zone member states. Germany has repeatedly voiced its objection to the idea.

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