The men’s and women’s apparel and accessories retailer revealed quarterly earnings Wednesday before the market opened, improving on top and bottom lines thanks to strength across all channels. The outcome includes updated guidance for the back half of the year.
“Our results in the second quarter really clearly reflect the power of our strategy and that our transformation is really taking hold,” Tim Baxter, chief executive officer of Express, told WWD in an exclusive interview. “For the period following the Fourth of July, we delivered an 11 percent comp growth, compared with 2019, and that trend has continued into the third quarter. These are great indicators that the product strategy is working, consumer response has been incredible and our marketing strategies that support the product strategies are working.”
Last quarter’s results, for the three-month period ending July 31, included total revenues of nearly $458 million, up from roughly $246 million a year earlier. Comparable retail sales, which include Express stores and the Express e-commerce business, increased 48 percent during the quarter, while comparable sales in the outlet channel grew 30 percent, compared with 2020’s second quarter.
The company logged $10.6 million in profits as a result, compared with losses of nearly $108 million the same time last year, and now expects net sales in the back half of the year above 2019 levels on a comparable basis.
Baxter said the company’s progress was broad-based, across all channels and product categories, including denim, women’s body contour, everyday basics and men’s polos and graphic T-shirts.
“The versatile parts of our assortment is what is driving these increases,” he said. “We drove a 21 percent comp in denim, versus 2019 in the second quarter. So, we are winning in denim and will continue to drive denim.”
The CEO added that even wear-to-work and occasion-based categories are beginning to see improvements, as more consumers return to the office or resume social occasions. Categories such as men’s suits and dress shirts, as well as women’s dresses, were down 36 percent in the first quarter and 12 percent in the second quarter, compared with 2019 levels, but began to track closer to flat after the Fourth of July.
“I expect the occasion-based categories are going to continue to gain momentum as we move throughout the back half of the year,” Baxter said. “Our data tells us there are a significant number of people throughout the United States going back to work post-Labor Day, in a more normal setting. Even if it’s not full-time. I do think, too, that when people go out, for occasions, there will be a tendency to get even more dressed up, at least in the short term. It’s a very celebratory attitude.”
Meanwhile, consumers continue to take a hybrid approach to shopping.
Demand in e-commerce increased 28 percent, compared with 2020, and 20 percent compared with 2019, even with some consumers returning to in-person shopping. Baxter said the results will help Express reach its previously stated goal of $1 billion in annual e-commerce revenues by 2024. Although he would not divulge the company’s current annual e-commerce revenues, Baxter did say: “We are well on our way to reaching $1 billion.”
Express also upgraded its mobile app during the most recent quarter and now has more than 2 million active users and is growing rapidly.
“In the second quarter, our demand on our app was up 70 percent with traffic up 30 percent,” Baxter said. “These are our most valuable customers. App customers actually make four more visits annually and spend over $200 more annually than customers who only shop in one of our other channels.”
At the same time, more shoppers are beginning to feel comfortable entering physical stores, as illustrated in a 7 percent comp increase in the Express outlet channel during the quarter and a return to comp growth in retail stores in July.
Express has more than 550 brick-and-mortar units, or 350 retail stores, approximately 200 Express Factory outlets and five Express Edit locations. In 2020, Express said it would close 100 underperforming Express stores, of which Baxter said about 93 have since shut down. (The remaining will close when leases expire.)
Since then, Baxter said the focus has shifted from fleet rationalization mode to fleet optimization mode, or making existing stores smaller and therefore more productive, as well as expanding to off-mall locations.
“We have a very mall-based fleet right now and it’s important for us to be where customers are,” Baxter said. “Convenience is incredibly important.”
In addition, he said there’s opportunity to add more Express Edit stores, or stores with a smaller footprint (4,500 square feet or less) in highly trafficked street locations. The benefits include greater customer acquisition (about 49 percent of the customers in Express Edit are new to Express), as well as a return of lapsed shoppers to the brand.
Baxter told analysts on Wednesday morning’s conference call that the number of Express Edit stores will likely increase to around 10 by the end of the year.
Express is also testing out style editors through its Community Commerce Program, which will allow a select group of people to curate a digital Express storefront, complete with exclusive capsules, in addition to the entire assortment, which links to their personal social media accounts. Style editors will earn commission through sales.
“We launched the program in its pilot phase in Texas a few weeks ago and we plan to roll the program out nationwide sometime this fall,” Baxter said. “The potential is limitless. I believe ultimately that we could have more Express style editors than we have associates.”
In addition, the retailer will continue to invest in marketing and customer acquisition, funded by reduced promotions, Baxter said. The company also has paid influencer partnerships with actress Emma Roberts, actress and singer Liz Gillies and NFL player Juwan Johnson, among others.
But Wall Street wasn’t satisfied with the results. Despite a surge in the stock pre-market, shares of Express closed down 11.57 percent Wednesday to $6.42 a piece.
Some headwinds include cost pressures throughout the supply chain. But Baxter said, “We have been effectively managing those challenges for the past year and a half. They have continued and I suspect will continue through the entire back half of the year.
“That cost pressure is included in the updated outlook,” he added.
The company ended the quarter with $33.9 million in cash and cash equivalents and $109 million in long-term debt.
Shares of Express are up 494 percent, year-over-year.