Express’ fashion comeback is shaping up to be a large part of its pandemic story.
The men’s and women’s apparel and accessories retailer, which includes the Express and UpWest brands, revealed quarterly and full-year earnings Wednesday before the market opened, improving on top-line sales and narrowing losses for the year thanks to strength across all categories. Express updated its current-quarter and full-year outlooks as a result, causing shares to rise more than 4 percent at the start of Wednesday’s session, only to close down 1.70 percent to $4.04 apiece that same day.
Still, Tim Baxter, chief executive officer of Express, told WWD in an exclusive interview that the company “had a very, very strong quarter and momentum built throughout the year. The strength of the [fourth] quarter also pushed us to positive operating income for the year, which is also really encouraging. And that momentum continued into January.”
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The details break down to net sales of nearly $595 million for the three-month period ending Jan. 29, or a 38 percent increase from 2020’s fourth-quarter sales of $430 million. Comparable retail sales for the quarter — which includes Express stores and the e-commerce business — increased 45 percent, compared with a year earlier, up 4 percent, when compared with 2019’s fourth quarter.
Baxter said there was strength across all channels, but most noticeably in e-commerce. (The company has previously stated its goals to reach $1 billion in e-commerce demand by 2024.) The CEO wouldn’t say what the current volumes are, but did say Express had a 33 percent increase in e-commerce demand (which the company defines as gross sales from the online and app businesses, excluding products returned to stores) in 2021. In addition, Express apps currently have about 2.3 million active users, which are some of the company’s most engaged customers.
“They spend over $300 more each year than customers who only shop through our website or one of our stores,” Baxter said. “I’d put that up against any of our competitors to say that we are winning in e-commerce.”
The CEO added that the e-commerce business’ strength wasn’t to the detriment of brick-and-mortar stores either. In fact, comps in the Express Outlet channel grew four percent in the last nine months of 2021, “outpacing the retail business just slightly,” Baxter said.
“[Traffic] is changing very consistently; it ebbs and flows,” he added, pointing out this is largely dependent on local mask and vaccine regulations. In addition, the smaller-format stores tend to increase e-commerce demand in the surrounding areas. The company is planning on opening more Express Edit locations throughout 2022 and 2023, but Baxter declined to say how many or where.
Other growth drivers included the UpWest brand (where sales grew 41 percent in 2021, year-over-year), denim, the body contour category (which generated $60 million in revenues for the year) and more structured pieces, such as dresses and men’s suits.
“We have historic strength in occasion-based categories,” Baxter said. “And while those categories remained very, very challenged in the first quarter of last year, they gained momentum throughout the year and culminated in strong positive comps in the fourth quarter.”
All of this explains why Express registered more than $7.5 million for the quarter, compared with losses of $53.2 million a year earlier.
For the full year, consolidated net sales increased 55 percent to $1.87 billion, up from $1.2 billion in 2020. Consolidated comparable sales rose 37 percent in 2021, year-over-year, but down 2 percent when compared with 2019 levels. Baxter added that comparable sales in the last three quarters were positive and improved sequentially throughout the year. Comparable retail sales for the year, including stores and e-commerce, grew 41 percent in 2021, compared with 2020.
Express narrowed its losses to $14.4 million, compared with losses of more than $405 million a year earlier.
The firm is now anticipating current-quarter comparable sales to increase 25 percent to 30 percent, compared with 2021’s first quarter. For the full fiscal 2022 year, the company expects comparable sales to increase 7 percent to 9 percent. Express also expects to generate a mid-single-digit operating margin and more than $100 million in operating profit by 2024, with growth opportunities in areas such as international, the UpWest brand, wholesale and livestreaming.
The news comes as many of Express’ retail competitors guide down for the coming year. In fact, the majority of the retail industry is anticipating elevated freight costs, inflationary pressures, labor shortages and decreased consumer spending, which could curtail revenues and margins, particularly in the first half of the year. While Express is anticipating approximately $7 million in additional supply chain expenses during the first quarter, Baxter said the company is still planning on increasing comps for the year.
“Our confidence is based on the strength of the results and the momentum that we have seen in our business,” he said. “We, as a company, have successfully mitigated many of the supply chain challenges that we’ve all experienced.
“That’s not to say that we haven’t been negatively impacted by them just like all of our competitors,” Baxter continued. “There certainly are macroeconomic headwinds. It remains to be seen the impact of the inflationary pressure on our business. I do think consumer sentiment has changed slightly. I think there was a very celebratory sentiment coming out of the fourth quarter and moving into the spring season as COVID[-19] restrictions were beginning to ease. And I do think there is a very different consumer sentiment now as a war rages in Europe. [But] we have balanced those headwinds with the optimism and the tailwinds that we’ve seen with the results.
“We got very aggressive in categories that are fairly season-less,” he added. “So we were able to bring in enough supply to drive demand in the first half of the year. And we’ll continue to do that; we’ll continue to accelerate our deliveries to ensure that we’re in stock on all of the categories that consumers want.”
The firm ended the year with more than $41 million in cash and cash equivalents and nearly $118 million in long-term debt. The retailer has approximately 561 brick-and-mortar stores, or 346 Express locations, 203 outlets, five Express Edits and seven UpWest units.
Shares of Express are down 4.94 percent, year-over-year.