The men’s and women’s apparel and accessories retailer, which includes the Express and UpWest brands, revealed third-quarter earnings Thursday before the market opened, growing revenues and logging a $13 million profit. That’s on top of last quarter’s profits of $10.6 million. Express updated its fourth-quarter guidance as a result, causing shares to rise 14.8 percent to $3.88.
“The momentum is continuing to build as the Express Way Forward strategy takes hold,” Tim Baxter, chief executive officer of Express, told WWD in an exclusive interview. “It’s exciting to deliver the second consecutive quarter of profitable growth against 2019.”
“We’ve seen a remarkable shift in all the occasion-based categories, which have obviously been big dominant categories for us in the past,” Baxter said, adding that it “bodes very well for us as we move through the fourth quarter.”
Highlights include men’s suits, growing 20 percent in comps in the most recent quarter; women’s dresses, up 22 percent; denim rising 12 percent, and men’s polos and graphic Ts increasing 39 percent, all compared with 2019 levels.
“We at Express have a different approach,” Baxter said. “A lot of what is driving the growth for us is that the customer actually comes to us for fashion.”
All of this helped the retailer register a 47 percent increase in net sales to $472 million during the most recent quarter, the three-month period ending Oct. 30, up from $322 million a year ago. Consolidated comparable sales were up 46 percent, compared with a year ago, or up 3 percent compared with 2019. Comparable retail sales, which includes both Express brick-and-mortar stores and its e-commerce businesses, was up 52 percent during the quarter, compared with 2020, while comparable outlet store sales rose 33 percent during the same timeframe, compared with a year earlier.
E-commerce demand also continued to grow, up 26 percent, compared with 2020 levels, or up 21 percent compared with 2019’s pre-pandemic levels. Express has previously stated a goal of $1 billion in annual e-commerce revenues by 2024. Baxter wouldn’t say its current levels, but did say Express is “on track to achieve that billion-dollar goal that we set forth.”
Other tailwinds included Express’ Community Commerce Program, of which the retailer named designer Rachel Zoe its lead style editor in November. Baxter said the program helps drive new customer acquisition to the brand.
The company logged more than $13 million in profits, compared with losses of $90.3 million the same time last year, and updated its guidance as a result.
Express is now expecting fourth-quarter comparable sales to grow in the low-single-digits range, with the gross margin rate up roughly 100 basis points for the quarter. The guidance includes about $15 million in expenses related to supply chain pressures in the fourth quarter. The CEO told WWD that the company will likely have another $10 million in supply chain headwinds into the first quarter as well.
“In total, we will have spent around $25 million on mitigating supply chain challenges,” Baxter said. “I think that is significantly lower than many of our competitors. We are better positioned from an inventory level and composition standpoint to continue to drive positive comparable sales and margin expansion in the fourth quarter.
“On the supply chain, I think we’ve done a fantastic job of mitigating the supply chain challenges,” he continued. “We actually accelerated many of our deliveries back in the spring season, in anticipation of supply chain challenges and actually ended the third quarter and began the fourth quarter with about 9 percent more inventory than we had in 2019. That was done very, very strategically, to ensure that we would have the supply to meet the demand of the fourth quarter.”
The company ended the quarter with $36.7 million in cash and cash equivalents, more than $108 million in long-term debt and 570 brick-and-mortar stores, or 351 Express locations, 207 outlets, five Express Edits and seven UpWest units.
While Baxter said in-store traffic continues to be down, compared with pre-pandemic levels, it is improving at a faster rate than overall apparel, or mall traffic in general. In addition, Express drove a 27 percent increase in average unit retail in its stores.
“If traffic is going to continue to be depressed, you have to be able to drive a higher average unit retail,” Baxter explained. “You have to be able to drive higher conversion. And we are doing that. We are offsetting many of the challenges presented by less traffic with higher conversion and higher average unit retail.”
Baxter added that the higher prices — unlike some of Express’ industry peers — is “not as a reaction to inflationary costs. We have actually put significantly more value in the make and quality into our product, which has driven the average unit retails up higher.”
In the future, Express will continue to update its store fleet with additional smaller format stores, or Express Edit locations, although Baxter would not say how many or which markets.
“It’s a concept we’re going to continue to roll out as we learn more and more about it,” he said. “There is tremendous opportunity for many, many more Express Edit stores. We have also seen an increase in our e-commerce sales in the zip codes surrounding Express Edit stores, which again speaks to the power of an omnichannel brand and the customers desire to be able to shop a brand where and how they want to. If you see the store all the time, it becomes top-of-mind. The fast majority of these stores are in highly trafficked foot traffic locations, so if you’re walking by the store all the time, even if you may not visit the store all the time, it is a trigger for the brand.”
Also on Thursday, Express appointed Antonio Lucio as a member of the board, effective immediately. Lucio, who has worked in the consumer and technology space for nearly four decades, is the founder and principal of 5S Diversity, a firm that helps companies increase senior-level representation. Before that he worked as the global chief marketing officer at Facebook. Lucio’s resume also includes stints at Hewlett-Packard, Visa, PepsiCo and Procter & Gamble, among others.
“Antonio has had a positive impact at some of the most well-respected public companies and I look forward to his perspective and contributions,” said Baxter. “His track record of driving results while advancing inclusive leadership will add tremendous value as we accelerate our diversity, equity and inclusion mission.”
Shares of Express are up almost 146 percent over the past 12 months.