Shares of Express Inc. rose 3.3 percent after the retailer posted fourth quarter results.
For the three months ended Jan. 30, net income rose 34.3 percent to $56.1 million, or 67 cents a diluted share, from $41.8 million, or 49 cents, a year ago. Net sales rose 5.5 percent to $765.6 million from $725.8 million, while comparable-store sales gained 4 percent in the quarter. The company said that e-commerce sales rose 8 percent to $156.3 million. Wall Street was expecting earnings per share of 65 cents on revenues of $769.3 million.
David Kornberg, president and chief executive officer, said, “During the year, we successfully delivered balanced growth attributable to robust comparable sales, margin gains and expense discipline.”
The ceo added that positive momentum from 2015 is expected to continue and that the company is “optimistic about 2016. Consumers are responding favorably to our Spring product. We are continuing to approach promotions with restraint and managing inventory with discipline.”
For the first quarter of 2016, the company is net income of between $13 million and $15 million, with diluted EPS between 16 cents to 19 cents and a comps gain in the low single digits. On an adjusted basis, net income is expected to be between $20 million to $22 million, with adjusted diluted EPS between 25 cents to 28 cents. In the year ago quarter, net income was $13.1 million, or 15 cents a diluted share, while comps rose 7 percent. The year ago adjusted net income was $19 million, with adjusted diluted EPS of 22 cents.
The company also said that merchandise margin in the fourth quarter grew by 180 basis points due to carefully managed promotions and inventory levels. That contributed to the gross margin improvement of 230 basis points – the balance was due to improvement in buying and occupancy as a percentage of net sales – with a gross margin of 34 percent versus the 31.7 percent in the year-ago quarter.
During the conference call to Wall Street analysts, Kornberg said the company made product changes during the year that incorporate more fashion items and to flow in units more often. “Product categories were expanded, and new collections were introduced. We now cover a broader spectrum of our customers’ wardrobe needs and intend to continue down this path,” the ceo said.
Kornberg added that the company also made changes to its product testing, inventory management and speed to market. “Collectively, these are bringing better products to our customers faster, reducing fashion risk and ensuring a tighter control of inventory and open to buy dollars,” he explained. On the marketing side, the company has focused on branding, such as partnering with key influencers, to drive customer engagement with the brand.
The company is winding down its activities in the Middle East and South Africa, electing instead to focus its international resources in Mexico and Latin America.
Shares on Wednesday closed at $19.66 in New York Stock Exchange trading.
Nomura’s Simeon Siegel said, “We believe Express’ fourth quarter beat and slightly above-Street guidance continues to support our belief that the company stands to benefit from the emerging trends, but also serves as an indication of the success the new management team is having.” Nomura has a “Buy” rating on the stock.