Express, experiencing drops in sales and mall traffic due to the coronavirus, reported a net loss of $107.8 million for the second quarter ended Aug. 1, compared to a loss of $9.7 million in the year-ago period.
On an adjusted basis, the loss was $95.6 million. The adjusted loss excludes a $9.1 million income tax benefit from the Coronavirus Aid Relief and Economic Security act, or CARES; a $16.2 million deferred tax asset valuation allowance, and a $6.8 million pretax impairment charge.
The fashion specialty retailer’s operating loss was $136.3 million, compared to a loss of $9.8 million in the second quarter of 2019.
Sales declined 48 percent to $245.7 million last quarter, from $472.7 million in the year-ago period. Comparable sales were down 24 percent.
The results failed to meet Wall Street’s expectations, as the stock declined 4.4 percent to $1.08 on Wednesday. By selling channels, comparable sales at Express stores and e-commerce decreased 28 percent, and outlet sales fell 15 percent. The company cited liquidations of spring merchandise necessitated by temporary closures of stores due to the health crisis, which impacted margins and profitability.
Express ended the quarter with $193 million in cash, compared to $154 million in the year-ago quarter. Inventory was down 14 percent to $232.3 million.
“When we began the transformation of Express, we certainly did not anticipate a global pandemic, and none of us could have imagined the duration or magnitude of its impact on the retail apparel industry,” Tim Baxter, chief executive officer, said in a statement Wednesday. “And while we have taken decisive and appropriate action to protect the financial health of our company over this extended period of time, we have also continued to advance each of the four foundational pillars of our corporate strategy. I am encouraged by the momentum in our e-commerce business, the strong response to our August fashion deliveries, and the increase in customer engagement with our brand messages. While mall traffic continues to be challenging, I would expect our results to improve as we move through the back half of the year.”
Prior to the coronavirus outbreak last March, Express had anticipated reporting losses this year, which have been exacerbated by the health crisis.
In January 2020, Baxter unveiled a strategy called “The ExpressWay Forward,” which entails closing 100 stores and other cost reductions through personnel cuts, and process improvements such as accelerating speed-to-market, inventory optimization and systems implementations.
Baxter also said the strategy would lead to creating “curated assortments reflecting versatility and consistent newness,” revamping the loyalty program, evolving store associates from being task-oriented to service-oriented, and selling more denim with additional fits and washes. The transformation was not a turnaround, and unlike many other retailers, Express was not saddled with huge debt, he emphasized.
The 40-year-old Express brand reported more than $2 billion in sales last year and operates more than 500 retail and outlet stores in the U.S. and Puerto Rico, and has an online store.