Express’ stock is up.
Shares of the apparel and accessories retailer surged more than 21 percent during Wednesday’s trading session after the company beat quarterly earnings expectations.
But the company said it has more work to do and will focus on updating its assortment in key categories, trimming promotional sales and adding new members to the leadership team.
“With respect to the second quarter, we are clearly disappointed in our results,” Timothy Baxter, chief executive officer and director of Express, told analysts on Wednesday morning’s conference call. “However, we did deliver sales and profit at the top end of our guidance.
“Through the changes we are making to our product, our merchandising and our marketing, we expect to drive top line sales improvement over time,” he added. “In addition, we are in the process of identifying cost savings and rightsizing our expenses. And let me be clear: We will take the necessary action to significantly reduce our operating expense in 2020.”
Still, in the most recent quarter, the company fell short on both top and bottom lines. Net sales for the three-month period ending Aug. 28 fell 4 percent to $472 million, down from $493 million the year before. The retailer lost $9.7 million during the quarter, compared with profits of $2.2 million in 2018. Total comps also decreased — by 7 percent — compared with the same time last year.
“I do believe we’ll get progressively better this fall,” said Baxter, who took over the helm as ceo in June. “We should expect incremental improvement.”
Starting in September, Malissa Akay and Sara Tervo will join the leadership team as executive vice president and chief merchandising officer and executive vice president and chief marketing officer, respectively. The company will also focus on trimming overall promotional activities.
Meanwhile, Baxter said the company is in need of some fresh looks, particularly in denim and the women’s tops business.
While men’s denim and hyperstretch have outperformed thus far this year, Express’ denim business has been “a challenge,” despite a thriving denim business.
“Denim is obviously a key part of every one of our consumers’ lives,” Baxter said on the call. “So there is no doubt that we need to win in denim.”
But, he added, “There is a shift happening in silhouette on the women’s side of the business. We’ve been in a skinny-legging cycle for probably nearly a decade now and now there is a huge momentum shift. And honestly, we missed it in women’s denim. The women’s [business] is definitely gravitating back toward a boot cut, a flare or a wide leg in denim and our assortment is still too heavily penetrated in leggings and skinnies.”
Other adjustments include revising the selection of women’s tops.
“We’ve had too much depth in older key items and not enough breadth in style diversity,” Baxter said.
Either way, investors and analysts seem satisfied with the company’s results year-to-date — at least for now.
“We see signs of the turnaround story materializing, as we continue to track positive promotional trends thus far in [third quarter-to-date], and are encouraged by the selection of Macy’s Inc. veteran Timothy Baxter as new ceo,” Wedbush analyst Jen Redding said in a note. “With a solid quarter now in the books and strong positioning gained in July, we believe Express has the right strategies in place, with multiple avenues to explore as a means to turn its business on a stable path toward consistent quarterly performance, including e-commerce, continued store closures and omnichannel optimization opportunities.”