Express Inc., a leading fashion apparel retailer, has recently provided details on its new corporate strategy, announcing fourth quarter guidance that narrows the previous range.
“Our expected results show the third consecutive quarter of sequential improvement in our comp sales trends. I am encouraged that the new initiatives we have put in place are resonating with our customers,” said Tim Baxter, chief executive officer. “Today, we are unveiling our new corporate strategy, called ‘The Expressway Forward,’ and we are focused on profitable growth. My expectation is that we will return to a mid-single-digit operating margin through a combination of low-single-digit comp sales growth, margin expansion and cost reductions. This will of course take some time, but we have a clear path.”
2019 Fourth Quarter Guidance:
Comparable sales are currently expected to be approximately -3%. The company expects adjusted net income to be in the range of $11 to $12.5 million and adjusted diluted earnings per share to be in the range of $0.17 to $0.19. The company is also announcing that it expects to have approximately $200 million in cash on hand by the end of fiscal 2019. This guidance excludes an estimated pre-tax restructuring charge between $6.5 and $7.5 million that will be incurred during the fourth quarter and does not take into account any additional non-core items that may occur. The company expects to report fourth quarter and full year 2019 results during the week of March 9.
Corporate Strategy:
“The Expressway Forward” outlines key initiatives based on the company’s four foundational pillars of product, brand, customer and execution, as represented by the company’s ticker symbol, EXPR.
- E stands for Engage our customers and acquire new ones. The company will drive customer retention and acquisition through a combination of relaunching its loyalty program and private label credit card in Fall 2020, optimizing marketing spend through new tools and predictive models, and more personalized customer communications.
- X is for Execute with precision to accelerate sales and profitability. Several new initiatives will create operational efficiency across the organization, including a new go-to-market process, inventory optimization, an improved customer experience, enhanced omni-channel capabilities, fleet rationalization and cost reductions.
- P represents Product first. The company’s new product approach – “The Express Edit” – will result in a curated assortment reflecting versatility and consistent newness. This will allow Express to deliver great product in every category.
- R stands for Reinvigorate the brand. Based on customer insights, the company is unveiling its new brand purpose, which is to create confidence and inspire self-expression, and its promise to customers to edit the best of current fashion for real-life versatility. How the brand engages with customers will be consistent with this point of view across women’s and men’s, across channels, and across communication touchpoints, and will encourage them to “Dream Big. Dress Accordingly.”
Cost Reductions:
The company has identified $80 million in annualized cost reduction opportunities expected to be realized over the next three years. Of this, $25 million will be driven by process improvements, inventory optimization and systems implementations associated with its go-to-market transformation. The other $55 million of expense reductions will be driven mainly by the previously announced workforce restructuring. These savings are incremental to the $50 million dollars in savings that were announced in 2016 and delivered over the past three years.
Fleet Rationalization:
The company expects to close approximately 100 stores by 2022. This includes nine stores that have already closed in 2019, 31 by the end of January and an additional 35 by the end of January 2021. The company expects the net impact to sales to be a reduction of $90 million by 2022. This reduction is offset by the elimination of the fixed operating costs of the closed stores and leveraging the remaining stores’ and online infrastructure for additional sales, which it expects to result in a $15 million annualized increase in EBITDA by 2022.
Cash Flow:
The company has a long-term goal to increase free cash flow from approximately $50 million in 2019 to $90 to $110 million by 2022. It expects to achieve this goal by increasing operating cash flow by $60 to $80 million, driven by growth in net income and improved working capital. Over the next three years, the company expects to spend between approximately $50 and $60 million in capital expenditures each year to fund technology investments, ongoing maintenance of technology platforms, enhance customer facing e-commerce capabilities, and refresh stores to ensure consistent representation of the brand across the entire fleet.
Webcast and Presentation Information:
Express will provide additional details to the investment community during an event today at 8:00 a.m. EDT at the New York Stock Exchange (NYSE). The event will be webcast live and available for replay for 90 days at www.express.com/investor. In addition, a copy of the presentation can be accessed from the company’s website.
