Express (EXPR) Stock: Why The Price Jumped Today

By Amit Chowdhry ● Dec 2, 2021
  • The stock price of Express, Inc. (NYSE: EXPR) increased by over 6% pre-market today. This is why it happened.

The stock price of Express, Inc. (NYSE: EXPR) increased by over 6% pre-market today. Investors are responding positively to the company’s financial results for Q3 2021.

These are the highlights from the quarter:

— Consolidated net sales increased 47% to $472.0 million from $322.1 million in the third quarter of 2020, with consolidated comparable sales up 46%. Compared to 2019, consolidated comparable sales increased by 3%.

— Comparable retail sales, which includes both Express stores and eCommerce, increased 52% compared to the third quarter of 2020.

— Comparable outlet store sales increased 33% versus the third quarter of 2020.

— Gross margin was 33.2% of net sales compared to 4.3% in last year’s third quarter, an increase of approximately 2,890 basis points. Compared to 2019, the gross margin increased by 500 basis points.

— Merchandise margin improved approximately 1,350 basis points compared to 2020 driven by positive customer response to the new receipts and a significant reduction in promotional activity.

— Buying and occupancy expenses leveraged approximately 1,540 basis points compared to 2020 due to increased sales and rent reductions.

— Selling, general, and administrative (SG&A) expenses were $141.1 million, 29.9% of net sales, versus $124.9 million, 38.8% of net sales, in last year’s third quarter. The improvement in the SG&A rate is driven by leveraging the increased sales and cost reductions from the previously announced corporate restructuring. The $16.2 million increase versus 2020 is mainly driven by last year’s pandemic-related store closures and current year incremental investments in marketing.

— Operating income was $16.3 million compared to a loss of $110.9 million in the third quarter of 2020 and a loss of $6.7 million in the third quarter of 2019.

— Income tax expense was $0.3 million at an effective tax rate of 2.2% and includes a $1.5 million partial release of the valuation allowance against the Company’s deferred tax assets. This compares to a benefit of $21.5 million and an effective tax rate of 19.2% in the third quarter of 2020. Excluding the benefit of the valuation allowance release, the effective tax rate would have been approximately 13% driven by a true-up from the second quarter provision due to an improvement in forecasted pre-tax results.

— Net income was $13.1 million, or $0.19 per diluted share. On an adjusted basis, net income was $11.6 million, or $0.17 per diluted share, excluding the benefit of the previously mentioned valuation allowance reversal. This compares to a net loss of $90.3 million, or a loss of $1.39 per diluted share, in the third quarter of 2020. On an adjusted basis, net loss was $76.2 million, or a loss of $1.17 per diluted share, in the third quarter of 2020.

— Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $31.9 million compared to negative EBITDA of $92.6 million in the third quarter of 2020. EBITDA was $14.2 million in the third quarter of 2019.

2021 Outlook

Based on strong third-quarter performance and the power of the product, brand, and customer strategies balanced against the ongoing supply chain constraints, tight labor market, and other inflationary pressures, the Company expects the following compared to 2019:

— Comparable sales to increase by low-single digits for the fourth quarter

— Inventory level and composition well-positioned to deliver the fourth-quarter sales outlook

— Gross Margin rate to be approximately 100 basis points higher for the fourth quarter, including approximately $15 million of expenses related to mitigating supply chain challenges

— Selling, General and Administrative expenses up 9% – 11%, driven by investments in marketing and higher labor expenses

— Net interest expense of $3 million for the fourth quarter

— Effective Tax rate essentially zero percent for the fourth quarter and full-year

— Positive free cash flow for the full year

— Capital expenditures of approximately $35 million for the full year

— Well-positioned to achieve the long-term goals, including $1.0 billion in eCommerce demand and over $100 million in operating profit by 2024

Assumptions in the Company outlook may be affected by the continued uncertainty of the pandemic and its impacts throughout the supply chain.

See Schedule 5 for a discussion of projected real estate activity.

KEY QUOTE:

“Our strong third-quarter results reflect the second consecutive quarter of profitable growth and positive comparable sales versus 2019 and demonstrate the power of our EXPRESSway Forward strategy. Our results provide tangible evidence that the versatility, quality, and value of our product is resonating with consumers. I am confident that we will continue to deliver positive comparable sales and gross margin expansion versus 2019 in the fourth quarter.”

— Tim Baxter, Chief Executive Officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.