Express Q1 sales and earnings fall following Canada exit

By

Obi Anyanwu

Published
Jun 1, 2017

Express on Thursday reported its first quarter results that include a decrease in net sales, an expansion of net loss, and an operating loss due to the exit of Canada.

 
The specialty apparel retailer in May commenced shuttering its Canadian subsidiary, which included 17 stores in Alberta, Ontario and British Columbia. The exit of Canada had a negative $0.04 per diluted share impact on the first quarter net loss, which was $4.5 million, or $0.06 per diluted share. In the prior first quarter, Express reported a net income of $12.9 million, or $0.16 per diluted share.
 
The retailer also incurred a $6.3 million restructuring cost for the exit of Canada, which also impacted the operating loss that was $9.7 million compared to operating income of $31.8 million in the prior year.

“We strongly believe we have the right initiatives in place and are committed to driving shareholder value,” said President and CEO David Kornberg. “Our balance sheet remains strong with more than $190 million in cash and no debt, and we continue to have solid cash flow.”
 
Net sales decreased 7% to $467.0 million from $502.9 million, and comparable sales, including e-commerce, decreased 10% compared to a decrease of 3% in the prior year. E-commerce, which accounted for 21% of net sales, increased 27% in the quarter to $97.6 million (e-commerce has increased 27% year-over-year), but could not offset the sales decline.
 
Merchandise margin for the quarter fell 380 basis points due to increased promotional activity, and SG&A expenses were $130.1 million compared to $135.8 million in the previous year.
 
“We are pleased with the recent trends in our business and believe that our initiatives are gaining traction in a challenging retail environment,” said Kornberg. “E-commerce sales accelerated in the first quarter, and are on track for another record year. Store performance is also showing sequential progress. This led to a comparable sales improvement as we moved through the first quarter, a trend that has continued into the second quarter."
 
Kornberg added that he is excited about Express’ summer and fall collections, the e-commerce performance and the improvement of stores. Express is also focused on optimizing its store footprint and improving profitability.
 
In the second quarter, Express expects its comparable sales to be in the negative mid single digits, and its net loss to range from $(19) million to $(16) million. For the year, the retailer expects comparable sales to be in the negative low single digits and net income to range from $16 million to $22 million.