Is Express Bucking the Trend of Struggling Retailers?

Amid the pullbacks that retailers have experienced in and following this holiday season, there seems to be at least one retailer that made actual progress. We already have seen sales results from Target, Five Below, Urban Outfitters, J.C. Penney, Kohl’s and Macy’s and how shares reacted. Note though that some suggest that holiday retail sales growth was better than many troubled retailers’ results may have suggested.

Express Inc. (NYSE: EXPR) shares jumped on Wednesday after the company narrowed its fourth-quarter guidance and unveiled a new corporate strategy, including significant cost reductions and fleet rationalization.

The retailer narrowed its guidance to the range of $0.17 to $0.19 on an adjusted basis, within the previous range. At the same time, the company expects comparable sales to be down roughly 3%.

Express management also said that it has identified $80 million in cost reduction opportunities. Of this, $25 million will be driven by process improvements, inventory optimization and systems implementations associated with its go-to-market transformation. The previously announced workforce restructuring will drive the other $55 million of expense reductions.

Separately, the company has initiated a fleet nationalization plan to close roughly 100 stores by 2022. The company expects the net impact to sales to be a reduction of $90 million by 2022. Obviously, this reduction will be offset by the elimination of the fixed operating costs of the closed stores and leveraging the remaining stores’ and online infrastructure for additional sales.

CEO Tim Baxter commented:

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. 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.

Shares of Express traded up about 16% to $4.81 on Wednesday, in a 52-week range of $1.83 to $6.24. The consensus price target is $5.00.

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