The retailer reported diluted earnings per share of $0.15, $0.02 on an adjusted basis, and net income of $10.6 million or $1.7 million on an adjusted basis, compared to losses in both 2020 and 2019. Shares on the New York Stock Exchange rose 0.27% to $7.26 in late morning trading.
Net sales increased 86% to $458 million in the second quarter of 2021, compared to $246 million in the 2020 period, and rose 3% over 2019’s $437 million, beating the analyst consensus of $447.91 million. Consolidated comparable sales jumped 42% compared to 2020, and 3% versus to 2019.
Express said it experienced a positive inflection point after the July Fourth holiday when comp-store sales and demand significantly accelerated to a positive 11% comp versus 2019, adding that the momentum has continued into August.
There was strong growth in e-commerce demand of 28% versus 2020, and 20% relative to 2019.
“Acceleration,” Express CEO Tim Baxter said, summing up the quarter in one word. “As investors, you only get a sense of how a company is performing on a quarterly basis. We’re driving and charting and witnessing our performance every day. We’re creating best-in-class product that offers incredible value. We’re invigorating the brand and becoming highly relevant. We’re getting a greater share of wallet from existing customers and [attracting] new ones.
“Our double-digit comps signify increasing margin rates and are tangible evidence of our strategy,” Baxter added on a conference call with analysts this morning. “We’re well on our way from being known as a store in the mall to being a brand with a purpose.”
Baxter said Express is testing small-format stores and results have been encouraging. “The reduction in square footage and doing more with less has been really impressive,” said Oliver Chen, a retail analyst at Cowan. “The average order value is impressive as well.”
The remodeling and resizing of Express’ store at the King of Prussia mall drove a 12% increase in sales in the second quarter, Baxter said, noting that the retailer also reduced the square footage of its Northpark store in Dallas.
“As we look forward at our mall-based fleet, we know we can be more productive and that will be our mission,” Baxter said. “Two-thirds of our leases are actionable over the next three years. As we take action over leases, we’ll decide whether we want to reduce square footage. At the same time, we’re giving the customer a better experience with larger fit rooms, call buttons for associates when you need help, lounge areas outside the fitting rooms, and table and chairs with outlets. It’s a smaller store, but a much better shopping experience.”
Baxter said Express Edit, a new small-format store concept is showing signs of promise. “We’re excited about the opportunity we have with our Edit stores,” he said. “I firmly believe in omnichannel and getting to customers where they live. Our fleet is predominantly mall based, and we continue to have great success in many of those stores, but we need to expand outside of the mall and be where other people are.
“Express Edit gives us that opportunity,” Baxter continued. “A typical mall store is 8,500 square feet, Edit stores are 4,500 square feet or less. It’s about getting those feet in highly-trafficked street locations. We’ve been very productive in these stores. the most exciting thing is that nearly 50% of customers at Express Edit are new to the brand and 20% are reactivated customers who are rediscovering our brand and the evolution of our brand.”
Baxter said Express is learning the impact of Edit stores on its e-commerce business when it has a stronger physical store presence in a market. He said online spending goes up, and added that Express is on track to doing $1 billion in sales by 2024.
“Average order basket size is another proof point that our strategy is gaining momentum,” he said, adding that this is happening with fewer promotions, a new outfitting tool that was added to the app and web site, user generated content and digital stylists.
The digital stylists represent a major initiative for Express and are a key component of the EXPRESSway Forward strategy.
Baxter said Express is well-positioned in term of cash flow to support its various programs. The retailer ended the second quarter of 2021 with $34 million, compared to a deficit of $193 million in 2020 due to the Covid-19 pandemic and $154 million in 2019.
Inventory was up 15 percent in 2021 to $267 million, compared to negative $232 million in 2020 due to the health crisis, and $269 million in 2019. Operating cash flow year-to-date is $68 million, versus a deficit of $170 million last year due to the Covid-19 pandemic, and $2 in 2019.
“There are clearly some logistics challenges across the industry,” Baxter said. “Our team has worked hard to mitigate them. We’ve done things such as reduced the time from port to distribution center, and the time from distribution centers to stores. We’ve placed a fair number of fall orders early and have have agility in our supply chain to move to different countries of origin.
“We feel good about the level of inventory we have heading into November and December,” Baxter added, noting that there’s a $15 million impact related to the logistics actions.
Baxter said Express made many digital enhancements during the quarter and is bringing its app into greater parity with its web experience. “From an enhancement standpoint, we’ll continue to move forward,” he said.
The launch of Community Commerce is the next step in Express’ transformation. Style editors made up of fashion enthusiasts in local towns and small cities will be empowered to help Express consumers find their fashion mojo, and earn commissions at the same time.
“The world has changed dramatically and the way people work has changed dramatically,”Baxter said. “We’re sharing the desire to create confidence. Style editors will be able to build their own storefronts. That’s a really incredible exciting thing for this group of people. We’ll be designing product especially for this group of stylists, who will earn commission to whatever extent they choose. It can be a full time job or a side hustle.”