Express Posts Strong Q4 Results And Positive Operating Income For 2021

Express reported today strong growth in the fourth quarter ended January 29 when net sales increased 38% compared to 2020. Consolidated comparable sales increased 43% compared to 2020 and 4% compared to 2019. The modern, multichannel apparel and accessories brand whose raison etre is to create confidence and inspire self-expression, forecast a robust first quarter and full year 2022. For the first quarter, the company expects same-store sales to rise 25% to 30%, and 7% to 9% for the full year 2022.

The Columbus, Ohio-based retailer posted net income of $7.6 million, after reporting a loss in the same period last year and a profit of 11 cents per share. The clothing and accessories chain posted revenue of $594.9 million in the period.

For the full year 2021, Express increased sales by 55% and comparable sales by 37% compared to 2020, driven by outstanding consumer response to our product and momentum in both retail and outlet channels.

Express saw strong growth in the fourth quarter e-commerce demand of 33% versus 2020 and 21% versus 2019. The company is on track to achieve a goal of $1 billion in e-commerce demand by 2024. The retailer saw increases across all key metrics for web site and mobile app, including traffic, conversion, average order value, and average unit retail.

The retailer pulled back on promotions and began the process of fleet optimization, and is renovating a number of stores. It also plans to open additional Express Edit units its smaller concept, which features enhanced customer service and a curated assortment optimized for the location.

“In 2021, we delivered profitable growth in the second, third and fourth quarters, and drove positive operating income and free cash flow for the full year,” said Tim Baxter, chief executive officer. “Comparable sales improved sequentially throughout the year, culminating in a positive 4% comp in the fourth quarter compared to 2019. We had a strong holiday season and our momentum has continued.

“Our transformation has been driven by significant progress in each of the four foundational pillars of the Expressway Forward strategy: Outstanding product, a relevant and compelling brand purpose, a customer loyalty program driving higher engagement, and solid execution,” Baxter added. “The momentum of our business is tangible evidence that the strategy is working.”

“Each pillar has gone through a pretty active transformation,” said Sara Tervo, chief marketing officer. “It took our collective Express team’s full focus in how we can truly deliver on our mission. We all have worked very hard and worked collaboratively, and there’s great momentum behind that.”

Brian Seewald, senior vice president of e-commerce, said, “We got more traffic, obviously as our demand increased, and our average order value increased, which is a very hard metric to move typically. That was driven by less promotions and a higher average retail.”

Significant enhancements to product drove the results, with the assortment overhauled to represent greater quality and a robust fashion quotient. The Express loyalty program, which was relaunched in March of 2021 is also working. “We took it from being more of a bank-like engagement loyalty program to a full engagement loyalty program and we ended the year with a record number of active loyalty members.”

Express also saw momentum in its brand campaigns, which were harnessed to spread the word about the improved assortments. “We want to make sure that we’re delivering,” Tervo said. “We know they want quality product, they want items that fit and they want items that are fashion-forward. So how do we make sure that they know we listened, and that we reimagined our product and we’re delivering that now.”

Express launched in the fourth quarter, a campaign, RSVP Yes, with the idea that customers post-Covid 19 pandemic were getting back together for the holidays, going to holiday parties and needed help getting dressed. The campaign, which highlighted the different occasions for which consumers might need clothing received over 100 million impressions in the fourth quarter time period.

“It becomes this great cycle for us because those customers are very loyal,” Seewald said. “They download our mobile app, which is a huge area of focus for us and since we increased our loyalty numbers and those people have gotten involved, we were able to see our app [engagement] grow 70 percent year-over-year. Those customers spend more with us. All those things work together beautifully.”

Express launched a partnership with celebrity stylist Rachel Zoe during the quarter, collaborating with her as lead style editor to drive style editors into the Community Commerce business that launched last year, which is essentially a social commerce platform where consumers sell Express products to their networks.

“We leveraged her to drive awareness of the program,” Seewald said. “We also leveraged her to share her holiday picks and what she would recommend wearing to all the occasions for holiday. She also did a Facebook Live event where she talked about product and shared her tips and tricks, so fashion is definitely resonating with our customer, in terms of our engagement and traffic and sales.

“Rachel Zoe has been a shot in the arm around the passion in our community,” Seewald said. “We view this as a critical component of continuing to grow not just our digital business but our business in general as we start to get our style editors out to our brick and mortar locations for actual styling events with our customers. If you think about it, any traditional, great business starts with relashionships and what we’re finding is getting our style editors out to our stores to work with customers will result in them being able to grow their business digitally as well.”

The retailer launched a campaign in February themed, #ExpressYou, tied to light and bright colors with on-trend looks. “It’s created a lot of momentum and we’ll continue to drive different ways to activate our community. Style editors is one component. We’ll be adding some great new enhancements to our e-commerce and app experiences with Edit stores, continue the expansion and renovation of brick and mortar stores.

Express in the first quarter will be releasing a series of enhancements to its checkout experience to make easier to navigate and more intuitive for customers. Later this year, Express will improve the Buy Online Pick-Up In Store option to make it much easier for customers to filter the web site by store location and basically shop from wherever they are.

“That notion of really being where are customer is will bring that to life,” Tervo said. “We’ll take an already growing BOPIS business and make it grow even faster. We’ve also been testing our way of livestream shopping. We’re really in test and learn mode right now and we’re trying to figure out what works best for us. We run those on express.com and Facebook Live. We try to be wherever our customer needs us to be.”

Gross margin rate in the first quarter is expected to increase approximately 550 basis points, including about $7 million of expenses related to mitigating supply chain challenges. SG&A expenses as a percent of sales is projected to leverage approximately 250 basis points with net interest expense of $4 million, and an effective tax rate of approximately 50%.

For the full year 2022, the gross margin rate should increase approximately 100 basis points. SG&A expenses as a percent of sales will be approximately flat in 2022, including incremental investments in technology, higher labor expenses and general inflationary pressures, with net interest expense of $13 million and $50 million to $55 million earmarked for capital expenditures. Inventory will be elevated in the first half of the year and closer to parity with sales growth in the back half of the year, the company said.

Tervo said Express consumers don’t necessarily lean to a specific age. “Through customer research, we’ve validated that our customer spans ages, ethnicities and gender,” she said. “There are differences in the nuances and life stages and how they consume content, as well as household income, but they are unified by the spirit of optimism and desire for professional growth. They truly appreciate fashion and believe that clothes can give them the confidence to go for what’s next in their lives.”