Express wants to transform from mall staple to an international brand following its WHP tie-up. (AP … [+]
Fashion apparel retailer Express
The rather grandiose proclamation went on to say that the plan is to “advance an omni-channel platform which is expected to drive accelerated, long-term growth through the acquisition and operation of a portfolio of brands.”
Express and WHP will also form an intellectual property joint venture intended to scale the Express brand through new domestic category licensing and international expansion opportunities.
So what does that actually mean?
Benetah the management speak, there is what looks like an increasingly important step=change for Express, which need sto get its name out front and center.
WHP – which has also bet big on reviving Toys R Us as an online and physical retailer – has invested $260 million in Express, which hands the company a 7.4% stake in the 42-year-old apparel retailer.
And the news comes at a crucial time for Express, which reported a $30 million third quarter loss last week, down from a $16.3 million profit last year. Sales were down 8% year-on-year for the period to $434.1 million, with comps also down 8%.
Express Looks To Brand Awareness
The travails came after the company had bet on formalwear, which has recovered slowly, and because it suffers from the relative anonymity of the brand.
“Our strategy to elevate our brand through higher average unit retails and reduced promotions, which has driven steady growth for the past five quarters, came up against the consumer’s reduced spending in discretionary categories and increased appetite for deep discounts,” Express CEO Tim Baxter conceded of the results. “At the same time, we had some misses in our women’s business that further impacted our performance.”
Baxter admitted that brand recognition needed to be stronger: “I have said many times that we are transforming Express from being known as a store in the mall to a brand with a purpose, powered by a styling community. And that remains true going forward for the Express brand.”
Indeed as a mall, staple, Express has 550 brick and mortar stores in the U.S. and Puerto Rico, but its ambition are greater and acquisitive.
Express conceded that sales by competitors had hit its Q3 performance but is looking to a new … [+]
“Our Expressway Forward strategy has reinvigorated our brand and rebuilt the foundation of our company, paving the way for this bold next chapter in our transformation,” said Baxter. “Our partnership with WHP will drive greater scale and profitability of the Express brand through their category licensing and international expertise and strengthen our balance sheet. We expect to accelerate our growth by acquiring multiple brands in partnership with WHP and operating them on our platform.”
The partnership will be executed by Express forming an intellectual property joint venture with WHP, which will acquire certain intellectual property of Expess. Concurrently, Express will transform into an omni-channel platform company, managed and run by its current leadership upon closing of the transaction. All other aspects of the existing Express business will remain unchanged.
WHP Uses PIPE For Stake
Under the terms of the transaction, WHP will also make a common equity PIPE investment to acquire 5.4 million newly issued shares of Express at $4.60 per share, representing an approximate pro forma ownership of 7.4%.
The intellectual property joint venture implies a total value of the Express brand’s intellectual property at approximately $400 million and will be 60% owned by WHP and 40% owned by the Express platform company. WHP will invest $235 million for its stake iand Express will contribute certain of its intellectual property assets in exchange for cash consideration.
WHP’s portfolio of eight brands includes Toys R Us, Babies R Us, apparel and accessories maker Anne Klein, Lotto, an activewear brand, and Joe’s Jeans, a men’s and women’s denim brand.
The transaction is expected to close in Express’s fourth fiscal quarter of 2022, subject to lender consent, regulatory approvals and closing conditions.
The existing Express Inc. management team and board will continue, with Baxter serving as a director and CEO and Mylle Mangum serving as chairman of the Express, Inc. board of directors, which will be expanded to include WHP chair and CEO Yehuda Shmidman.
Source: https://www.forbes.com/sites/markfaithfull/2022/12/12/toys-r-us-owner-whp-bets-on-retail-again-with-260m-express-stake/