Citadel Investment Group, a large hedge fund managed by billionaire Ken Griffin, has reported a position of 4.8 million shares in Express, Inc. (NYSE:EXPR), a $1.6 billion market cap retailer of apparel and accessories. Citadel owns 5.6% of the outstanding shares after increasing its stake from the 1.4 million shares that it owned at the end of September (see more of Citadel's stock picks).
Express’s last fiscal quarter ended in October with the company’s sales actually down slightly from the same period in the previous fiscal year. The company reported that sales per store and sales per square foot had been down, with these figures partially offset by an increase in store count and a 21% increase in e-commerce revenue (stores were responsible for 87% of sales). With revenue falling despite opening new stores, it’s no surprise that margins contracted and as a result Express experienced a 47% drop in net income. Earnings per share in the first nine months of the fiscal year came out to 86 cents, down slightly from 90 cents a year earlier. The stock price dropped 26% in October, presumably as the company disclosed that it was performing poorly, but has rebounded 60% since that time including a 22% rise year to date. As a result we would guess that the share price is already considerably higher than where Citadel started buying.
In terms of financial metrics a case can still be made that Express, Inc. is a value play. The trailing P/E is 12, which is normally low enough to make a stagnant company worth considering. Wall Street analysts project earnings growth in the future, with a forward P/E of 11 and a five-year PEG ratio of 0.6. Of course, Express did have a poor quarter and so there’s certainly some doubt in our mind that the company can report a stable financial performance over the next year.
Even before the recent increase in the size of its position, Citadel was the largest hedge fund holder of the stock at the end of September according to our database of 13F filings. Renaissance Technologies, founded by billionaire Jim Simons, increased its own stake in Express, Inc. during the third quarter of 2012 to over 880,000 shares (find more stocks Renaissance was buying). The retailer was also one of Joel Greenblatt’s top ten stock picks; Greenblatt is a well-known value investor and author of books including You Can Be A Stock Market Genius. Check out Greenblatt's favorite stocks.
Are other apparel retailers good values?