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Express, Inc. (EXPR), Urban Outfitters, Inc. (URBN): What’s Driving Growth at This Retailer?

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Express, Inc. (NYSE:EXPR)’s stock price has increased by 53% since the beginning of this year. It has seen significant growth in its online sales in this period which increased by 48% and 44% in the last two quarters. It has reported results above the consensus estimates, but gross margin has declined by 450 bps in the first quarter of 2013. Its margin declined due to high expenditure on some unplanned promotion and deep discounting to clear merchandise. It has strong growth plans including store expansion plans and offering new product lines.
Express, Inc. (NYSE:EXPR)

Now, let’s discuss a few of these points in detail.

Online sales will drive growth with clearly specified price points

Express, Inc. (NYSE:EXPR)’s sales growth was helped significantly by its higher online sales last quarter. Its online sales increased by a thumping 48% in the first quarter of fiscal 2013. The company has launched apps and used its digital channels to reach out to the customers. Its online orders and free shipping has also helped it to drive stores sales growth. It has focused on value promotions through simple low price point message to customers rather than Buy One Get One free (BOGO) offers or any other offers.

NBC’s Fashion Star promotion has helped it to increase customer awareness with 1 million visitors to its website. Express Inc’ (NYSE:EXPR)s online channel will continue to be the largest growth driver for it in the future.

Store expansion and  Outlet strategy offer long term growth opportunity

The company’s Canada expansion has delivered positive results and Express, Inc. (NYSE:EXPR) has reported double-digit first quarter comparables. The company has plans to continue the stores’ growth and it has identified 13-16 locations for new openings in the U.S. and Canada. It will also look to move into new markets with franchise operations.

Express, Inc. (NYSE:EXPR) is also moving ahead with new Outlet strategy and it has appointed a dedicated vice president for Outlet stores. Express, Inc. (NYSE:EXPR) has five Outlet locations at present which are used to sell distressed products but they will be used as factory stores in future. These stores will sell made-for-factory products which are high margin products and they will be a big opportunity to explore.

Product development and product line extensions drive sales growth

The company has developed new product lines to drive its sales growth in the second half of this year. Its new categories are a casual lounge product category and active/athletic capsule in women’s apparel. Its men’s suits and women dresses categories benefited from web exclusive products and it will continue to use the online channel for new product launches.

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