Specialty retailer and shopping mall staple Express, Inc. (NYSE:EXPR) delivered a stellar earnings report last week that delighted investors and analysts alike. The beat was impressive, given that many specialty retailers remain challenged by macroeconomic tepidity and unseasonable weather patterns. Yet the real news regarding the company is not so much its recent performance but its upcoming focus. With management’s latest comments in mind, let’s take a closer look at Express.
The tone just a few months back was much different for Express, Inc. (NYSE:EXPR) management, which was anticipating a more hesitant shopper base coupled with a large disconnect between spring break and the Easter holiday (not to mention a dreadful 2012). The company wisely chose to combat these factors with a very active promotional campaign — namely a 40%-off, no-nonsense campaign that seemed to resonate with cost-conscious mall-goers. While same-store sales were flat on a year-over-year basis, management was excited to see a higher conversion rate in existing stores. More encouraging was the company’s Web effort, with e-commerce growing an impressive 48% — representing a total of 14% of the company’s entire sales.
As with so many retailers these days, omnichannel retailing looks to be the growth maneuver du jour for Express, Inc. (NYSE:EXPR).
First-quarter profit was down nearly 25% for the quarter, but it did nothing to deter investors and analysts (the drop was less than the Street anticipated), as the future remains bright and the company even raised its previously issued guidance from $1.40-$1.54 per share to $1.48-$1.58 per share.
So with sales still slumped on a year-over-year basis, why is the Street all smiles?
Internet and outlets
With sales up nearly 50%, the company’s Web store is a great source for high-conversion traffic and limited capital outlays. Express is seeing customers opt for promotions such as free shipping over $125 and allowing for in-store pickups.
Not only is management wisely targeting the Internet as a growth node, but it is putting the pedal down on a new outlet division. Similar to its former parent L Brands Inc (NYSE:LTD) , Express looks to take advantage of the ongoing expansion of outlet malls and their value proposition to customers. Real estate trusts such as Simon Property Group, Inc (NYSE:SPG) have used outlet malls as a primary source of expansion in recent years, driven by customers’ desire to own luxury brands at discount prices.