Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 2017
 
 EXPRESS, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Delaware
 
001-34742
 
26-2828128
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
 
1 Express Drive
Columbus, Ohio
 
43230
(Address of principal executive offices)
 
(Zip Code)
(614) 474-4001
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 





Item 2.02 Results of Operations and Financial Condition.

On November 30, 2017, Express, Inc. issued a press release providing information regarding earnings for the thirteen and thirty-nine weeks ended October 28, 2017 and outlook for the fourth quarter and full year 2017 and also made available an investor presentation with supplemental information regarding the same. A copy of the press release is attached hereto as Exhibit 99.1. A copy of the investor presentation is attached hereto as Exhibit 99.2.

The information in this Item 2.02, including Exhibits 99.1 and 99.2, in this Form 8-K is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information in this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, except as shall otherwise be expressly set forth by specific reference in such filing.
Item 8.01 Other Events.

Share Repurchase Program

On November 28, 2017, the Board approved a new share repurchase program that authorizes the Company to repurchase up to $150 million of the Company’s outstanding common stock using available cash. The Company may repurchase shares on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, through block purchases, or otherwise in compliance with applicable laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and amount of stock repurchases will depend on a variety of factors, including business and market conditions as well as corporate and regulatory considerations. The share repurchase program may be suspended, modified, or discontinued at any time and the Company has no obligation to repurchase any amount of its common stock under the program.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
 
 
Press Release
Investor Presentation





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
EXPRESS, INC.
Date: November 30, 2017
 
/s/ Periclis Pericleous
 
 
Periclis Pericleous
 
 
Senior Vice President, Chief Financial Officer and Treasurer




Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11917029&doc=4


Contact:            
Mark Rupe
Vice President, Investor Relations
Express, Inc.
(614) 474-4465




EXPRESS, INC. REPORTS THIRD QUARTER 2017 COMPS AT THE TOP END OF GUIDANCE;
ANNOUNCES $150 MILLION SHARE REPURCHASE PROGRAM

Third quarter comparable sales decreased by 1%
Third quarter diluted earnings per share (EPS) of $0.08
Hurricane activity negatively impacted third quarter net sales and EPS by approximately 1% and $0.02, respectively
E-commerce sales increased 23%, accounting for 24% of net sales
Initial success from omni-channel initiatives, with continued rollout planned for 2018
Remain on track to deliver $20 million in cost savings in 2017
Strong balance sheet maintained with $198 million in cash, an improved inventory position, and no debt
Narrows full year 2017 guidance for adjusted diluted EPS to $0.43 to $0.47

Columbus, Ohio - November 30, 2017 - Express, Inc. (NYSE: EXPR), a specialty retail apparel company, announced its financial results for the third quarter of 2017. These results, which cover the thirteen weeks ended October 28, 2017, are compared to the thirteen weeks ended October 29, 2016.
David Kornberg, the Company’s president and chief executive officer, stated: “We are pleased with the progress we are making towards returning our business to growth. Our key initiatives continue to gain traction and contribute incrementally, which is driving improved trends in our results. Comparable sales were at the top end of our guidance, as were earnings excluding the hurricane impact. E-commerce sales growth remained strong, increasing 23% over last year, and store comps showed further sequential improvement.”
Mr. Kornberg continued, "We enter the important holiday season with positive momentum and are confident that our assortment and fashion are resonating well with our customers based on the continued strength in our e-commerce business and improving store performance. We are seeing success from our recently expanded omni-channel capabilities and expect enrollment growth in our NEXT loyalty program to drive increased customer engagement in the fourth quarter and into 2018. Our team is managing costs effectively and delivering on our savings targets. Our balance sheet remains strong with $198 million in cash and no debt, our inventories are well-positioned, and we expect to generate solid cash flow. We are committed to driving shareholder value and are pleased to announce a new $150 million share repurchase program. We continue to remain confident in our strategy and ability to successfully transform our business to navigate a rapidly changing environment.” 





Third Quarter 2017 Operating Results:
Net sales decreased 1% to $498.7 million from $506.1 million in the third quarter of 2016.
Comparable sales (including e-commerce sales) decreased 1%, compared to an 8% decrease in the third quarter of 2016.
E-commerce sales increased 23% year over year to $118.2 million.
Merchandise margin improved by 30 basis points, driven by sourcing-related cost savings, partially offset by the highly promotional environment. Buying and occupancy as a percentage of net sales rose by 50 basis points. In combination, this resulted in a 20 basis point decline in gross margin, representing 29.8% of net sales compared to 30.0% in last year’s third quarter.
Selling, general, and administrative (SG&A) expenses were $137.7 million versus $136.6 million in last year's third quarter. As a percentage of net sales, SG&A expenses increased by 60 basis points year over year to 27.6%.
Restructuring costs of $0.3 million in the third quarter of 2017 represent costs incurred related to the Company's exit from Canada.
Operating income was $11.2 million. This compares to operating income of $15.1 million in the third quarter of 2016.
Income tax expense was $4.3 million, at an effective tax rate of 40.8%, compared to income tax expense of $2.8 million, at an effective tax rate of 19.6% in last year's third quarter. The effective tax rate for the third quarter of 2016 included a net tax benefit of approximately $2.9 million attributable to certain discrete items.
Net income was $6.3 million, or $0.08 per diluted share. This compares to net income of $11.6 million, or $0.15 per diluted share, in the third quarter of 2016. Net income in the third quarter of 2016 includes a net $0.04 per diluted share benefit related to the aforementioned income tax items.
Real estate activity for the third quarter of 2017 is presented in Schedule 5.
Third Quarter 2017 Balance Sheet Highlights:
Cash and cash equivalents totaled $198.3 million versus $101.9 million at the end of the third quarter of 2016.
Capital expenditures totaled $42.2 million for the thirty-nine weeks ended October 28, 2017, compared to $80.9 million for the thirty-nine weeks ended October 29, 2016.
Inventory was $342.7 million compared to $341.9 million at the end of the prior year’s third quarter.





2017 Guidance:
The Company notes that 2017 is a fifty-three week period as compared to a fifty-two week period in 2016. The fifty-third week is in the fourth quarter and is expected to represent approximately $0.04 in diluted EPS. The table below compares the Company's projected results for the fourteen week period ended February 3, 2018 to the actual results for the thirteen week period ended January 28, 2017.
 
Fourth Quarter 2017 Guidance
 
Fourth Quarter 2016 Actual Results
Comparable Sales
Positive low single digits
 
-13%
Effective Tax Rate
Approximately 40%
 
40.5%
Interest Expense, Net
$0.3 million
 
$0.6 million
Net Income
$32 to $35 million
 
$22.8 million
Diluted EPS
$0.40 to $0.44
 
$0.29
Weighted Average Diluted Shares Outstanding
79.3 million
 
78.7 million
The table below compares the Company's projected results for the fifty-three week period ended February 3, 2018 to the actual results for the fifty-two week period ended January 28, 2017.
 
Full Year 2017 Guidance
 
Full Year 2016
Actual Results
Comparable Sales
Negative low single digits
 
-9%
Effective Tax Rate
Approximately 40%
 
36.6%
Interest Expense, Net
$2.5 million
 
$13.5 million(3)
Net Income
$22 to $25 million(1)
 
$57.4 million(3)
Adjusted Net Income
$34 to $37 million(2)
 
$64.3 million(2)
Diluted EPS
$0.28 to $0.32(1)
 
$0.73(3)
Adjusted Diluted EPS
$0.43 to $0.47(2)
 
$0.81(2)
Weighted Average Diluted Shares Outstanding
79.0 million
 
79.0 million
Capital Expenditures
$58 to $63 million
 
$98.7 million
(1) Includes $24.2 million, or $11.7 million net of tax and $0.15 per diluted share, related to the exit of Canada.
(2) Adjusted net income and adjusted diluted EPS are non-GAAP financial measures. Refer to Schedule 4 for a reconciliation of GAAP to Non-GAAP financial measures.
(3) Includes approximately $11.4 million, or $6.9 million net of tax and $0.08 per diluted share, of non-core items related to an amendment to the Times Square Flagship store lease.
This guidance does not take into account any additional non-core items that may occur.
See Schedule 5 for a discussion of projected real estate activity.
Share Repurchase Program:
The Company also announced today that its Board of Directors has approved a new $150 million share repurchase program. The repurchase program authorizes the Company to repurchase shares of its outstanding common stock using the Company’s available cash.
The Company may repurchase shares on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, through block purchases, or otherwise in compliance with applicable laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and amount of stock repurchases will depend on a variety of





factors, including business and market conditions as well as corporate and regulatory considerations. The share repurchase program may be suspended, modified, or discontinued at any time and the Company has no obligation to repurchase any amount of its common stock under the program.
Conference Call Information:
A conference call to discuss third quarter 2017 results is scheduled for November 30, 2017 at 9:00 a.m. Eastern Time (ET). Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at: http://www.express.com/investor and remain available for 90 days. A telephone replay of this call will be available at 12:00 p.m. ET on November 30, 2017 until 11:59 p.m. ET on December 7, 2017 and can be accessed by dialing (844) 512-2921 and entering replay pin number 13672476.
About Express, Inc.:
Express is a specialty retailer of women's and men's apparel and accessories, targeting the 20 to 30-year-old customer. Express has more than 35 years of experience offering a distinct combination of fashion and quality for multiple lifestyle occasions at an attractive value addressing fashion needs across work, casual, jeanswear, and going-out occasions. The Company currently operates more than 600 retail and factory outlet stores, located primarily in high-traffic shopping malls, lifestyle centers, and street locations across the United States and Puerto Rico. Express merchandise is also available at franchise locations and online in Latin America. Express also markets and sells its products through its e-commerce website, www.express.com, as well as on its mobile app.
Forward-Looking Statements:
Certain statements are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and include, but are not limited to, (1) guidance and expectations for the fourth quarter and full year 2017, including statements regarding expected comparable sales, effective tax rates, interest expense, net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, and capital expenditures, (2) statements regarding expected store openings, store closures, store conversions, and gross square footage, (3) statements regarding the Company's strategy, plans, and initiatives, including, but not limited to, results expected from such strategy, plans, and initiatives, (4) statements regarding inventory and expectations for the holiday season, (5) expectations for the NEXT loyalty program, (6) expectations regarding cash flow, and (7) statements regarding the Company's intention to repurchase shares of its common stock and the funding for such purchases. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict, and significant contingencies, many of which are beyond the Company's control. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (3) fluctuations in our sales, results of operations, and cash levels on a seasonal basis and due to a variety of other factors, including our product offerings relative to customer demand, the mix of merchandise we sell, promotions, and inventory levels; (4) competition from other retailers; (5) customer traffic at malls, shopping centers, and at our stores and online; (6) our dependence on a strong brand image; (7) our ability to develop and maintain a relevant and reliable omni-channel experience for our customers; (8) the failure





or breach of information systems upon which we rely; (9) our ability to protect customer data from fraud and theft; (10) our dependence upon third parties to manufacture all of our merchandise; (11) changes in the cost of raw materials, labor, and freight; (12) supply chain or other business disruption; (13) our dependence upon key executive management; (14) our ability to achieve our strategic objectives, including improving profitability through a balanced approach to growth, increasing brand awareness and elevating our customer experience, transforming and leveraging information technology systems, and investing in the growth and development of our people; (15) our substantial lease obligations; (16) our reliance on third parties to provide us with certain key services for our business; (17) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (18) our inability to protect our trademarks or other intellectual property rights which may preclude the use of our trademarks or other intellectual property around the world; (19) restrictions imposed on us under the terms of our asset-based loan facility, including restrictions on the ability to effect share repurchases; (20) impairment charges on long-lived assets; and (21) changes in tax requirements, results of tax audits, and other factors that may cause fluctuations in our effective tax rate. Additional information concerning these and other factors can be found in Express, Inc.'s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.





Schedule 1
Express, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)

 
October 28, 2017
 
January 28, 2017
 
October 29, 2016
ASSETS
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
198,294

 
$
207,373

 
$
101,855

Receivables, net
16,023

 
15,787

 
16,274

Inventories
342,696

 
241,424

 
341,936

Prepaid minimum rent
30,831

 
31,626

 
31,434

Other
29,366

 
17,923

 
21,786

Total current assets
617,210

 
514,133

 
513,285

 
 
 
 
 
 
PROPERTY AND EQUIPMENT
1,039,197

 
1,029,176

 
1,017,259

Less: accumulated depreciation
(617,958
)
 
(577,890
)
 
(550,725
)
Property and equipment, net
421,239

 
451,286

 
466,534

 
 
 
 
 
 
TRADENAME/DOMAIN NAMES/TRADEMARKS
197,618

 
197,618

 
197,618

DEFERRED TAX ASSETS
7,749

 
7,926

 
21,612

OTHER ASSETS
13,161

 
14,226

 
12,696

Total assets
$
1,256,977

 
$
1,185,189

 
$
1,211,745

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
Accounts payable
$
229,339

 
$
172,668

 
$
222,818

Deferred revenue
21,579

 
29,428

 
25,322

Accrued expenses
117,775

 
80,301

 
166,953

Total current liabilities
368,693

 
282,397

 
415,093

 
 
 
 
 
 
DEFERRED LEASE CREDITS
140,350

 
146,328

 
145,507

OTHER LONG-TERM LIABILITIES
108,970

 
120,777

 
40,451

Total liabilities
618,013

 
549,502

 
601,051

 
 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity
638,964

 
635,687

 
610,694

Total liabilities and stockholders’ equity
$
1,256,977

 
$
1,185,189

 
$
1,211,745







Schedule 2
Express, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

 
Thirteen Weeks Ended
 
Thirty-Nine Weeks Ended
 
October 28, 2017
 
October 29, 2016
 
October 28, 2017
 
October 29, 2016
NET SALES
$
498,651

 
$
506,090

 
$
1,444,216

 
$
1,513,766

COST OF GOODS SOLD, BUYING AND OCCUPANCY COSTS
349,850

 
354,373

 
1,036,947

 
1,043,382

Gross profit
148,801

 
151,717

 
407,269

 
470,384

OPERATING EXPENSES:
 
 
 
 
 
 
 
Selling, general, and administrative expenses
137,721

 
136,633

 
399,529

 
405,547

Restructuring costs
258

 

 
22,869

 
 
Other operating (income) expense, net
(341
)
 
(17
)
 
(664
)
 
28

Total operating expenses
137,638

 
136,616

 
421,734

 
405,575

 
 
 
 
 
 
 
 
OPERATING INCOME/(LOSS)
11,163

 
15,101

 
(14,465
)
 
64,809

 
 
 
 
 
 
 
 
INTEREST EXPENSE, NET
577

 
567

 
2,070

 
12,845

OTHER EXPENSE (INCOME), NET

 
90

 
(537
)
 
(404
)
INCOME/(LOSS) BEFORE INCOME TAXES
10,586

 
14,444

 
(15,998
)
 
52,368

INCOME TAX EXPENSE/(BENEFIT)
4,316

 
2,827

 
(5,935
)
 
17,725

NET INCOME/(LOSS)
$
6,270

 
$
11,617

 
$
(10,063
)
 
$
34,643

 
 
 
 
 
 
 
 
EARNINGS PER SHARE:
 
 
 
 
 
 
 
Basic
$
0.08

 
$
0.15

 
$
(0.13
)
 
$
0.44

Diluted
$
0.08

 
$
0.15

 
$
(0.13
)
 
$
0.44

 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
Basic
78,805

 
78,401

 
78,679

 
78,754

Diluted
78,890

 
78,595

 
78,679

 
79,151








Schedule 3
Express, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Thirty-Nine Weeks Ended
 
October 28, 2017
 
October 29, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net (loss)/income
$
(10,063
)
 
$
34,643

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
67,852

 
58,960

Loss on disposal of property and equipment
1,323

 
907

Impairment charge
5,479

 
829

Amortization of lease financing obligation discount

 
11,354

Loss on deconsolidation of Canada
10,672

 

Share-based compensation
11,110

 
10,783

Deferred taxes
1,210

 
(385
)
Landlord allowance amortization
(9,779
)
 
(8,345
)
Other non-cash adjustments
(500
)
 

Changes in operating assets and liabilities:
 
 
 
Receivables, net
(660
)
 
5,883

Inventories
(105,379
)
 
(86,468
)
Accounts payable, deferred revenue, and accrued expenses
61,797

 
28,749

Other assets and liabilities
14,612

 
2,954

Net cash provided by operating activities
47,674

 
59,864

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(42,207
)
 
(80,900
)
Decrease in cash and cash equivalents resulting from deconsolidation of Canada
(9,232
)
 

Purchase of intangible assets

 
(21
)
Investment in equity interests

 
(10,133
)
Net cash used in investing activities
(51,439
)
 
(91,054
)
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Payments on lease financing obligations
(1,262
)
 
(1,186
)
Repayments of financing arrangements
(2,040
)
 

Proceeds from exercise of stock options

 
2,735

Repurchase of common stock under share repurchase program

 
(51,538
)
Repurchase of common stock for tax withholding obligations
(1,574
)
 
(4,498
)
Net cash used in financing activities
(4,876
)
 
(54,487
)
 
 
 
 
EFFECT OF EXCHANGE RATE ON CASH
(438
)
 
629

 
 
 
 
NET DECREASE IN CASH AND CASH EQUIVALENTS
(9,079
)
 
(85,048
)
CASH AND CASH EQUIVALENTS, Beginning of period
207,373

 
186,903

CASH AND CASH EQUIVALENTS, End of period
$
198,294

 
$
101,855






Schedule 4

Supplemental Information - Consolidated Statements of Income
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
The Company supplements the reporting of its financial information determined under United States generally accepted accounting principles (GAAP) with certain non-GAAP financial measures: adjusted operating income, adjusted net income, and adjusted diluted earnings per share. The Company believes that these non-GAAP measures provide additional useful information to assist stockholders in understanding its financial results and assessing its prospects for future performance. Management believes adjusted operating income, adjusted net income, and adjusted diluted earnings per share are important indicators of the Company's business performance because they exclude items that may not be indicative of, or are unrelated to, the Company's underlying operating results, and provide a better baseline for analyzing trends in the business. In addition, adjusted operating income is used as a performance measure in the Company's seasonal cash incentive compensation program and adjusted diluted earnings per share is used as a performance measure in the Company's executive compensation program for purposes of determining the number of equity awards that are ultimately earned. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported operating income, reported net income, or reported diluted earnings per share. These non-GAAP financial measures reflect an additional way of viewing the Company's operations that, when viewed with the GAAP results and the below reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of the Company's business. Management strongly encourages investors and stockholders to review the Company's financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.


























Schedule 4 (Continued)

Supplemental Information - Consolidated Statements of Income
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)

Thirteen Weeks Ended October 28, 2017
 
(in thousands, except per share amounts)
Operating Income
 
Net Income
 
Diluted Earnings per Share
 
Weighted Average Diluted Shares Outstanding
 
Reported GAAP Measure
$
11,163

 
$
6,270

 
$
0.08

 
78,890

 
Impact of Canadian Exit (a)
258

 
258

 

 

 
Income Tax Benefit - Canadian Exit

 
(98
)
 

 

 
Adjusted Non-GAAP Measure
$
11,421

 
$
6,430

 
$
0.08

 

 
(a)
Consists of $0.3 million in restructuring costs related to the Canadian exit.

Thirty-Nine Weeks Ended October 28, 2017
 
(in thousands, except per share amounts)
Operating Income/(Loss)
 
Net Income/(Loss)
 
Diluted Earnings per Share
 
Weighted Average Diluted Shares Outstanding
 
Reported GAAP Measure
$
(14,465
)
 
$
(10,063
)
 
$
(0.13
)
 
78,679

 
Impact of Canadian Exit (a)
$
24,151

 
$
24,151

 
0.31

 

 
Income Tax Benefit - Canadian Exit
$

 
$
(12,469
)
 
(0.16
)
 

 
Adjusted Non-GAAP Measure
$
9,686

 
$
1,619

 
$
0.02

 
78,851

(b)
(a)
Includes $22.9 million in restructuring costs and an additional $1.3 million in inventory adjustments related to the Canadian exit.
(b)
Weighted average diluted shares outstanding for purposes of calculating adjusted diluted earnings per share includes the dilutive effect of share-based awards as determined under the treasury stock method.





















Schedule 4 (Continued)

Supplemental Information - Consolidated Statements of Income
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
 
Thirty-Nine Weeks Ended October 29, 2016
(in thousands, except per share amounts)
Net Income
 
Diluted Earnings per Share
 
Weighted Average Diluted Shares Outstanding
Reported GAAP Measure
$
34,643

 
$
0.44

 
79,151

Interest Expense (a)
11,354

 
0.14

 
 
Income Tax Benefit (b)
(4,428
)
 
(0.06
)
 
 
Adjusted Non-GAAP Measure
$
41,569

 
$
0.53

 
 
(a)
Represents non-core items related to the amendment of the Times Square Flagship store lease.
(b)
Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the thirty-nine weeks ended October 29, 2016.
 
Fifty-Three Weeks Ended February 3, 2018
(in thousands, except per share amounts)
Projected Net Income
 
Projected Diluted Earnings per Share
 
Projected Weighted Average Diluted Shares Outstanding
Projected GAAP Measure*
$
23,800

 
$
0.30

 
78,967

Projected Impact of Canadian Exit
24,200

 
0.31

 
 
Projected Income Tax Benefit - Canadian Exit
(12,500
)
 
(0.16
)
 
 
Projected Adjusted Non-GAAP Measure*
$
35,500

 
$
0.45

 
 
* Represents mid-point of guidance range.
This guidance does not take into account any additional non-core items that may occur.
 
Fifty-Two Weeks Ended January 28, 2017
(in thousands, except per share amounts)
Net Income
 
Diluted Earnings per Share
 
Weighted Average Diluted Shares Outstanding
GAAP Measure
$
57,417

 
$
0.73

 
79,049

Interest Expense (a)
11,354

 
0.14

 
 
Income Tax Benefit (b)
(4,428
)
 
(0.06
)
 
 
Adjusted Non-GAAP Measure
$
64,343

 
$
0.81

 
 
(a)
Represents non-core items related to the amendment of the Times Square Flagship store lease.
(b)
Represents the tax impact of the interest expense adjustment at our statutory rate of approximately 39% for the fifty-two weeks ended January 28, 2017.






Schedule 5
Express, Inc.
Real Estate Activity
(Unaudited)

 
 
 
 
 
Third Quarter 2017 - Actual
 
 
October 28, 2017 - Actual
Company-Operated Stores
Opened
Closed
Conversion
 
Store Count
Gross Square Footage
United States - Retail Stores
(2)
(2)
 
499
 
United States - Outlet Stores
7
2
 
141
 
Canada
 
 
Total
7
(2)
 
640
5.5 million
 
 
 
 
 
 
 
Fourth Quarter 2017 - Projected
 
 
February 3, 2018 - Projected
Company-Operated Stores
Opened
Closed
Conversion
 
Store Count
Gross Square Footage
United States - Retail Stores
(5)
(3)

491
 
United States - Outlet Stores
1
3

145
 
Canada

 
Total
1
(5)

636
5.4 million
 
 
 
 
 
 
 
Full Year 2017 - Projected
 
 
February 3, 2018 - Projected
Company-Operated Stores
Opened
Closed
Conversion
 
Store Count
Gross Square Footage
United States - Retail Stores
(20)
(24)
 
491
 
United States - Outlet Stores
17
24
 
145
 
Canada
(17)
 
 
Total
17
(37)
 
636
5.4 million



exprq32017earningscallpr
Q3 2017 Earnings Call


 
Cautionary Statement Regarding Forward-Looking Statements Forward Looking Statements: Certain statements are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and include, but are not limited to, (1) guidance and expectations for the fourth quarter and full year 2017, including statements regarding expected comparable sales, interest expense, effective tax rates, net income, adjusted net income, diluted earnings per share, adjusted diluted earnings per share, and capital expenditures, (2) statements regarding expectations for improving sales and margin performance, (3) statements regarding cash flow generation, (4) statements regarding expected store openings, store closures, store conversions, and gross square footage, (5) expectations regarding the retail environment, including those regarding mall traffic and promotions, (6) statements regarding the Company's strategy, plans, and initiatives, including, but not limited to, results expected from such strategy, plans, and initiatives, and (7) statements regarding the Company’s intention to repurchase shares of its common stock and the funding for such purposes. Forward looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict, and significant contingencies, many of which are beyond the Company's control. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors; (3) fluctuations in our sales, results of operations, and cash levels on a seasonal basis and due to a variety of other factors, including our product offerings relative to customer demand, the mix of merchandise we sell, promotions, and inventory levels; (4) competition from other retailers; (5) customer traffic at malls, shopping centers, and at our stores and online; (6) our dependence on a strong brand image; (7) our ability to develop and maintain a relevant and reliable omni-channel experience for our customers; (8) the failure or breach of information systems upon which we rely; (9) our ability to protect customer data from fraud and theft; (10) our dependence upon third parties to manufacture all of our merchandise; (11) changes in the cost of raw materials, labor, and freight; (12) supply chain or other business disruption; (13) our dependence upon key executive management; (14) our ability to achieve our strategic objectives, including improving profitability through a balanced approach to growth, increasing brand awareness and elevating our customer experience, transforming and leveraging information technology systems, and investing in the growth and development of our people; (15) our substantial lease obligations; (16) our reliance on third parties to provide us with certain key services for our business; (17) claims made against us resulting in litigation or changes in laws and regulations applicable to our business; (18) our inability to protect our trademarks or other intellectual property rights which may preclude the use of our trademarks or other intellectual property around the world; (19) restrictions imposed on us under the terms of our asset-based loan facility, including restrictions on the ability to effect share repurchases; (20) impairment charges on long-lived assets; and (21) changes in tax requirements, results of tax audits, and other factors that may cause fluctuations in our effective tax rate. Additional information concerning these and other factors can be found in Express, Inc.'s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward looking statement as a result of new information, future events, or otherwise, except as required by law. 2


 
♦ One of the largest specialty retail apparel companies with ~$2.2 billion in annual sales ♦ Strong and enduring brand, uniquely positioned within industry with solid financial fundamentals ♦ Focused on improving profitability through balanced growth and cost savings ♦ Strong, tenured leadership team Sales Profile Footprint 3 ♦ Iconic dual-gender lifestyle brand appealing to 20-30 year olds ♦ Balanced assortment of core styles and the latest fashions ♦ Address fashion needs across multiple wearing occasions ♦ Quality products at an attractive value ♦ 640 company operated stores across the U.S. and Puerto Rico ♦ E-commerce and mobile platform ♦ 17 international franchise locations in Latin America 3 Express Overview 499 141 17 Retail Stores Outlet Stores International Franchises # of Stores 1. For the fiscal year ended January 28, 2017. 2. Excludes “other revenue” of $41 million. 3. As of October 28, 2017.


 
4 Key Q3 Achievements ♦ Comparable sales were at the top end of our guidance, as were earnings excluding the hurricane impact ♦ Outstanding performance in e-commerce, with sales increasing 23%, on top of 15% growth last year, and accounting for 24% of net sales, up from 19% in the prior year period ♦ Further sequential improvement in our retail stores’ performance, driven by merchandise that resonated with our customers and greater clarity in our fashion message ♦ Significant enrollment growth in our NEXT loyalty program, with customer sign-ups already achieving our 2017 target ♦ Initial success from our expanded omni-channel capabilities, including positive sales contribution from “ship from store” and the pilot launch of “buy online, pick up in store” ♦ Increased marketing effectiveness with new brand platform, focus on digital and social media, and expanded content creation; announced marketing partnership with the NBA ♦ Strong balance sheet maintained, with $198 million in cash, an improved inventory position, and no debt ♦ Remain on track to deliver $20 million in cost savings in 2017 and a total of $44 to $54 million over the 2016 to 2019 period


 
♦ We are focused on generating long-term value for our stockholders through the following strategic objectives: 1. Improving profitability through a balanced approach to growth 2. Increasing brand awareness and elevating our customer experience 3. Transforming and leveraging information technology systems 4. Investing in the growth and development of our people 5 Strategic Objectives


 
6 Improving Profitability 1. Increasing the productivity of our existing stores  Telling more defined fashion stories  Ensuring offerings are clear and cohesive across lifestyles 2. Optimizing our retail store footprint and opening new outlet stores  Investing in stores that achieve a strong return on investment  Continuing conversion of select mall stores to outlets 3. Growing our e-commerce and omni-channel capabilities  Expanding product assortment, further enhancing mobile experience, launching “ship from store,” and piloting “buy online, pick up in store” 4. Significant cost savings initiatives  Aggressively managing costs across all areas of the business  Taking a more conservative approach to capital spending


 
Q3 2017 Results


 
8 Q3 2017 Financial Performance $ in millions Net Sales Diluted EPS  Net sales -1%  Comparable sales -1%  E-commerce sales +23% • Comps were at the top end of guidance, as were earnings excluding the hurricane impact • E-commerce sales increased 23%, accounting for 24% of net sales vs. 19% last year • Store comps showed further sequential improvement • Merchandise margin improved 30 basis points year-over-year Key Highlights  Q3-2017 includes approximately $0.02 per share negative impact related to hurricane activity  Q3-2016 includes net positive $0.04 per share benefit related to certain discrete tax items


 
9 Balance Sheet and Cash Flow $ in millions Cash Capital Expenditures  No debt outstanding  Untapped revolver of up to $250M • Strong balance sheet fundamentals with $198 million in cash and no debt • Improved inventory position • Expect continued strong operating and free cash flow generation • New $150 million share repurchase program announced November 30, 2017 $ in millions Key Highlights


 
2017 Financial Guidance


 
♦ We expect our sales and margin performance to improve during the balance of the year  Traffic in the mall continues to be a headwind and we expect the retail environment to remain promotional ♦ Our key 2017 initiatives remain consistent with our long-term objectives and include:  Improving the fashion clarity in our stores through reduced choice counts  Improving the effectiveness of our marketing investment with a new brand platform  Introducing compelling new products and improving upon key existing categories  Relaunching our customer loyalty program  Capitalizing on our new IT systems, including implementing additional omni-channel capabilities  Managing our overall cost structure and optimizing our store footprint 11 2017 Outlook


 
12 2017 Financial Guidance Guidance as of November 30, 2017 Q4 2017 FY 2017 Comparable Sales Positive low single digits Negative low single digits Interest Expense, Net $0.3 million $2.5 million Effective Tax Rate Approximately 40% Approximately 40% Net I come $32 to $35 million $22 to $25 million (1) Adjusted Net Income $34 to $37 million (2) Diluted EPS $0.40 to $0.44 $0.28 to $0.32 (1) Adjusted Diluted EPS $0.43 to $0.47 (2) 79.3 million 79.0 million Capital Expenditures N/A $58 to $63 million Weighted Average Diluted Shares 1. Includes $24.2 million, or $11.7 million net of tax and $0.15 per share, related to the exit of Canada. 2. Adjusted net income and adjusted diluted EPS are non-GAAP financial measures. Refer to page 18 for information about non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures. This guidance does not take into account any additional non-core items that may occur.


 
Appendix


 
14 Projected 2017 Real Estate Activity


 
591 609 625 632 641 653 656 636 41 81 104 145 591 609 625 632 600 572 552 491 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E Total Stores Outlet Stores Retail Stores 15 Our Store Portfolio Net Sq Ft Growth 3% 3% 3% 1% 2% 0% 0% -4% # of Stores 1 Projection for the period ending February 3, 2018. 1


 
Non-GAAP Reconciliations


 
Cautionary Statement Regarding Non GAAP Financial Measures Non-GAAP Financial Measures This presentation contains references to adjusted net income and adjusted diluted earnings per share, which are non-GAAP measures. These measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles (GAAP). The Company provides non-GAAP measures when management believes they provide additional useful information to assist stockholders in understanding the Company’s financial results and assessing its prospects for future performance. Management believes adjusted net income and adjusted diluted earnings per share are important indicators of the Company's business performance because they exclude items that may not be indicative of, or are unrelated to, the Company's underlying operating results, and provide a better baseline for analyzing trends in the business. In addition, adjusted diluted earnings per share is used as a performance measure in the Company's executive compensation program for purposes of determining the number of equity awards that are ultimately earned. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Please refer to page 18 in this presentation for reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated in accordance with GAAP. 17


 
18 Non-GAAP Reconciliations FY 2017 Adjusted Net Income and Adjusted EPS This guidance does not take into account any additional non-core items that may occur.