Express (NYSE:EXPR) stock is down by about 20% after the company reported its second-quarter earnings. Net income tallied in at $7.04 million, down about 33% compared to $10.6 million a year ago. On top of that, Express reported earnings per share (or EPS) of 10 cents, down from 15 cents year-over-year (YOY), but beating the consensus analyst estimate of nine cents. Total sales were up 1.6% YOY to $464.9 million, falling short of the analyst estimate of $479.6 million.
Meanwhile, rising inflation has dampened consumer demand for clothing and accessories. Inventories were up 30% to $346.2 million. The rise was driven by the “pull-forward of purchases” to stay ahead of supply chain shortages and “pack-and-hold for late-arriving 2021 holiday inventory.”
CEO Tim Baxter added:
While we have lowered our outlook for the back half of this year to reflect the uncertainty of macroeconomic conditions, we remain committed to our long-term objective of a mid-single digit operating margin. We have demonstrated our ability to stay focused on the fundamentals, control the controllables, and operate with both discipline and agility.
Why Is EXPR Stock Down Today?
Express expects third-quarter same-store sales to fall in the mid-single digits percentage range. For full year guidance, the company expects an EPS loss between 16 cents and 22 cents, while analysts were forecasting earnings of 14 cents. Full-year capital expenditure is expected to be around $50 million, while gross margin is expected to increase by 1%.
However, Baxter has high hopes for the coming quarters. He lauded Express’ brand growth through changes in products, the marketing model, and the relaunch of the Express Insider Loyalty program. Since last year, the company has attracted over 4 million new customers and has regained 3.2 million lapsed customers.
Express is also working on improving and expanding its Express Edit format, which are smaller-format stores. The company is opening up six new Edit stores in high-traffic locations in the coming months, such as Manhattan and Miami. The Edit stores have proven to be more efficient at attracting customers than traditional stores.
E-commerce sales are also an area for improvement. As part of The ExpressWayForward plan, Express seeks to achieve $1 billion in digital channel sales by 2024. The e-commerce plan is based on four pillars: personalization, omnichannel execution, and styling and fit experience.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
