Big news out of the fashion industry has a struggling retailer rising today. Yesterday, Express (NYSE:EXPR) announced plans to acquire men’s fashion brand Bonobos from Walmart (NYSE:WMT) in a deal worth $75 million with partner WHP Global. The two companies finalized their strategic partnership earlier this year, but this is their first joint venture. News of the deal has sent EXPR stock shooting up as the market reacts favorably to the news.
This comes at a good time. Express has spent the past year declining steadily, losing more than 70% of its value in the past 12 months. If today’s performance is any indication, however, this deal may represent the turning point the company needs.
Does this mean that EXPR is one of the penny stocks to buy for 2023? Let’s take a closer look at the Bonobos acquisition and assess what investors can expect.
What’s Happening With EXPR Stock?
After a volatile month of mostly declining, EXPR stock is picking up significant momentum today. As of this writing, shares are up around 30% for the day.
Last month, shares of the company rose on speculation that EXPR was the next short squeeze candidate. That kind of attention seems to have since shifted to other stocks. Still, today Express has the kind of news to report that can actually lead to sustainable growth.
It’s clear that Express is walking away with a better deal than Walmart, which is likely why EXPR stock is outperforming WMT stock today. CNN reports that the retail giant is selling Bonobos for $75 million. Considering that the company acquired Bonobos in 2017 for $310 million, that’s certainly a steep loss.
For Express, though, it’s more than a gain. It’s an opportunity to extend into a fresh market and appeal to consumers seeking the casual-yet-upscale men’s styles that have carried Bonobos into popularity.
Part of Express’ problem is that it caters to middle-market shoppers who can find similar deals at better-known competitors. According to Express CEO Tim Baxter, “Bonobos is delivering double-digit sales growth.” The acquisition offers some valuable exposure to the men’s fashion market:
“Our strategic roadmap to transform EXPR to create shareholder value includes achieving profitable growth in our core Express business – which is our first priority – optimizing our omnichannel platform, and accelerating our growth and profitability through our partnership with WHP Global.”
Owning a brand like Bonobos also makes more sense for Express than Walmart. The latter may be a leader among retailers, but it hasn’t done much to develop the brand since acquiring it. As noted, Bonobos is known for producing clothing items that are both upscale and casual. Express caters to the type of young, fashionable shoppers likely to appreciate that.
What Comes Next?
As EXPR stock has declined due to subsiding meme stock momentum, experts have continued to write if off among penny stocks to sell. However, late in 2022, InvestorPlace contributor Thomas Niel recognized that Express’ partnership with WHP Global could potentially lead to growth in 2023 and beyond.
Today’s news signals that Niel’s prediction may be correct. The deal could take EXPR stock past the $1 mark in the near future. In the long term, shares could also rise even higher if the company’s execution is successful.
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On the date of publication, Samuel O’Brient 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.