What happened

Shares of Express, Inc. (NYSE:EXPR), the mall-based fashion chain, were climbing for the third session in a row today, following a better-than-expected earnings report last week that also included upbeat guidance for the holiday quarter. The surprising move has come as the stock has been mostly forgotten by investors, steadily decling in recent years amid the greater upheaval in the retail industry.

Today, the stock was up 9.7% as of 3:09 EST, and it had gained an impressive 54% over the last three sessions since the report came out.

A woman shopping for jeans in a clothing store

Image source: Getty Images.

So what

The fashion brand's results weren't exactly strong, but still came in ahead of expectations.

Comparable sales in the quarter fell 5%, better than guidance of a 6% to 7% loss, while overall sales also fell 5% to $488.5 million, which beat analyst estimates of $483.5 million. Gross margin in the period fell sharply from 30.7% to 28.2% due to increased markdowns and increased occupancy costs as a percentage of revenue based on the declining comparable sales.

Selling, general, and administrative costs also rose 70 basis points to 29.5% of sales. On the bottom line, the company reported an adjusted loss of $0.03, which compares to a per-share profit a year ago of $0.11. Still, that result was better than consensus estimates of a loss of $0.09.

CEO Tim Baxter, who joined the company in June, was not happy with the results, saying, "While we are certainly not satisfied with our results, sequential improvement over the last two quarters, and throughout the third quarter is compelling evidence that the immediate changes we have been able to make to our product, merchandising and marketing approach are resonating with customers." He also said he was confident the company could return to a mid-single-digit operating margin over time.

Now what

For the key fourth quarter, Express sees comparable sales improving, both sequentially and from a year ago, to a 1% to 3% decline. Last year, they fell 5%. On the bottom line, management expects earnings per share (EPS) of $0.16 to $0.21, essentially in line with its results a year ago of $0.19, but better than analyst estimates of $0.11.

Express shares have now nearly tripled in the last three months on enthusiasm for Baxter's turnaround plan, a potential trade deal between the U.S. and China, and some strong reports from other brick-and-mortar retailers. However, the company still faces considerable challenges as it looks to return to growth, including pressure from fast fashion chains and e-commerce operators. After three days, this post-earnings rally seems like it's gone far enough.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.