Please ensure Javascript is enabled for purposes of website accessibility

Why Express Stock Rocketed by 40% at the Open Today

By Reuben Gregg Brewer - Mar 10, 2021 at 10:29AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the fashion retailer rallied strongly on earnings, even though the company bled a lot of red ink. Here's why.

What happened

Shares of clothing retailer Express (EXPR -4.71%) rose dramatically at the open, leaping a massive 40% as the trading day got under way. The big news was the company's earnings release, which wasn't exactly great reading. But Wall Street was still pretty impressed with the results. Here's a quick look at why.

So what

Sales at Express fell 29% year over year to $430 million in the fourth quarter of 2020, despite strength in the online space. Comparable store sales were off by a hefty 27%. Adjusted earnings came in at a loss of $0.66 per share. Those are pretty dismal numbers, but they were better than what analysts had been expecting. On the top line, the average consensus estimate was roughly $425 million, with the bottom-line call at an adjusted loss of $0.82 per share. So, despite the year-over-year declines, Express is doing better than expected and investors rewarded the stock accordingly.  

A hand checking a box next to the word Awesome on a list that also includes Poor, Average, Good, and Great.

Image source: Getty Images.

Notably, the company is seeing sequential improvement. For example, comparable store sales were lower by 30% in the third quarter of 2020, when the company posted an adjusted loss of $1.17 per share. Which suggests that the future could be brighter here than many expect, with the company explaining that the sales strength it saw in December continued into January. In the long run, this progress could be helped along by the company's plan to increase its focus on its online business. Express expects sequential sales gains throughout 2021 and projects that it will be cash flow positive for the full year.  

Now what

Express was clearly hit hard by the impacts of the coronavirus pandemic, but management appears to believe the company has turned a corner. Investors seem to believe it, too, though long-term investors might want to tread cautiously, given the stock's price volatility. Indeed, the huge gain in early trading today prices in a lot of good news. It might be prudent for more conservative types to take a "show me" attitude. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Express, Inc. Stock Quote
Express, Inc.
$3.24 (-4.71%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.