What happened

Shares of clothing retailer Express (NYSE:EXPR) 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. 

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.