Please ensure Javascript is enabled for purposes of website accessibility

Why Express Stock Plunged Today

By Joe Tenebruso - Jun 3, 2021 at 3:50PM

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

Investors could see their ownership stakes heavily diluted.

What happened

Shares of Express (EXPR 12.83%) declined by as much as 25.5% on Thursday. The fashion retailer announced a massive equity offering shortly after the release of its first-quarter earnings results. As of 3:15 p.m. EDT, the stock's price was down more than 17%. 

So what 

Express's revenue jumped 64% year over year to $346 million, fueled by store reopenings and a 40% rise in e-commerce sales. CEO Tim Baxter said the retailer's store traffic has also begun to recover. "We experienced an inflection point in our business after Easter as more people were vaccinated and states began lifting restrictions," Baxter said in a press release.

A person is pointing to a stock chart that rises sharply and then falls.

Image source: Getty Images.

Still, Express continues to rack up losses. It generated an operating loss of $40.6 million following a loss of $145.3 million in the year-ago period.

To help shore up its dwindling cash reserves, Express said it would sell as many as 15 million shares to investors at market prices. 

Now what

The stock sale could increase Express's shares count by over 22%. The resulting dilution will make it more difficult for the struggling retail chain to produce meaningful per-share profits, even if its sales continue to recover.

Still, management remains undaunted. "We are well-positioned for the post-pandemic world, we are on track to achieve our goal of $1 billion in e-commerce demand by 2024, and I expect that we will return to positive operating cash flow in the second quarter," Baxter said. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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.
$2.60 (12.83%) $0.29

*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 analyst team.

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 08/16/2022.

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.