What happened
Shares of Express (EXPR) fell 28% this past week, according to data provided by S&P Global Market Intelligence, after the fashion retailer slashed its full-year earnings forecast.
So what
Express' net sales rose 2% year over year to $464.9 million in its fiscal second quarter, which ended on July 30. The company's comparable outlet store sales, which includes revenue from locations that were open for 12 months or more, climbed by 2%. However, its retail comps were flat, as a 6% rise in retail store sales was offset by a 6% decline in e-commerce sales.
Express' gross margin improved by 50 basis points (1 basis point equals 0.01%) to 33.1%, driven in part by its increased sales leverage. Yet its operating margin was negatively impacted by technology investments and higher store staffing levels. Express' operating income in turn declined by 30% to $10.4 million. And its net income fell 34% to $7 million, or $0.10 per share.
These results fell short of Express' guidance, which had called for comparable sales growth in the "mid-single digits" and gross margin to increase by roughly 100 basis points. "While our performance was below our outlook, we achieved solid results despite challenging macroeconomic conditions that worsened as the quarter progressed," CEO Tim Baxter said in a press release.
Now what
For the third quarter, Express sees its comparable sales declining by mid-single digits and its gross margin decreasing by 350 basis points. Management also cut its full-year earnings forecast to a net loss per share of $0.16 to $0.22, compared to its prior projection of a net profit per share of $0.24 to $0.34.
"While we have lowered our outlook for the back half of this year to reflect the uncertainty of macroeconomic conditions, we remain committed to our long-term objective of a mid-single digit operating margin," Baxter said.
