Express sales slide $86 million, as consumers continue to abandon malls
More bad news for retail as Express warns their sales just dipped $86 million in the fourth quarter. This alarming trend continues to echo throughout the retail landscape as consumers continue to ditch malls.
Express, Inc. (NYSE:EXPR), a specialty retail apparel company, announced its financial results for the fourth quarter and full year 2016. These results, which cover the thirteen and fifty-two weeks ended January 28, 2017, are compared to the thirteen and fifty-two weeks ended January 30, 2016.
David Kornberg, the Company’s president and chief executive officer, noted that, “Despite ongoing pressures in the retail sector, our fourth quarter earnings were in line with previously issued guidance. As expected, our store performance continued to be impacted by challenging mall traffic and a promotional retail environment. As our industry adapts to changing consumer preferences, we continue to invest in our omni-channel and marketing capabilities to ensure that we capitalize on this evolution. As a result, e-commerce sales made up 25% of fourth quarter net sales, with sales increasing 9% over the prior year period. We also remain intensely focused on managing our overall cost structure and optimizing our store footprint. Our balance sheet remains strong with more than $200 million in cash and we continue to have solid cash flow.”
Mr. Kornberg went on to note that, “We enter 2017 with confidence that the actions we have taken and the initiatives underway will translate into stronger performance as we move through the year. These initiatives include improving the fashion clarity in our stores through reduced choice counts, launching a new brand campaign, introducing compelling new products, and improving upon key existing categories. We also expect to benefit from the relaunch of our customer loyalty program and our new IT systems, which will foster more efficient decision making and precise planning.”
Fourth Quarter 2016 Operating Results:
- Net sales decreased 11% to $678.8 million from $765.6 million in the fourth quarter of 2015.
- Comparable sales (including e-commerce sales) decreased 13%, compared to a 4% increase in the fourth quarter of 2015.
- E-commerce sales increased 9% to $170.1 million.
- Merchandise margin declined by 330 basis points driven by increased promotional activity. Buying and occupancy as a percentage of net sales rose by 230 basis points. In combination, this resulted in a 560 basis point decline in gross margin, representing 28.4% of net sales compared to 34.0% in last year’s fourth quarter.
- Selling, general, and administrative (SG&A) expenses were $154.0 million versus $167.4 million in last year’s fourth quarter. As a percentage of net sales, SG&A expenses increased by 80 basis points to 22.7%.
- Operating income was $38.8 million, or 5.7% of net sales, compared to $92.9 million, or 12.1% of net sales in the fourth quarter of 2015.
- Income tax expense was $15.5 million, at an effective tax rate of 40.5%, compared to $35.1 million, at an effective tax rate of 38.5% in last year’s fourth quarter.
- Net income was $22.8 million, or $0.29 per diluted share. This compares to net income of $56.1 million, or $0.67 per diluted share, in the fourth quarter of 2015.
- Real estate activity for the fourth quarter of 2016 is presented in Schedule 5.