Express, Inc.

Q3 2023 consolidated net sales were $454 million, including $52 million from Bonobos, versus expected net sales of $460 million to $490 million. Diluted loss per share was $9.83 versus expected loss of $5.50 to $7.50. Operating margin was negative 6.3% versus negative 6.8% in the prior-year quarter, and gross margin fell 370 basis points, worse than the roughly 200 bps decline management had expected. SG&A leverage was 300 basis points, helped by $30 million of cost savings in the quarter. At quarter end, cash and cash equivalents were $35 million, borrowings were $278 million, and $22 million remained available under the ABL facility. For Q4 2023, the company expects net sales of approximately $565 million to $590 million, including about $60 million from Bonobos and the benefit of the 14th week, and operating margin of negative mid-single digits. For full-year 2023, it expects net sales of approximately $1.84 billion to $1.865 billion, including about $150 million from Bonobos and the 53rd week, diluted loss per share of $46 to $50, and capex of approximately $25 million.

Stewart Glendinning framed the quarter as below expectations but said he sees a path to recover Express’s full profit potential through customer engagement, operating excellence, cost reduction, and inventory management. He emphasized that merchandising is being reset toward better balance, with women’s improving and a more casual product mix starting to resonate, while men’s remains weaker because of last year’s tough suit comparison. His tone was cautious but confident, repeatedly saying the business has the right building blocks and that he expects to hit the $200 million savings target.

Mark Still focused on the numbers and balance sheet. He said Q3 sales of $454 million and EPS loss of $9.83 came in below outlook, gross margin declined 370 bps because of increased promotions and greater margin erosion, and SG&A leverage of 300 bps reflected $30 million of savings. He noted $35 million of cash, $278 million of borrowings, $22 million of ABL availability, and inventory up 14% year over year, with Bonobos adding roughly $58 million of inventory. He also said the company expects to receive $48 million from the CARES Act claim in pieces and that full-year 2023 includes $80 million of expense reductions, with the remaining $40 million arriving in the first half of 2024.

Analysts pressed management on how quickly women’s can be fixed, what remains to be done in men’s, and how the store base and promotions should be managed. Stewart said women’s is already improving thanks to the new merchandising lead and a return to icons like Portofino and Gramercy, while men’s is still pressured by last year’s strong suit business but is seeing strength in sweaters and casual products. On stores, Mark said the company will keep evaluating locations and may close high-effort, unprofitable stores, while also expecting holiday to remain highly promotional. Questions on inventory and WHP/acquisitions drew the answer that inventory should start coming down in 1H24 and that the priority remains getting EXPR back to profitability before pursuing more deals.