It has been a very challenging environment for mall based retailers due to declining traffic, rising trend for online shopping and increasing competition from off-price fashion chains. Many of them have seen declining sales of late despite improving labor market.
About the Company
Express (EXPR) is a retailer of specialty apparel and accessories for women and men. The company targets the 20 to 30 year old customer. They currently operate over 600 retail stores, located primarily in shopping malls, lifestyle centers, and street locations across the US, in Canada and in Puerto Rico.
Their merchandise is also available at franchise stores in the Middle East and Latin America. Further, the Company also markets and sells its products through its e-commerce website.
Weak Results and Lower Guidance
The company reported Q3 results on December 1. Net income came in $11.6 million or 11 cents per share on an adjusted basis, short of the Zacks Consensus Estimate of 12 cents per share. Net income was also down significantly from $26.3 million, or 31 cents per share, in the same quarter a year ago.
Net sales were down 7% year-over-year, while comparable sales, including e-commerce sales, fell 8%. However, e-commerce sales were up 15% during the quarter.
The management slashes their guidance again for the year as declining mall traffic continues to impact their performance. They now expect adjusted earnings between $0.78 to $0.82 per share, down from previously lowered guidance of $1 to $1.14 per share.
They expect the” holiday season to remain challenging as mall traffic and a highly promotional retail environment continue to be headwinds.”
Shares fell about 15% after the report.
Analysts have slashed their estimates for the company after weak results and downbeat guidance. Zacks Consensus Estimates for the current and next fiscal year have plunged to $0.79 per share and $0.98 per share from $1.06 and $1.16 respectively, before the report.
Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).
The Bottom Line
In addition to disappointing consumer spending and mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, “wage pressure’ has also started hurting retailers.
Zacks Industry Rank of 213 out of 265 (Bottom 20%) for “Retail-Apparel and Shoes” and the Sector Rank of 14 out of 16 (Bottom 13%) for “Retail and Wholesale” indicate more pain ahead.
However, some retailers have been able to deliver much better-than-expected results Investors could look at a better ranked retailer Tilly’s (TLYS), which currently has a Zacks Rank #1 (Strong Buy). The company reported a huge beat and shares surged after the results.
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