Express, Inc. Reports First Quarter 2021 Results JUNE 03, 2021
Company also provides update on strength of Q2 2021 sales performance; store sales plus demand has exceeded 2019 levels quarter to date on a comparable basis
First quarter net sales of $346 million increased 64% compared to 2020 and exceeded the Company's expectations
Company experienced an inflection point after Easter with Q2 2021 store sales plus demand to date now exceeding 2019 on a comparable basis
First quarter eCommerce demand increased over 40% compared to 2020, and has accelerated to over 70% in the second quarter of 2021 to date
First quarter operating cash flow improved $130 million versus 2020 Company now expects positive operating cash flow for the year beginning in Q2 and positive EBITDA in Q3 and Q4
COLUMBUS, Ohio--(BUSINESS WIRE)-- Fashion apparel retailer Express, Inc. (NYSE: EXPR), announced its financial results for the first quarter of 2021. These results, which cover the thirteen weeks ended May 1, 2021, are compared to the thirteen weeks ended May 2, 2020.
"First quarter results exceeded our expectations across all channels and drove a $130 million improvement in our operating cash flow," said Tim Baxter, Chief Executive Officer. "We are well positioned for the post pandemic world, we are on track to achieve our goal of $1.0 billion in eCommerce demand by 2024, and I expect that we will return to positive operating cash flow in the second quarter and positive EBITDA in the third quarter.”
"We experienced an inflection point in our business after Easter as more people were vaccinated and states began lifting restrictions," Baxter continued. "As some people resumed pre-pandemic routines and began attending occasions, we have also seen improved trends in our historically dominant occasion based and wear to work product categories, while continuing our momentum and growth in our ‘new core’ such as denim and Express Essentials. As a result, our store sales plus demand in the second quarter of 2021 to date are exceeding 2019 levels on a comparable basis."
“We have made significant progress against the EXPRESSway Forward strategy we launched early last year, our transformation is well underway, customer response to our product assortment and brand positioning has been very positive, and our performance has begun to reflect the strength of our strategy."
First Quarter 2021 Operating Results
Consolidated net sales increased 64% to $345.8 million from $210.3 million in the first quarter of 2020, with consolidated comparable sales up 5%.
Comparable retail sales, which includes both Express stores and eCommerce, increased 11% compared to the first quarter of 2020.
Comparable outlet store sales decreased 19% versus the first quarter of 2020.
Please note, comparable sales calculations are not consistent across all retailers. Our comparable sales exclude sales from stores that were closed for at least one full day, including during the pandemic, consistent with our historical policy.
Gross margin was 22.8% of net sales compared to (22.0)% in last year's first quarter. The increase was driven by the sales impact of COVID-19 and a $14.7 million non-cash impairment charge taken against certain long-lived store assets in 2020.
Selling, general, and administrative (SG&A) expenses were $119.4 million, 34.5% of net sales, versus $99.2 million, 47.2% of net sales, in last year's first quarter. The improvement in SG&A rate is driven by leveraging the increased sales and cost reductions from the previously announced corporate restructuring. Operating loss was $40.6 million compared to a loss of $145.3 million in the first quarter of 2020.
Income tax benefit was $0.1 million at an effective tax rate of 0.2%, compared to income tax expense of $6.0 million at an effective tax rate of (4.0)% in last year's first quarter. The Company's effective tax rate for the first quarter of 2021 was impacted primarily by the recording of a valuation allowance against the Company's deferred tax assets. Excluding this valuation allowance the effective tax rate would have been approximately 22%. Net loss was $45.7 million, or a loss of $0.70 per diluted share. On an adjusted basis, net loss was $35.7 million, or a loss of $0.55 per diluted share for the first quarter of 2021. The adjusted loss excludes the negative non-cash impact of the deferred tax asset valuation allowance of $10.0 million. This compares to a net loss of $154.1 million, or a loss of $2.41 per diluted share, in the first quarter of 2020. On an adjusted basis, net loss was $99.4 million, or a loss of $1.55 per diluted share, in the first quarter of 2020.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) was a loss of $23.8 million compared to a loss of $128.7 million in the first quarter of 2020.
Balance Sheet And Cash Flow Highlights
Cash and cash equivalents totaled $84.1 million versus $236.2 million at the end of the first quarter of 2020.
Capital expenditures totaled $3.6 million for the thirteen weeks ended May 1, 2021, compared to $4.2 million for the thirteen weeks ended May 2, 2020.
Inventory was $264.5 million at the end of the first quarter, down 2% compared to $268.8 million at the end of the prior year’s first quarter. Short-term debt was $37.8 million and long-term debt was $190.0 million at the end of the first quarter of 2021 compared to long-term debt of $165.0 million at the end of the prior year’s first quarter. Subsequent to the end of the first quarter of 2021 we repaid approximately $61 million of our debt; $31 million on our term loan and $30 million on our revolving credit facility.
At the end of the first quarter of 2021, $70.8 million remained available for borrowing under the revolving credit facility and subsequent to quarter-end this amount has increased to approximately $100 million due to the repayment noted above
Full Year 2021 Outlook
At this time, the Company will only provide a high level outlook for 2021. The Company expects the following:
Sequential comparable sales improvement throughout the year Significant gross margin improvement for the year
Buying & Occupancy expense dollars to decrease double digits as a percent to 2019
SG&A expense dollars to decrease mid-single digits as a percent to 2019 Net interest expense of $4 million in the second quarter and $16 million for the full year
Effective tax rate of approximately 16% for the second quarter and approximately 20% for the third quarter, fourth quarter and for the year, excluding the impact of any valuation allowances recorded against deferred tax assets
Positive EBITDA for the third quarter and the second half of the year Positive operating cash flow for the year beginning in Q2 2021 Capital expenditures of approximately $35 million
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