Express(EXPR) - 2022 Q1 - Quarterly Report

Part I Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the thirteen-week period ended May 1, 2021, showing significant year-over-year revenue growth and a reduced net loss, reflecting recovery from the pandemic Consolidated Balance Sheets As of May 1, 2021, total assets decreased to $1.41 billion from $1.46 billion, resulting in a stockholders' deficit of $35.7 million due to the net loss | (Amounts in Thousands) | May 1, 2021 | January 30, 2021 | | :--- | :--- | :--- | | Total Assets | $1,406,739 | $1,458,457 | | Total Current Assets | $482,350 | $474,510 | | Total Liabilities | $1,442,418 | $1,448,768 | | Total Current Liabilities | $552,442 | $515,053 | | Total Stockholders' (Deficit)/Equity | ($35,679) | $9,689 | Consolidated Statements of Income and Comprehensive Income Net sales increased 64% to $345.8 million for the thirteen weeks ended May 1, 2021, significantly narrowing the net loss to $45.7 million from $154.1 million in the prior year | (Amounts in Thousands, Except Per Share) | Thirteen Weeks Ended May 1, 2021 | Thirteen Weeks Ended May 2, 2020 | | :--- | :--- | :--- | | Net Sales | $345,759 | $210,275 | | Gross Profit/(Loss) | $78,804 | ($46,207) | | Operating Loss | ($40,556) | ($145,279) | | Net Loss | ($45,724) | ($154,050) | | Diluted Loss Per Share | ($0.70) | ($2.41) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity shifted from a $9.7 million positive balance to a $35.7 million deficit by May 1, 2021, primarily due to a $45.7 million net loss for the quarter - Stockholders' equity decreased from a balance of $9.7 million on January 30, 2021, to a deficit of $35.8 million on May 1, 2021. The change was primarily driven by a net loss of $45.7 million for the quarter[18] Consolidated Statements of Cash Flows Net cash used in operating activities significantly decreased to $1.6 million in Q1 2021, with the period ending cash balance at $84.1 million, down from $236.2 million in Q1 2020 | (Amounts in Thousands) | Thirteen Weeks Ended May 1, 2021 | Thirteen Weeks Ended May 2, 2020 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,580) | ($131,238) | | Net Cash Used in Investing Activities | ($3,562) | ($4,176) | | Net Cash Provided by Financing Activities | $33,340 | $164,460 | | Cash and Cash Equivalents, End of Period | $84,072 | $236,185 | Notes to Unaudited Consolidated Financial Statements These notes detail accounting policies, revenue recognition, debt facilities, and legal contingencies, including the company's 563 stores and significant debt obligations - As of May 1, 2021, the company operated 563 retail and factory outlet stores in the United States and Puerto Rico[22] Revenue by Category (Q1 2021) | Amount (in thousands) | | :--- | :--- | | Apparel | $304,272 | | Accessories and other | $32,223 | | Other revenue | $9,264 | | Total net sales | $345,759 | - As of May 1, 2021, the company had total outstanding debt of $232.6 million, consisting of $127.6 million under the Term Loan Facility and $105.0 million under the Revolving Facility[72] - The company is defending itself against several representative action lawsuits in California alleging violations of state wage and hour statutes and has established an estimated liability[113][114][117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting significant recovery from the pandemic, progress on the EXPRESSway Forward strategy, and improved liquidity through new financing Overview & COVID-19 Pandemic This section overviews Express as an apparel brand and details the COVID-19 pandemic's material impact, noting encouraging recovery trends in Q1 2021 as restrictions eased - The COVID-19 pandemic materially impacted the business throughout 2020, with store closures, depressed customer traffic, and significant declines in demand for wear-to-work and occasion wear categories[125] - In Q1 2021, the company saw encouraging trends as COVID-related restrictions were lifted, with comparable sales performing better in markets where mask mandates were removed[126] Financial Details & Outlook Q1 2021 performance exceeded expectations with a 64% net sales increase and $129.7 million improved operating cash flow, driven by the EXPRESSway Forward strategy focusing on product, customer, and fleet optimization Q1 2021 Key Financial Metrics (vs. Q1 2020) | Metric | Value | | :--- | :--- | | Net Sales | Increased 64% to $345.8M | | Comparable Sales | Increased 5% | | Gross Margin Percentage | Increased 4,480 bps to 22.8% | | Operating Loss | Decreased by $104.7M to a loss of $40.6M | | Diluted EPS | Increased by $1.71 to a loss of $0.70 | - The EXPRESSway Forward strategy is showing progress with positive customer response to new product in denim and Express Essentials, and early signs of recovery in wear-to-work categories[133][136][138] - Customer strategy includes a relaunched loyalty program driving acquisition and reactivation, and a reimagined marketing approach. Execution focuses on driving conversion and fleet optimization, including opening reduced square footage stores and eight new Express Edit concept stores[142][145][148] Results of Operations Q1 2021 results show net sales increased by $135.5 million due to pandemic recovery, with gross margin improving by 4,480 basis points and SG&A expenses rising by $20.2 million | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales (in thousands) | $345,759 | $210,275 | | Total Comparable Sales | 5% | (24)% | | Gross Margin % | 22.8% | (22.0)% | | SG&A as % of Net Sales | 34.5% | 47.2% | - The 4,480 basis point increase in gross margin was due to an 1,100 basis point increase in merchandise margin and a 3,380 basis point improvement in buying and occupancy costs as a percentage of sales, which also benefited from the absence of a $14.7 million impairment charge taken in Q1 2020[167] Reconciliation of Net Loss to Adjusted Net Loss (Non-GAAP) | (in thousands) | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Loss (GAAP) | ($45,724) | ($154,050) | | Adjustments (e.g., impairments, tax effects) | $9,977 | $54,626 | | Adjusted Net Loss (Non-GAAP) | ($35,747) | ($99,424) | Liquidity and Capital Resources The company's liquidity significantly improved with a $129.7 million decrease in operating cash flow usage and new financing, including a $90.0 million FILO Term Loan and a $50.0 million Delayed Draw Term Loan - Cash used in operating activities improved to $1.6 million in Q1 2021 from $131.2 million in Q1 2020, a $129.7 million improvement, driven by improved operating results and receipt of CARES Act receivables[190] - In January 2021, the company entered into a new financing agreement that included a $90.0 million FILO Term Loan and a $50.0 million Delayed Draw Term Loan (DDTL), which was drawn in March 2021[192] - As of May 1, 2021, the company had $227.8 million in net debt outstanding and approximately $70.8 million available for borrowing under its Revolving Credit Facility[195] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, where a 100 basis point change would impact annual interest expense by approximately $2.3 million - The company's primary market risk is interest rate risk associated with its variable-rate Revolving Credit Facility and Term Loan Facility[198] - As of May 1, 2021, the company had $105.0 million outstanding under its Revolving Credit Facility and $127.6 million under its Term Loan Facility. A 100 basis point change in interest rates would result in an approximate $2.3 million change in annual interest expense[199] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of May 1, 2021, with no material changes to internal control over financial reporting during Q1 2021 - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of May 1, 2021[203] - No changes occurred during the first quarter of 2021 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[204] Part II Legal Proceedings The company is a defendant in several representative action lawsuits in California alleging wage and hour violations, for which an estimated liability has been recorded - The company is involved in various legal proceedings, including several representative action lawsuits filed in California alleging violations of state wage and hour statutes and other labor standards[113][114][205] Risk Factors This section updates risk factors, focusing on extreme common stock price volatility and potential "short squeezes" driven by social media, which may be disconnected from financial performance - The company's common stock has experienced extreme volatility, with the price fluctuating from an intra-day low of $0.86 to a high of $13.97 in January 2021, which may not be related to operating performance[208] - A potential "short squeeze" has led to, and could again lead to, extreme price volatility unrelated to the company's business prospects. Investors purchasing during such events could suffer substantial losses[211][212] - The company warns that information published by third parties on blogs, message boards, and social media may not be reliable or accurate and should not be the basis for investment decisions[213][214] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 647,000 common shares for employee tax withholding, with approximately $34.2 million remaining under the authorized repurchase program Shares Purchased | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 31 - Feb 27, 2021 | 1,000 | $2.80 | | Feb 28 - Apr 3, 2021 | 1,000 | $5.10 | | Apr 4 - May 1, 2021 | 645,000 | $3.35 | | Total | 647,000 | | - All shares purchased were in connection with employee tax withholding obligations and not part of the publicly announced share repurchase program. Approximately $34.2 million remains available for repurchase under the program[217] Defaults Upon Senior Securities This item is not applicable - Not applicable[218] Mine Safety Disclosures This item is not applicable - Not applicable[220] Other Information No other information is disclosed for this item - None[222] Exhibits This section lists exhibits filed with the Quarterly Report, including Sarbanes-Oxley certifications and Inline XBRL documents - The exhibits filed with this report include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act and various Inline XBRL documents[225]