expr-20230429

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended April 29, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO ______

Commission File Number 001-34742

EXPRESS, INC.

(Exact name of registrant as specified in its charter)


Delaware						26-2828128
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1 Express Drive Columbus, Ohio						43230
(Address of principal executive offices)						(Zip Code)

Telephone: (614) 474-4001

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

EXPR

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock was 74,592,956 as of May 27, 2023.

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EXPRESS, INC.

INDEX TO FORM 10-Q



FORWARD-LOOKING STATEMENTS			3


PART I		FINANCIAL INFORMATION	5
	Item 1.	Financial Statements (Unaudited)	5
		Consolidated Balance Sheets	5
		Consolidated Statements of Income and Comprehensive Income	6
		Consolidated Statements of Changes in Stockholders' Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to Unaudited Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
	Item 4.	Controls and Procedures	35


PART II		OTHER INFORMATION	35
	Item 1.	Legal Proceedings	35
	Item 1A.	Risk Factors	35
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
	Item 3.	Defaults Upon Senior Securities	36
	Item 4.	Mine Safety Disclosures	36
	Item 5.	Other Information	36
	Item 6.	Exhibits	37


SIGNATURES			38

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the “safe harbor” provisions of the Private Securities Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” "continue to," and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, and financial results, our plans and objectives for future operations, growth, initiatives, or strategies, plans to repurchase shares of our common stock, the expected outcome or impact of pending or threatened litigation, or our strategic partnership with WHP Global or any transactions arranged as part of that partnership, including the Bonobos acquisition, and the anticipated benefits or effects of such transactions, are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:


Operational and Industry Risks

▪general economic conditions and changes in consumer spending, including as a result of recent high inflation and fears of a potential recession or instability in the financial markets and banking industry;
▪customer traffic at malls, shopping centers, and at our stores;
▪the COVID-19 pandemic has had, and may in the future have, an adverse effect on our business operations, financial condition, liquidity and cash flow;
▪competition from other retailers;
▪our dependence upon independent third parties to manufacture all of our merchandise;
▪changes in the availability and cost of raw materials, labor, and freight;
▪labor shortages;
▪supply chain disruption and increased tariffs;
▪geopolitical risks, including impacts from the ongoing conflict between Russia and Ukraine and increased tensions between China and Taiwan;
▪difficulties associated with our third-party owned distribution facilities;
▪natural disasters, extreme weather, public health issues, including pandemics, fire, and other events that cause business interruption; and
▪our reliance on third parties to provide us with certain key services for our business.


Strategic Risks

▪our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors including selling through inventory at an appropriate price;
▪fluctuations in our sales, results of operations, and cash levels on a seasonal basis and due to a variety of other factors, including our product offerings relative to customer demand, the mix of merchandise we sell, promotions, inventory levels, and sales mix between stores and eCommerce;
▪our dependence on a strong brand image;
▪our ability to adapt to changes in consumer behavior and develop and maintain a relevant and reliable omnichannel experience for our customers;
▪our ability to realize the expected strategic and financial benefits of the Bonobos acquisition;
▪our dependence upon key executive management; and
▪our ability to execute our growth strategy, including but not limited to, achieving profitable growth in our core Express business, optimizing our omnichannel platform, accelerating our growth and profitability through the WHP strategic partnership and operating with financial discipline.


Risks Related to Our Strategic Partnership with WHP

▪our ability to realize success in our strategic partnership with WHP and the potential for the relationship with WHP to divert resources away from existing operations or expose us to liabilities; and
▪our inability to realize the benefits and synergies of the strategic partnership or any transactions arranged as part of that partnership.

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Information Technology Risks

▪the failure or breach of information systems upon which we rely;
▪the increase of our employees working remotely and use of technology for work functions; and
▪our ability to protect our customer data from fraud and theft.


Financial Risks

▪our substantial lease obligations;
▪restrictions imposed on us under the terms of our current credit facility, including asset based requirements related to inventory levels, ability to make additional borrowings, and restrictions on our ability to repurchase shares of our common stock;
▪our inability to maintain compliance with covenants in our current credit facility; and
▪impairment charges on property and equipment and our right of use assets.


Legal, Regulatory and Compliance Risks

▪claims made against us resulting in litigation or changes in laws and regulations applicable to our business;
▪our inability to protect our trademarks or other intellectual property rights that may preclude the use of our trademarks or other intellectual property around the world;
▪changes in tax requirements, results of tax audits, and other factors including timing of tax refund receipts, that may cause fluctuations in our effective tax rate and operating results; and
▪our failure to maintain adequate internal controls.


Stock Ownership Risk Factors

▪our inability to pay dividends and repurchase shares;
▪our charter documents and applicable law may discourage or delay acquisition attempts;
▪our failure to regain compliance with the continued listing requirements of the New York Stock Exchange, or any future failure to meet those requirements, could result in the delisting of our common stock;
▪our shares of common stock may experience extreme volatility and purchases of our common stock could incur substantial losses;
▪our stock price may incur rapid and substantial increases or decreases that may not coincide in timing with the disclosure of news or developments affecting us;
▪potential short squeezes related to our common stock have led to, and could again lead to, extreme price volatility in shares of our common stock; and
▪information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to us and may not be reliable or accurate.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. For a discussion of these risks and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Item 1A. Risk Factors” included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended January 28, 2023 (“Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

EXPRESS, INC. | Q1 2023 Form 10-Q | 4

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PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

EXPRESS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Per Share Amounts) (Unaudited)


	April 29, 2023		January 28, 2023
ASSETS
Current Assets:
Cash and cash equivalents	$	34,092	$	65,612
Receivables, net	17,106		12,374
Income tax receivable	1,140		1,462
Inventories	346,963		365,649
Prepaid royalty	47,146		59,565
Prepaid rent	5,762		7,744
Other	25,628		21,998
Total current assets	477,837		534,404



Right of Use Asset, Net	522,922		505,350

Property and Equipment	1,022,132		1,019,577
Less: accumulated depreciation	(894,020)		(886,193)
Property and equipment, net	128,112		133,384


Non-Current Income Tax Receivable	52,278		52,278
Equity Method Investment	166,210		166,106
Other Assets	6,342		6,803
TOTAL ASSETS	$	1,353,701	$	1,398,325

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term lease liability	$	197,944	$	189,006
Accounts payable	162,369		191,386
Deferred royalty income	15,412		19,852
Deferred revenue	33,243		35,543

Accrued expenses	101,243		105,803
Total current liabilities	510,211		541,590

Long-Term Lease Liability	408,006		406,448
Long-Term Debt	179,750		122,000

Other Long-Term Liabilities	20,075		20,718
Total Liabilities	1,118,042		1,090,756

Commitments and Contingencies (Note 10)

Stockholders’ Equity:
Preferred stock – $0.01 par value; 10,000 shares authorized; no shares issued or outstanding	—		—
Common stock – $0.01 par value; 500,000 shares authorized; 99,067 shares and 99,067 shares issued at April 29, 2023 and January 28, 2023, respectively, and 74,571 shares and 73,760 shares outstanding at April 29, 2023 and January 28, 2023, respectively	990		990
Additional paid-in capital	229,468		228,633

Retained earnings	269,812		355,736
Treasury stock – at average cost; 24,496 shares and 25,307 shares at April 29, 2023 and January 28, 2023, respectively	(264,611)		(277,790)
Total stockholders’ equity	235,659		307,569
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,353,701	$	1,398,325

See Notes to Unaudited Consolidated Financial Statements.

EXPRESS, INC. | Q1 2023 Form 10-Q | 5

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EXPRESS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in Thousands, Except Per Share Amounts) (Unaudited)


	Thirteen Weeks Ended
		April 29, 2023		April 30, 2022
Net Sales		$	383,257	$	450,785
Cost of Goods Sold, Buying and Occupancy Costs		319,464		319,285
GROSS PROFIT		63,793		131,500
Operating Expenses (Income):
Selling, general, and administrative expenses		139,348		141,093
Royalty income		(4,440)		—

Other operating income, net		(1,000)		(490)
TOTAL OPERATING EXPENSES		133,908		140,603

OPERATING LOSS		(70,115)		(9,103)


Interest Expense, Net		2,943		3,494

Other Income, Net		—		(200)
LOSS BEFORE INCOME TAXES		(73,058)		(12,397)
Income Tax Expense (Benefit)		369		(483)
NET LOSS		$	(73,427)	$	(11,914)





COMPREHENSIVE LOSS		$	(73,427)	$	(11,914)

EARNINGS PER SHARE:
Basic		$	(0.99)	$	(0.18)
Diluted		$	(0.99)	$	(0.18)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		73,878		67,211
Diluted		73,878		67,211

See Notes to Unaudited Consolidated Financial Statements.

EXPRESS, INC. | Q1 2023 Form 10-Q | 6

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EXPRESS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Amounts in Thousands) (Unaudited)


	Common Stock									Treasury Stock
	Shares Outstanding	Par Value		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	At Average Cost		Total
BALANCE, January 28, 2023	73,760	$	990	$	228,633	$	355,736	$	—	25,307	$	(277,790)	$	307,569
Net loss	—	—		—		(73,427)		—		—	—		(73,427)
Exercise of stock options and vesting of restricted stock	1,232	—		(1,036)		(12,497)		—		(1,232)	13,533		—
Share-based compensation	—	—		1,871		—		—		—	—		1,871
Repurchase of common stock	(421)	—		—		—		—		421	(354)		(354)
BALANCE, April 29, 2023	74,571	$	990	$	229,468	$	269,812	$	—	24,496	$	(264,611)	$	235,659



	Common Stock									Treasury Stock
	Shares Outstanding	Par Value		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	At Average Cost		Total
BALANCE, January 29, 2022	67,072	$	936	$	220,078	$	77,093	$	—	26,560	$	(296,799)	$	1,308
Net loss	—	—		—		(11,914)		—		—	—		(11,914)
Exercise of stock options and vesting of restricted stock	1,520	—		(5,038)		(11,935)		—		(1,520)	16,973		—
Share-based compensation	—	—		2,393		—		—		—	—		2,393
Repurchase of common stock	(570)	—		—		—		—		570	(1,890)		(1,890)
BALANCE, April 30, 2022	68,022	$	936	$	217,433	$	53,244	$	—	25,610	$	(281,716)	$	(10,103)

SEC Form 10-Q filed by Express Inc.