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Bear of the Day: Express (EXPR)

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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

Founded in 1980 and is headquartered in Columbus, OH,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 Guidance Sends Stock Lower

The retailer reported its Q4 results on Mar 14. Adjusted earnings came in at $0.34 per share, slightly ahead of the Zacks Consensus Estimate of $0.32.

Net sales increased 2% to $693.8 million from $678.8 million in the same quarter a year ago. They benefited from an extra week in the quarter.

However, comparable sales fell 1%.

E-commerce sales increased 20% and 17% on a comparable sales basis.

However, guidance was weaker than street consensus. They expect FY 2018 comparable sales to be between -1% and 1% and earnings to be between $0.32 and $0.46.

Shares fell after the report.

Falling Estimates

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 $0.41 per share and $0.55 per share from $0.50 and $0.70 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 156 out of 265 (Bottom 41%) for “Retail-Apparel and Shoes” also indicates more pain ahead.

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