After Express' IPO There's Nowhere to Go but Up
When we last looked in on Express (EXPR), the company was counting on sexy threads and an aggressive CEO to sell off 16 million of its shares in an IPO. The fashion-forward retailer accomplished that transaction in May (raising close to $170 million at $17 per share) but management has its work cut out now that they must make investors, as well as shoppers, happy. Fortunately, Express' hipster CEO Michael Weiss has a vision -- and a successful track record.
Smart Growth
It's been a while since Express was the retailer of choice for 20-somethings. Back in its heyday (think the bold-shouldered 80s and 90s) Express was an offshoot of the Limited (LTD) and did a brisk business selling young working stiffs affordable style. The chain swelled its ranks to 1,000 stores and raked in over $2 billion at its peak in 2000.
Weiss retired at this point, but didn't stay away long. Management pared nearly half of Express' store holdings and started moving in a more strategic direction after Golden Gate Private Equity took a 75 percent share (for $602 million) from Limited Brands in 2007, coaxing Weiss back into the retail fray.
Now with investors looking over his shoulder, Weiss is taking a somewhat cautious approach to expansion which is smart given that the brand could use a little more buzz before it pushes into new territories (think Tokyo or London). Weiss plans open about 30 stores a year over the next five years in North America, including 50 to debut in the Canadian market. Internationally, Express already partnered with Alshaya Trading Co. to open four franchised stores in the Middle East.
Along with expansion plans, Weiss is looking to boost the e-commerce portion of the business. Just two years old, Express' online store generated $92 million in volume last year, which is less than 10 percent of the retailer's total sales. But there's plenty of room to grow there, especially judging by the savvy focus of Express' just-released mobile shopping app. Featuring location-based functionality (find it at a store near you!) in addition to news, video and social networking, Weiss has been pleased by the number of downloads.
Focused Style
The assortment in stores will stay focused on Express' youthful target demographic, but provide them with well-edited collections that present entire looks -- including underpinnings and accessories -- and eventually even shoes. Weiss likened this method to selling a whole car as opposed to its various parts, a strategy that should work well with chronically busy (and distracted) 20-something shopper. Currently, Express threads for both men and women are admirably on-trend without being trashy, either in design or in the quality of construction.
This approach is already working. Second quarter comps were up 6 percent and net sales rose 9 percent to $407.3 million. Though cash flow is still not terrific, Express' total debt declined by $55.4 million to $367.9 million. If Weiss and team can stay the course, especially as the retail sector continues to gain strength, the chain is going to be in the express lane to stable profits.
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