Express Execs are Counting on Sexy to Sell in Their IPO

Expect the latest one-two punch from fashion-forward retailer Express to have a major impact. CEO Michael Weiss is leading the charge for the company's IPO as well as a planned expansion into the international retail arena. Skeptics can say what they will, and already have, but Express -- currently the sixth largest specialty apparel retailer in the U.S. -- is in an excellent position to snap up an even bigger slice of the pie.

Here's why.

Clothes Make the Brand Express is filling a much-needed niche in both men's and women's styles by offering a mix that leans heavily toward young and sexy for both genders. Even on the more "professional" separates (think women's jackets and trousers, men's button-up shirts) the cuts are slim, the colors are bold, and the prices are easy on a twentysomething's budget. Experts can pit Express against Bebe (BEBE), Forever21, Gap (GPS), and Abercrombie & Fitch (ANF), but actually, none of those brands is direct competition.

Take Bebe, which took a wrong turn several years ago when their creative direction went from trendy to trashy, but still kept a posh price tag. The Brisbane-based women's retailer is still suffering the consequences. Bebe's same-store sales were down 20.1 percent for the second quarter. Sure, Bebe's pushing for a makeover with Kim Kardashian's cele-buzz. But Kardashian's (limited) cachet may not turn into bottom-line cash.

Speaking of sexy, Abercrombie & Fitch could only coast on the cuts of its models' six packs for so long. The recession hit A&F particularly hard when the retailer refused to discount its high prices. Now A&F says it's ready to markdown -- or back down, perhaps -- but their target customer has already moved on to Aeropostale (ARO) and American Eagle (AE)... and Express. Express isn't afraid to serve up tables of discounts from $10 - $20 at season's end, igniting a frenzy of shopping to perk up flagging sales.

Good Direction, Deep Pockets Golden Gate Private Equity bought 75 percent of Express (for $602 million) from Limited Brands (LTD), the owners of Victoria's Secret and Bath and Body Works, in 2007. Golden Gate has $9 billion in capital under management and has a mixed portfolio of specialty retail brands. The move coaxed longtime helmsman Weiss out of retirement. The fact that Weiss (pictured right) originally catapulted Express to a billion dollars in sales in its first decade should assuage any doubts investors may have about the balance sheet, which shows $763 million in total liabilities vs. $860 million in total assets as of Jan. 31. Couple that with predictions that consumer spending is on the rise, and the fact retail numbers are climbing, and I'd say Express is going to be an interesting company to watch over the next couple of years.

Images from Express.com