Steering Express Back on Track: Glendinning's Plan to Boost Profitability
CEO of Express admits to blunders in merchandising strategy
Express Inc., following the acquisition of Bonobos, reported a 5% increase in net sales for Q3, climbing to $454.1 million from $434.1 million last year. But the company's Express and UpWest brands saw a 7% decline, dipping to $402 million from $434.1 million.
Comparable sales for Express stores and e-commerce dropped by 4%, with retail store comps plummeting 16%, while e-commerce comps rose a modest 10%. The retailer recorded an operating loss of $28.7 million and a net loss of $36.8 million for Q3. Inventory, inclusive of Bonobos, increased to $480.9 million, up 14% from $422.7 million a year ago. Excluding Bonobos, the inventory was flat.
Newly appointed CEO Stewart Glendinning aims to steer the apparel retailer on a path to recovered profit potential. His mission: accelerate cost-reduction initiatives and implement new strategies to boost business performance and liquidity.
Glendinning pointed out some of Express's shortcomings, including a misguided merchandise strategy that affected women's sales by offering an assortment out of balance across categories, price points, and wearing occasions. Former CEO Tim Baxter, who resigned in September, was replaced by Glendinning.
The top-line decline for the Express brand was mainly driven by weaker retail and outlet store results, partially offset by a 10% increase in online sales. While unit sales were consistent with expectations, Glendinning admitted that more extensive discounting was necessary to move inventory, resulting in greater gross margin erosion.
Analyst Eric Beder, CEO and senior research analyst at Small Cap Consumer Research, anticipates a focus on operational improvement, creating a more balanced product mix, and leveraging the WHP Global relationship will continue to be key for the Express business model.
Brand management firm WHP Global and Express entered an intellectual property joint venture last year. WHP and Express acquired Bonobos from Walmart in April for $75 million. Alongside Bonobos, its portfolio includes UpWest. The Q3 earnings report includes royalty expenses to WHP Global, which negatively impacted the gross margin by about 370 basis points.
Despite the Q3 setbacks, Glendinning highlighted some positive signs, including improved sales performance, $30 million in cost savings driving a 4% reduction in SG&A, and an improvement in women's sales due to a shift in merchandising strategy.
Interim CFO Mark Still reported that October trends continued into the first half of November, while sales improved and were more in line with last year in the back half of November. Express updated its 2023 outlook, now expecting net sales of approximately $1.84 billion to $1.87 billion and approximately $150 million in Bonobos net sales. Previously, the company forecast net sales ranging from $1.9 billion to $2 billion.
WHP, through its joint venture with Express Inc., plans to expand the brand into new markets and increase its presence in Mexico and Central America. Glendinning stated that the royalty-sharing agreement is "beneficial to us without extraordinary effort from us," as it'll be licensed and overseen by WHP.
To enhance Express Inc.'s profit potential, strategic focus areas could include:
- Integration and Synergy
- Leverage the complementary strengths of both brands.
- Implement strategies for cross-selling products across Express and Bonobos.
- E-commerce and Digital Transformation
- Upgrade and integrate online platforms for a cohesive shopping experience.
- Utilize data analytics to monitor sales trends, customer behavior, and preferences.
- Operational Efficiency
- Streamline operations to minimize operational overheads.
- Implement a smart inventory management system.
- Marketing and Brand Positioning
- Develop a unified brand identity that aligns with modern consumers.
- Engage customers through social media and events to foster brand loyalty.
- Innovation and Sustainability
- Adopt sustainable production methods and supply chain practices.
- Explore new retail formats and services to stay competitive.
By addressing these strategic areas, Glendinning can help Express Inc. grow both the Express and Bonobos brands while improving profitability.
- The newly appointed CEO of Express Inc., Stewart Glendinning, aims to boost the apparel retailer's profit potential by implementing cost-reduction initiatives and new strategies for business performance and liquidity.
- Despite the Q3 setbacks, Glendinning identified some positive signs, including improved sales performance, a 4% reduction in SG&A through $30 million in cost savings, and an improvement in women's sales due to a shift in merchandising strategy.
- Analyst Eric Beder anticipates a focus on operational improvement, creating a more balanced product mix, and leveraging the WHP Global relationship will continue to be key for the Express business model.
- WHP Global, through its joint venture with Express Inc., plans to expand the brand into new markets and increase its presence in Mexico and Central America.
- Express reported a 5% increase in net sales for Q3, but the Express and UpWest brands saw a 7% decline due to a misguided merchandise strategy that affected women's sales.
- The top-line decline for the Express brand was mainly driven by weaker retail and outlet store results, partially offset by a 10% increase in online sales, which necessitated more extensive discounting and resulted in greater gross margin erosion.
- Brand management firm WHP Global and Express entered an intellectual property joint venture last year, and WHP and Express acquired Bonobos from Walmart in April for $75 million. The Q3 earnings report includes royalty expenses to WHP Global, which negatively impacted the gross margin by about 370 basis points.
- To enhance Express Inc.'s profit potential, strategic focus areas could include integration and synergy, e-commerce and digital transformation, operational efficiency, marketing and brand positioning, and innovation and sustainability.
