Will Express Survive Bankruptcy?

Express has filed for bankruptcy, leading to the closure of around 100 stores nationwide. The retailer, which includes brands like Bonobos and UpWest, has entered a non-binding letter of intent with WHP Global and other participants, including Simon Property Group and Brookfield Properties, for the sale of a significant majority of its retail stores and operations.

Express’s recent performance marks a stark contrast to its earlier years. In 2010, it went public as the sixth-largest specialty retail apparel brand in the U.S., and by 2015, quarterly net sales reached $765.6 million. However, the company’s current financial situation paints a different picture.

Despite the challenges, Express has secured $35 million in new financing and intends to continue serving customers through its online platform and remaining retail locations. Mark Still has been appointed as the new chief financial officer and senior vice president.

The company stated in a press release that it “intends to close approximately 95 EXPRESS retail stores and all UpWest stores.” It currently has 10 UpWest locations. The closing sales at affected stores began on April 23. Though Express didn’t state exactly which locations it plans to close in the release, court documents list the affected stores.

Additionally, Express announced it may close its Ohio corporate offices at 1 Express Drive near Easton Town Center and 235 N. Fourth St. Downtown, potentially affecting over 600 employees.

The looming layoffs are highlighted in a Worker Adjustment and Retraining Notification (WARN) notice filed with the state. If the restructuring efforts fall through or the potential buyer doesn’t offer enough jobs to current employees, all 614 Ohio office workers could face permanent layoffs. The layoffs are projected to take place in late June.

Despite the uncertainties surrounding the bankruptcy and potential sale, Express assured that the WARN notices are precautionary. It emphasized that the notices don’t necessarily indicate immediate terminations but rather comply with state and federal laws regarding possible job losses during restructuring processes.

What Led to the Downfall of Express?

In December of last year, Express discussed its earnings, highlighting both challenges and improvements in its merchandise strategy. CEO Stewart Glendinning acknowledged difficulties, particularly with women’s apparel, but pointed to progress in merchandising under Chief Merchandising Officer Michael Rangel. The quarter showed positive comparable sales for women, with knit tops increasing by over 20% and sweaters, woven tops, and bottoms also showing growth.

Conversely, the men’s segment faced challenges due to strong suit sales the previous year. However, categories like sweaters showed promise with the successful launch of a new line. Casual apparel also performed better, indicating a positive trend for future quarters.

Despite a 5% rise in consolidated net sales to $454.1 million for the third quarter of 2023, Express and UpWest Brands experienced a 7% decrease in net sales, and comparable sales dropped by 6%. Additionally, Express retail stores saw a 16% decrease in comparable sales, while e-commerce sales increased by 10%. Comparable outlet sales also declined by 13%.

The net loss for the quarter amounted to $36.8 million, or $9.83 per diluted share, with a negative EBITDA of $17.1 million. Express also reported an operating loss of $67.5 million for fiscal 2022, compared to an operating income of $0.8 million in fiscal 2021. Despite these setbacks, Glendinning remained optimistic about Express’ potential, highlighting the company’s strong brand portfolio, a promising partnership with WHP, and a premier omnichannel platform as key strengths.

The company has seen declining demand for several quarters as consumers have reduced discretionary spending or shifted toward online shopping platforms like Amazon and SHEIN.

The company’s stock price has plummeted nearly 90% year-to-date. On March 6, the New York Stock Exchange delisted Express due to its share price failing to rise above $1 over six months. Furthermore, data from Creditsafe indicates that Express struggled with timely bill payments, with late payments skyrocketing from 42.05% in February to 90.33% in March.

Along with efforts to revive its fortunes by acquiring men’s fashion brand Bonobos for $75 million in May 2023 and expanding its Express Edit stores, the company also focused on strengthening its social media presence and improving its omnichannel capabilities.

Several factors contribute to Express’s financial woes. Rising inflation, with prices up 3.5% from a year ago, has led some consumers to cut back on nonessential spending. Additionally, analysts point to issues within Express’s core business, including its product assortment and competitive positioning.

Neil Saunders, managing director for GlobalData Retail, highlighted Express’s declining sales as a major concern. “Sales have been cratering for a long period of time and there are few signs that revenue has reached rock bottom. This has put the company under a lot of financial strain and has resulted in some significant loss,” he said.

He also explained that Express’s failure to adapt to changing consumer preferences has contributed to its decline. “The offer and assortment remain poor in that [they are] overpriced, lack differentiation and come across as very bland,” he stated. “As a result, the Express brand itself has become less relevant to shoppers.”