Hurt by an increase in everyday expenses and weak sales at its more established stores, Express (EXPR) nearly halved its third-quarter profit on Wednesday but laid out a turnaround strategy and forecast fiscal 2012 earnings well above Wall Street expectations.
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Looking toward the full-year, Express said it sees earnings in the range of $1.47 to $1.53 a share, down from $1.66 in 2011 but ahead of the consensus’ 2012 EPS of $1.39 a share, with same-store sales decreasing in the low-single-digits compared with an increase of 6% in 2011.
The year-earlier period included an extra week of sales.
The Columbus, Ohio-based operator of 600 apparel retail stores posted quarterly net income of $17.4 million, or 20 cents a share, compared with a year-earlier profit of $32.7 million, or 37 cents, topping average analyst estimates in a Thomson Reuters poll by three pennies.
Shares of Express climbed nearly 11% to $14.40 Wednesday morning.
Revenue for the three months ended Oct. 29 was up 4% to $468.5 million from $486.8 million a year ago, virtually matching the Street’s view of $469 million. Same-store sales, a measure of stores open longer than a year, fell 5%.
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Sales gains were also offset by higher selling, general and administrative expenses, which grew to $117.7 million, comprising 25.1% of sales, compared with $115.1 million a year ago, when they made up about 23.6% in total revenue.
"We were disappointed with our results,” Express CEO Michael Weiss said in a statement. “However, we believe we have identified the issues impacting our performance and have developed, and begun to execute, a plan to fix them.”
The company has reshuffled its sweater assortment and introduced entry price point fashion items in key categories. It has also begun setting clear prices and has unraveled promotions for customers in an effort to stem bleeding same-store sales.
Also part of the overhaul are aggressive expansion initiatives, which includes widening its global footprint to emerging international regions like the Middle East, boosting its online presence, as e-commerce sales last quarter recorded double-digit growth, and focusing on merchandise categories like its men’s business that have strong growth potential.
While Express said promotions contributing to a record Black Friday performance for the retailer that exceeded its internal expectations, Weiss said it remains “cautious on the overall performance of the fourth quarter,” though he added that he is confident in their strategy.