Express Handily Beats Earnings, But Focus Shifts To International And Outlets

May.30.13 | About: Express, Inc. (EXPR)

Express, Inc (NYSE:EXPR) earnings made headlines today as causing one of the biggest moves on the index, accelerating nearly 10% in the premarket, and into standard hours trading. Management pleased the Street by announcing a clean beat on top-line, bottom-line and future guidance.

Express management announced EPS of 38 cents, handily beating consensus estimates of 36 cents. On the top-line, Express had revenues of 508.5mm on analyst expectations of 498mm. These numbers were good enough to beat the estimates of even the most bullish analysts.

Minor bumps in the story include a gross margin that deteriorated to 33.6% but obviously analysts and investors alike were willing to accept this. The street expected a gross margin of 35.1% and the YoY mark was 38.1%.

The biggest catalyst for the appreciation in share price is that comp weakness seems to have stopped. The street was expecting negative comps in the 1st quarter but instead were delighted to see that they were flat year over year. In addition, guidance for Q2 comps were raised to the mid-single digits. Comp guidance for the full year were also slightly raised from "low to mid single digits" versus the prior guidance of solely "low single digits".

Full year guidance was also raised from $1.40 - $1.54 to $1.48 - $1.58. Moving forward management made bullish comments in the release stating that although the macro-economic condition for the entire apparel sector has been difficult, Express, instead, "successfully overcame those hurdles". He continued with even more positive comments:

The direction the business is heading is positive. As we start the second quarter, momentum in the business is on the upswing, and conversion, which we often cite as a leading indicator of the business, has been building since relatively early in the first quarter...

Savvy investors may make note of the increasing growth of the e-commerce platform, which grew 48% this quarter. This time last year the e-commerce platform grew 28%. Of the $508mm in total revenue, e-commerce accounted for 14% of the nugget, at $70.7mm.

Moving forward, investors will look again toward comps to drive the path to success, with progress in international sales. Of lesser extent will be the outlet stores which Express continues to delineate as a new growth opportunity. The story here is less clear on how it will impact the existing business model since heavy promotional activity is already a driving force behind comps and revenue.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.