Express jumps on strong holiday performance
NEW YORK (AP) — Shares of Express skyrocketed on Tuesday as the clothing chain lifted its fourth-quarter and full-year forecasts following better-than-expected holiday sales.
THE SPARK: Late Monday, Express, which sells men's and women's clothing aimed at shoppers between 20 and 30 years old, said that its promotional and pricing strategies were successful during the holiday season.
The November through December period is critical for retailers because it can comprise up to 40 percent of their annual revenue.
Express said that it now expects fourth-quarter earnings of 72 cents to 74 cents per share, up from a prior range of 62 cents to 68 cents per share.
Analysts polled by FactSet predict earnings of 65 cents per share.
Revenue at stores open at least a year, a key indicator of a retailer's health, is anticipated to be flat to up 1 percent. The company's prior forecast was for a low single-digit decline. This figure excludes results from stores recently opened or closed.
For the full-year, Express now foresees earnings of $1.56 to $1.59 per share. Its previous guidance called for earnings between $1.47 and $1.53 per share.
Wall Street forecast earnings of $1.49 per share.
Revenue at stores open at least a year is expected to be about flat. The retailer's prior outlook was for a low single-digit decline.
Express, which currently runs more than 600 stores, expects to report its fourth-quarter and full-year financial results the week of March 11.
THE ANALYSIS: Betty Chen of Wedbush said that it appears that Express was able to maintain the strong sales it experienced over the Black Friday weekend through the remainder of the holiday season.
The analyst said in a client note that she feels that more straightforward pricing — such as giving customers clear percentage off discounts — resonated well with shoppers during the periods of slow traffic in December.
Chen kept an "Outperform" rating and $17 price target.
Stifel Nicolaus' Richard Jaffe said it also appears that Express did not have to use significant promotions to sell its merchandise during the holidays, as its gross profit is expected to be up compared with the prior-year period.
The analyst said there is some near-term uncertainty as the company retools its merchandise, but that he is still positive on the long-term viability of the brand.
Jaffe maintained a "Buy" rating and $20 price target.
SHARE ACTION: Express Inc.'s stock jumped $3.14, or 22.4 percent, to $17.20 in midday trading. The shares have traded in a 52-week range of $10.47 to $26.27.