Express Inc exceeding expectations on strong sales growth

26 Aug '11

5 min read

Express Inc a specialty retail apparel chain operating 599 stores, announced its second quarter financial results for the thirteen and twenty-six week periods ended July 30, 2011, which compares to the same periods ended July 31, 2010.

Second Quarter Operating Results:
• Net sales increased 10% to $446.0 million from $407.3 million in the second quarter of 2010;
• Comparable sales increased 6% following an 8% increase in comparable sales in the second quarter of 2010;
• Gross margin increased 170 bps to 33.6% of net sales compared to 31.9% in the second quarter of 2010;
• Selling, general, and administrative (SG&A) expenses totaled $117.7 million, or 26.4% of net sales. This compares to SG&A expenses of $110.9 million, or 27.2% of net sales in the second quarter of 2010, which included $0.9 million of non-core operating costs associated with the initial public offering completed on May 18, 2010;
• Other operating expense, net was $0.4 million, or 0.1% of net sales. This compares to other operating expense, net of $14.0 million, or 3.4% of net sales in the second quarter of 2010, which included $13.3 million of one-time fees paid to Golden Gate Capital and Limited Brands related to the termination of advisory arrangements with them in connection with the initial public offering;
• Operating income increased more than five-fold to $31.7 million, or 7.1% of net sales, compared to $5.1 million, or 1.2% of net sales, in the second quarter of 2010;
• Interest expense was $10.5 million and included a $3.7 million loss on extinguishment of debt associated with the $24.2 million repurchases of Senior Notes and the Opco Revolving Credit Facility amendment. This compares to interest expense of $23.3 million in the second quarter of 2010 which included a $13.6 million loss on extinguishment of debt related to the prepayment of debt using proceeds from the initial public offering;
• Income tax expense was $8.6 million, at an effective tax rate of approximately 40.6%, compared to a tax benefit of $38.9 million in the second quarter of 2010. The change in tax expense is a result of the Company's conversion to a corporation in connection with its initial public offering in the second quarter of 2010;
• Net income was $12.6 million, or $0.14 per diluted share on 88.9 million weighted average shares outstanding, and included a $2.2 million, or $0.03 per diluted share, after tax loss on extinguishment of debt related to the $24.2 million repurchases of Senior Notes and the Opco Revolving Credit Facility amendment. This compares to net income of $22.1 million, or $0.25 per diluted share on 88.7 million weighted average shares outstanding, in the second quarter of 2010 which included the following non-core operating costs after tax: (i) $0.5 million, or $0.01 per diluted share, of costs related to the initial public offering; (ii) $8.0 million, or $0.09 per diluted share, of fees paid to Golden Gate Capital and Limited Brands related to the termination of advisory arrangements with them in connection with the initial public offering; and (iii) $8.2 million, or $0.09 per diluted share, loss on extinguishment of debt related to the prepayment of debt in connection with the initial public offering. These costs were more than offset by a one-time tax benefit of $31.8 million, or $0.36 per diluted share, recognized in connection with the Company's conversion to a corporation; and

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