Express, Inc., a specialty retail apparel chain operating approximately 630 stores, made several announcements.
The Company announced first quarter financial results covering the 13 week period ended May 3, 2014 compared to the 13 week period ended May 4, 2013.
First Quarter 2014 Operating Results:
Net sales decreased to $460.7 million from $509.4 million in the first quarter of 2013, a decline of 10%.
Comparable sales (including e-commerce sales) decreased 11%, following flat comparable sales in last year's first quarter. E-commerce sales declined 2% to $69.0 million following a 48% increase in last year's first quarter.
Gross margin as a percentage of net sales declined 370 basis points over last year's first quarter and represented 29.8% of net sales. Merchandise margin declined by 30 basis points and buying and occupancy costs as a percentage of sales rose by 340 basis points compared to last year's first quarter. The lower merchandise margin is attributable to heightened promotional activity, while the buying and occupancy de-leverage was the result of the decline in sales together with increased depreciation expense.
Selling, general, and administrative (SG&A) expenses were $122.9 million versus $112.6 million in last year's first quarter. As a percentage of net sales, SG&A expenses rose by 460 basis points to 26.7% compared to 22.1% in last year's first quarter. This de-leveraging is also attributable to lower sales, and increased marketing spend.
Operating income was $15.0 million, or 3.3% of net sales, compared to $58.7 million, or 11.5% of net sales, in the first quarter of 2013.
Income tax expense was $4.0 million, at an effective tax rate of 44.3%, compared to $21.2 million, at an effective tax rate of 39.6% in last year's first quarter. The effective tax rate was adversely impacted by nondeductible stock based compensation expenses.
Net income was $5.1 million, or $0.06 per diluted share. This compares to net income of $32.4 million, or $0.38 per diluted share, in the first quarter of 2013.
Michael Weiss, the Company's Chairman and Chief Executive Officer, noted that, "We had anticipated a very challenging first quarter, but our actual results were weaker than planned. Our business strengthened in April, but not to the degree that we anticipated when we formulated our first quarter guidance. While external challenges contributed to the decline in our first quarter performance, we also did not execute as well as we could have."