Q2 net income nosedives 59% at retailer Express
Net income at NYSE-listed apparel retail chain Express, Inc nosedived just a whisker under 60% from a year earlier quarter, in the second fiscal quarter ended August 2, 2014.
However, Express did not divulge reasons for this plunge in its press release, which disclosed that net income plunged to $6.9 million or $0.08 per diluted share in the second quarter of 2014, down 59.17% from $16.9 million or $0.20 per diluted share, in the corresponding fiscal quarter of 2013.
In the quarter under review, the retailer reported a decline of 2% in net sales at $481.4 million from $490.1 million in the second quarter of 2013. Comparable sales, including e-commerce sales fell 5% against a rise of 6% in last year's second quarter.
Second quarter of 2014 gross margin as a percentage of net sales went down 280 basis points year-on-year and accounted for 28.3% of net sales. Merchandise margin declined by 70 basis points from a year ago, while buying and occupancy costs as a percentage of sales rose 210 basis points.
Express said the merchandise margin decline was less than forecast in May, when it first estimated the impact of clearing through carried over first quarter inventory, while buying and occupancy de-leverage was mainly from combined impact of lower sales, higher rent and higher depreciation and amortization expenses.
Selling, general, and administrative (SG&A) expenses totalled $121.9 million in the second quarter of 2014 versus $119.2 million in last year's second quarter. As a percentage of net sales, SG&A expenses rose by 100 basis points to 25.3% compared to 24.3% in last year's second quarter.
This de-leveraging related SG&A is attributable to the decline in sales, and also reflects additional marketing activities, Express explained.
Operating income touched $14.6 million or 3.0% of net sales, compared to $33.4 million or 6.8% of net sales, in the second quarter of 2013.
Income tax expense reached $1.8 million, at an effective tax rate of 20.6% from $11.2 million, at an effective tax rate of 39.7% in last year's second quarter. It said, this year's rate reflects a benefit of $1.7 million or $0.02 per share associated with the completion of a multi-year tax examination.
Cash and cash equivalents totalled $253.3 million in second quarter of 2014 versus $234.3 million at the end of second quarter of 2013. Inventories stood at $239.9 million, down 1% from $241.9 million at the end of the second quarter of 2013.
The retailer added that inventory per square foot was down 4% compared to the comparable period in 2013 and the inventory balance at the end of the second quarter of 2014 includes around $12.5 million related to Express Factory Outlet stores.
Michael Weiss, CEO at Express said, “Looking ahead to the second half of the year, the opportunity remains to drive further sequential improvements in both sales and profits, while simultaneously continuing our disciplined approach to inventory units and input costs."
Fibre2fashion News Desk - India