Sally Reed
Apparel retailer Express has been facing challenges since the Covid pandemic. The company has been making efforts to present an optimistic outlook on its turnaround efforts. At least, this has been the message conveyed by Express CEO Stewart Glendinning during the third-quarter earnings call.
Glendinning Is Trying To Make The Company Profitable Again
Glendinning said, “After joining the business, a little under three months ago, my focus has been on the pathway to recovering the company’s full profit potential.”
Glendinning elaborate further, “This includes accelerating our cost reduction initiatives and launching new ones intended to improve our business performance and liquidity.”
The Efforts Have Not Been Completely Successful
Despite the efforts to turn things around, the company is still facing major challenges.
Glendinning said, “Our third-quarter sales and diluted loss per share came in below the low end of our outlook ranges. The macroeconomic environment remains challenging and the consumer and competitive landscapes were highly promotional.”
There Is Some Good News
The CEO shared some positive developments that have also taken place. He said, “While there’s more work to be done to improve year-over-year sales results, there were several positive indicators in the quarter.”
He added, “Our sales performance improved sequentially from Q2, we realized $30 million of cost savings, which drove a 4% reduction in SG&A and we saw real improvement in women’s sales driven by the shift in our merchandising strategy, and while traffic was weaker than expected, our conversion rates were higher than last year.”
Chapter 11 Bankruptcy Filing
Express has been in discussions with its advisors regarding a potential bankruptcy filing. The company has also attracted some potential suitors who could assist with the Chapter 11 bankruptcy process.
According to the UScourts.gov website, “A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a “reorganization” bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.”
Several Firms Are Considering Buying The Company
Bloomberg reported that WHP Global, a brand management firm that holds Express shares due to a 2023 partnership, is one of several firms exploring the possibility of buying the distressed apparel chain through Chapter 11 proceedings.
This revelation was made by sources familiar with the matter who requested anonymity due to the private nature of the ongoing discussions.
Sycamore Partners Is Another Potential Bidder
The sources also revealed that other potential bidders for Express include the private equity firm Sycamore Partners.
Bloomberg contacted representatives for Express, WHP, and Sycamore Partners but they declined to comment.
The Bankruptcy Filing May Happen This Week
Express may move forward with the Chapter 11 bankruptcy filing as early as this week (the week of April 21), although a final decision has not yet been reached.
Rapid Ratings, a provider of public financial information for publicly traded companies, has identified Express as a high default risk and has advised its customers to begin taking risk mitigation measures.
Rapid Ratings’ Warning To Customers
The Rapid Ratings website advises its customers to be cautious when dealing with companies like Express.
The website says, “These companies are typically profitable with potentially strong margins but may carry aggressive debt loads with poor liquidity, making them vulnerable to any operational shocks such as loss of a key client,” the site shared.”
Express Has Been Facing Challenges For A While Now
According to retail analysts, the challenges faced by Express have developed over a long period of time.
Last week, Bloomberg reported that Express has been in discussions with lenders to finance a potential bankruptcy process.
The Company Has Been Facing A Decline In Demand
Express has been facing declining demand over several quarters as consumers reduce discretionary spending or shift their dollars towards e-commerce giants like Shein or Amazon.
Express’s CEO Tim Baxter stepped down in September, just one day after the company reported that net sales for the second quarter of fiscal year 2023 had dropped down by 6% year-over-year to $435.3 million.
Getting Delisted From The New York Stock Exchange
The past few months have been especially challenging for Express. The company’s stock price has plummeted by nearly 90% year-to-date.
On March 6, the New York Stock Exchange delisted Express because its share price remained below $1 for over six months.
Surge In Late Payments
According to Creditsafe data provided to Modern Retail, Express paid approximately 30% to 39% of its bills on time in January and February of 2024.
The company’s rate of late payments (one to 30 days overdue) surged from 42.05% in February to 90.33% in March.
Massive Shift In The Company’s Fortunes
The current developments serve as a stark contrast to how things were in 2010 when Express went public as the sixth-largest specialty retail apparel brand in the country.
Even in 2015, the company was doing well with quarterly net sales at $765.6 million.
The Company’s Comeback Efforts
In the last few years, Express has taken several steps to stage a comeback. Last year in May, Express, in partnership with WHP Global, acquired the men’s fashion brand Bonobos from Walmart for $75 million.
In a statement, Baxter highlighted Bonobos’ “double-digit sales growth” and referred to the company as “a compelling addition to our brand portfolio.” In 2022, Express doubled the number of Express Edit stores to attract new customers. The Express Edit stores are a smaller version of the company’s typical stores.
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