Q3 2024 Express Inc Earnings Call
Speaker 1: Good morning, my name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the Express Incorporated Conference called our third quarter, 2023 earnings.
Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the Express incorporated conference call.
Our third quarter 2023 earnings.
All lines.
Speaker 1: Please vote at any background noise. After the speaker's remarks, there will be a question and answer session.
Thanks to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question again press Star one. Thank you I would now like to hand, it over to Greg.
Speaker 2: If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one. Thank you. I would now like to hand it over. To Greg Johnson, Vice President of the Minister Relations, please go ahead. Thank you. Good morning and welcome to our third quarter 2023 earnings conference call.
Johnson Vice President have been Mr. Relations. Please go ahead. Thank you good morning, and welcome to our third quarter 2023 earnings Conference call.
Johnson Vice President have been Mr. Relations. Please go ahead. Thank you good morning, and welcome to our third quarter 2023 earnings Conference call.
Speaker 2: Our third quarter, 2023 earnings release, can be founded our Investor Relations website, and this call will be available for replay.
Third quarter 2023 earnings release can be found at our Investor Relations website and this call will be available for replay.
Speaker 2: I'd like to open by reminding you of the company's safe harbor provisions. Today's call may contain...
I'd like to open by reminding you of the company's Safe Harbor provisions.
Today's call May contain forward looking statements any statements made during this conference call.
Speaker 2: Any statements made during this conference call, except those containing historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Security's Illigation Reform Act of 1995.
Those containing historical facts may be deemed to constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
Speaker 2: Actual future results may differ materially from those suggested in forward looking statements due to a number of risks and uncertain.
Actual future results may differ materially from those suggested in forward looking statements due to a number of risks and uncertainties for a description of the risks that could cause our results to differ materially from those described in forward looking statements. Please refer to our 2022 Form 10-K, and our other filings with the SEC.
Speaker 2: For a description of the risk that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2022 form 10K and our other filings with the SEC, which are posted on our Invest Relations website. These risks and uncertainties are further detailed in the earnings.
C, which are posted on our Investor Relations website. These risks and uncertainties are further detailed in the earnings release.
Speaker 2: These statements represent our current judgment, express assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, we may refer to certain non-GAAP measures. You can locate a reconciliation of any non-GAAP measures discussed in our comments to amounts reported under GAAP in our earnings report.
These statements represent our current judgment express assumes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise except as required by law. In addition, we may refer to certain non-GAAP measures.
Can locate a reconciliation of any non-GAAP measures discussed in our comments to amounts reported under GAAP in our earnings release.
Speaker 2: We will also be providing financial comparisons to prior periods. And our prepared remarks today refer to comparisons to the corresponding periods in 2022, unless otherwise noted.
We will also be providing financial comparisons to prior periods in our prepared remarks today refer to comparisons to the corresponding periods in 2022, unless otherwise noted.
Speaker 2: Please see the explanatory notes in the earnings release for additional details regarding the definition of certain terms. With me today, our Stuart Glendonink, Chief Executive Officer, and Mark Still, Interim Chief Financial Officer, I will now turn the call over to Stuart.
See the explanatory notes in the earnings release for additional details regarding the definition of certain terms with me today are Stewart Glendinning, Chief Executive Officer, and Mark still interim Chief Financial Officer, I will now turn the call over to Stuart.
Speaker 3: Thanks, Greg. Good morning everyone. Let me begin by thanking the board and the entire express organization for the opportunity to lead this company.
Thanks, Greg Good morning, everyone. Let me begin by thanking the board and the entire express organization for the opportunity to lead this company.
Speaker 3: I've been in the consumer products industry for much of my career, managing and growing global brands, as well as serving as a chief financial officer of multinational companies.
In the consumer products industry for much of my career, managing and growing global brands as well as serving as the chief financial officer of multinational companies.
Speaker 3: My experience with consumers, operations and finances well suited to the challenges facing express.
The experience with consumers operations and finance as well suited to the challenges facing express.
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.
Speaker 3: After joining the business of the London three months ago, my folks has been on the pathway to recovering the company's full profit potential.
Speaker 3: This includes accelerating our cost reduction initiatives and launching new ones intended to improve our business performance and liquidity.
This includes accelerating our cost reduction initiatives and launching new ones intended to improve our business performance and liquidity.
Speaker 3: Today I'm going to share with you the results from Q3 and then discuss my early thoughts on the path to recover it.
Today I'm going to share with you the results from Q3, and then discuss my early thoughts on the path to recovery.
Speaker 3: Our third quarter sales and deluded loss for a share came in below the land of our outlook range.
Our third quarter sales and diluted loss per share came in below the low end of our outlook ranges.
Speaker 3: The macroeconomic environment remains challenging and the consumer and competitive landscape who are highly promotion.
Macroeconomic environment remains challenging in the consumer and competitive landscapes were highly promotional.
Speaker 3: Operating margin in the third quarter was a negative 6.3% versus a negative 6.8% the same quarter last year
Operating margin in the third quarter was a negative six 3% versus a negative six 8% the same quarter last year.
Speaker 3: This is driven by weakness in our top line, which was largely all set by strong cost savings performance in SGNA.
This was driven by weakness in our top line, which was largely offset by strong cost savings performance in SG&A and.
Speaker 3: In brand express, the top line was down 7% driven by weaker results in our retail and outlet stores, partially offset by a 10% increase in online sales.
<unk> brand express the topline was down 7% driven by weaker results in our retail and outlet stores, partially offset by a 10% increase in online sales.
Speaker 3: In Express brand unit scales were consistent with our expectations. However, moving through this inventory required more extensive discounting and laid the greater gross margin erosion.
And the express brand unit sales were consistent with our expectations. However, moving through this inventory required more extensive discounting and lead to greater gross margin erosion.
Speaker 3: Keep in mind that our gross margin includes the royalty expense to WHP, which negatively impacted our gross margin by approximately 370 basis points, as we did not have this expense in the same quarter in 2022.
Keep in mind that our gross margin includes the royalty expense to WH P, which negatively impacted our gross margin by approximately 370 basis points as we did not have this expense in the same quarter in 2022.
Speaker 3: While there's more work to be done to improve the year of the year's sales results, there were several positive indicators in the quarter. Our sales performance improved sequentially.
While there is more work to be done to improve year over year sales results. There were several positive indicators in the quarter.
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.
Speaker 3: And while traffic was weak and unexpected, our conversion rates were higher than last year.
And while traffic was weaker than expected our conversion rates were higher than last year.
We're now driving improvements in our women's business with a low single digit positive comp anchored by strong E Commerce sales.
Speaker 3: We're now driving improvements in our women's business with a low single digit positive comp anchored by strong e-commerce sales.
Speaker 3: Our men's comp was down mid double digits, consistent with Q2 results, as we continue to lap the record 2022 performance, particularly in suits.
Our men's comp was down mid double digits consistent with Q2 results as we continue to lap the record 2022 performance, particularly in suits.
Speaker 3: To offset this decline, we're actively adjusting our assortment architecture through a better balance in wearing occasion price points and a focus on more casual tops and bottoms.
Offsetting this decline were actively adjusting our assortment architecture through a better balance in wearing occasion price points and a focus on more casual tops and bottoms.
Speaker 3: That said, we retain a strong market position with a high share of men's specialty retail.
That said, we retain a strong market position with a high share of men's specialty retail.
<unk> grew sales by 15% versus the same quarter last year and <unk> exceeded our expectations for the third quarter.
Speaker 3: Up west grew sales by 15% versus the same quarter last year, and Vanobos exceeded our expectations for the third quarter.
Speaker 3: The addition of Bonobos has allowed us to leverage our back office and is creating increased purchase leverage with suppliers.
The addition of <unk> has allowed us to leverage our back office and is creating increased purchase leverage with suppliers.
Speaker 3: While Express has broad market reach and penetration.
While express has broad market reach and penetration of.
Speaker 3: Vanobos with annual revenues in excess of $200 million has a tremendous opportunity for increased awareness and household penetration to build on its existing scale.
One of us with annual revenues in excess of $200 million.
<unk> has a tremendous opportunity for increased awareness and household penetration to build on its existing scale.
Speaker 3: combination of in-store fitting and online fulfillment has created strong customer retention and repeat purchase and we expect to continue to grow
The combination of in store fishing and online fulfillment has created strong customer retention and repeat purchase and we expect to continue to grow the topline.
Speaker 3: Having said that, we need to reinvigorate our brand express performance and build a stronger foundation on which to realize the company's full potential.
Having said that we need to reinvigorate our brand express performance and build a stronger foundation on which to realize the companys full potential.
Beginning last year, we faced a number of challenges, including declines in our customer file conversion and store traffic driven by missteps in our merchandise strategy, most notably in womens where we were out of balance across categories price points and wearing occasions.
Speaker 3: Beginning last year we faced a number of challenges, including declines in our customer file, conversion and store trap.
Speaker 3: Driven by missteps and our merchandise strategy must notably in women's where we were out of balance across categories, price points, and wearing a case.
Speaker 3: This misalignment between our assortment architectures
This miss alignment between our assortment architecture and customer demand significantly impacted our historic sales and margins.
We believe strongly there is a path to total company improvement.
Speaker 3: 4 key focus areas are expected to drive the recovery and are already underway.
Four key focus areas are expected to drive the recovery and are already underway.
Speaker 3: customer engagement, operating excellence, cost reduction, and inventory management. Let me explain.
Customer engagement operating excellence cost reduction and inventory management, let.
Let me explain a little bit more about each.
Speaker 3: The understanding consumer motivation that is providing them with the product they want and delivering a great purchase experience are all part of ensuring customer engagement.
Understanding consumer motivation that is providing them with the products they want and delivering a great purchase experience are all part of ensuring customer engagement.
Speaker 3: We expect our merchandise assortment to continue to drive increased customer appeal. Our marketing efforts will reinforce our products, style and quality. And our associates will ensure a positive shopping experience, both online and in our stores.
We expect our merchandise assortment to continue to drive increased customer appeal, our marketing efforts will reinforce our product style and quality and our associates will ensure a positive shopping experience both online and in our stores.
Across the board, we have opportunities to improve our operating execution. This includes cycle times in store execution.
Speaker 3: Across the board, we have opportunities to improve our operating execution. This includes cycle times, in-store execution, sourcing on logistics. All parts of our business should allow us to serve customers. Lower our cost space and beat the competition.
Sourcing on logistics, all parts of our business, which allow us to serve customers lower our cost base and beat the competition.
Speaker 3: As part of this effort, we expect some rationalization of our store count as we close high effort, unprofitable stores.
As part of this effort, we expect some rationalization of our store count as we closed high effort unprofitable stores.
Speaker 3: On cost reduction, we're making good progress and expect to meet the commitments we made.
On cost reduction, we're making good progress and expect to meet the commitments we made in.
Speaker 3: In 2023, we identified and implemented a $120 million in annualized expense savings.
In 2023, we identified and implemented $120 million in annualized expense savings, we realized $30 million in Q3, and we will realize a total of $80 million for the full year 2023, the remaining $40 million will be realized in the first half of 2020.
Speaker 3: We realized $30 million in Q3 and we realized a total of $80 million for the full year 2023. The remaining $40 million will be realized in the first half of 2024.
Paul.
Speaker 3: We are committed to over $200 million in savings.
We are committed to over $200 million in savings.
Speaker 3: by 2025, which is inclusive of the $120 million in annualized savings in 2024.
By 2025, which is inclusive of the $120 million in annualized savings in 2024.
Speaker 3: It also includes 50 million dollars in gross margin expansion opportunities by leveraging efficiencies in sourcing production and the supply chain.
It also includes $50 million and gross margin expansion opportunities by leveraging efficiencies and sourcing production and the supply chain.
Speaker 3: This is a great stock and I believe we can do even more.
This is a great start and I believe we can do even more.
Speaker 3: Lastly, we're driving changes to ensure lower inventories and higher turn rates. This will not only reduce our borrowings, it will also enhance our operating effectiveness as store backrooms and warehouses are not hampered by excess product. We expect a meaningful reduction in inventory during 2024.
Lastly, we're driving changes to ensure lower inventories and higher turn rates. This will not only reduce our borrowings. It will also enhance our operating effectiveness our store backrooms and warehouses are not hampered by access product.
We expect a meaningful reduction in inventory during 2024.
Speaker 3: Now these areas are just the beginning of our efforts to return expressed to profitability.
Now these areas are just the beginning of our efforts to return express to profitability.
Speaker 3: In the longer term, we expect to advance our partnership with WHP Global. And the opportunity here is twofold. First, early this month, WHP announced the signing of long-term licensing deals to bring the express brand to Indonesian Paraguay, grow our presence in Mexico and expand our retail footprint in Central America with the opening of four new express retail flagship stores through 2026.
In the longer term, we expect to advance our partnership with <unk> HP global and the opportunity here is twofold first.
Early this month <unk> announced the signing of long term licensing deals to bring the express brand to Indonesia, Paraguay grow our presence in Mexico and expand our retail footprint in Central America with the opening of four new express retail flagship stores through 2026.
Speaker 3: Royalties from these ventures, as well as non-core domestic licensing, will now flow into the partnership and express will receive its 40% share in that, of course.
Royalties from these ventures as well as non core domestic licensing will now flow into the partnership and express will receive its 40% share net of costs.
Speaker 3: The second component of the strategic partnership is pursuing acquisition.
The second component of the strategic partnership is pursuing acquisitions.
Our first acquisition was bonobos, which we completed in the second quarter and since then <unk> sales have exceeded our outlook and they are on track to deliver positive free cash flow for the full year.
Speaker 3: Our first acquisition was Bonavos, which we completed in the second quarter.
Speaker 3: Since then, Benobus' sales have exceeded our outlook and their on track to deliver positive free cashflow for the full year.
Speaker 3: We expect to leverage this agreement for further acquisitions in the years to come.
We expect to leverage this agreement for further acquisitions in the years to come.
Now, let me introduce Mark still Mark has been with the company for nearly 20 years and is just assume the interim CFO role. He will provide further detail on our Q3 results and outlook for the fourth quarter and full year Mark.
Speaker 3: Now, let me introduce Mark Still. Mark has been with the company for nearly 20 years and has just assumed the interim CFO role. He will provide further detail on our Q3 results and outlook for the fourth quarter and the full year. Mark, thank you, Stuart and good morning. Thank you.
Thank you Stuart and good morning.
I'll begin with our third quarter results.
Speaker 2: We expected consolidated net sales of $460 to $490 million for the approximately $50 million of sales from Bonobo.
We expected consolidated net sales of $460 to $490 million with approximately $50 million of sales from bonobos.
Speaker 4: Consolidated net sales actualized at $454 million, including $52 million from Bonova.
Consolidated net sales actualized at $454 million.
Including $52 million from Lenovo.
Speaker 4: In the express and up west brands combined, comparable sales declined 6%, which was a significant improvement over the 14% decline in the second quarter.
In the express and up West brands combined comparable sales declined 6%.
It was a significant improvement over the 14% decline in the second quarter.
Speaker 4: E-commerce comps increase 10%, driven by improvements in our women's business and strong conversion in...
E Commerce comps increased 10% driven by improvements in our women's business and strong conversion increases.
Speaker 4: Retail stores declined 16% and outlet stores were down 13%.
Retail stores declined 16% and outlet stores were down 13%.
Traffic declines and lapping record men's business contributed to the ongoing challenges in these channels.
Speaker 4: We expected gross margin to decrease approximately 200 basis.
We expect gross margin to decrease approximately 200 basis points.
Speaker 4: We saw the increase of 370 basis points as we increased promotions and had greater margin erosion than we originally anticipated.
We saw a decrease of 370 basis points as we increased promotions and have greater margin erosion than we originally anticipated.
Speaker 4: We expected approximately 275 basis points of leverage in our SG&A expenses. And we actualized that...
We expected approximately 275 basis points of leverage in our SG&A expenses.
We actualized at leverage of 300 basis points.
Speaker 4: The leverage was driven by our cost savings initiatives, which delivered $30 million of savings in the third.
Our leverage was driven by our cost savings initiatives, which delivered $30 million of savings in the third quarter.
We expected a diluted loss per share of $5 50 to $7 50.
Speaker 4: We expected a deluded loss per share of $5.50 to $7.50. Deluted loss per share was $9.
Diluted loss per share was $9 83.
Moving onto the balance sheet.
Speaker 4: At quarter close, we have $35 million of cash and cash equivalent on.
At quarter, close we had $35 million of cash and cash equivalents on hand.
Speaker 4: Total barwings were $278 million of which $213 million was drawn against our asset-based credit facility.
Total borrowings were $278 million.
Of which $213 million was drawn against our asset based credit facility.
Speaker 4: And the remaining $65 million was drawn on our term loan.
And the remaining $65 million was drawn on our term loan.
Speaker 4: $22 million remains available under the asset-based credit facility.
$22 million remains available under the asset based credit facility.
Inventory increased by 14% versus last year, consistent with our expectations and driven by the <unk> acquisition.
Speaker 4: Inventory increased by 14% versus last year, consistent with our expectations and driven by the BenoGo acquisition.
Regarding the $52 million Cares Act receivable, we have mentioned previously.
Speaker 4: Regarding the $52 million CARES Act received, what we have mentioned previous.
Speaker 4: We are now pursuing this refund in two different pieces as a means to accelerate the pace.
We are now pursuing this refund in two different pieces as a means to accelerate the payment.
Speaker 4: The first piece is for $43 million, which is agreed upon, and the second piece is for $9 million, which is still under review.
The first piece is for $43 million, which is agreed upon and the second pieces for $9 million, which is still under review.
Speaker 4: We expect to receive $48 million, which is comprised of the $43 million in cash related to the CARES Act receivable, and a $5 million reduction in our income taxes payable for 2022.
We expect to receive $48 million.
Which is comprised of a $43 million in cash related to the cares Act receivable.
And a $5 million reduction in our income taxes payable for 2022.
Speaker 4: It should be noted that we will continue to pursue the remainder of our claim with the IRS.
It should be noted that we will continue to pursue the remainder of our claim with the IRS.
Speaker 4: For amounts to be paid, the path forward includes approval by the IRS and the Congressional Joint Committee on Taxation.
For amounts to be paid the path forward includes approval by the IRS and the congressional Joint Committee on taxation. We are actively engaged with the IRS to move this claim forward given the importance of this receivable to our liquidity.
Speaker 4: We are actively engaged with the IRS to move this claim forward, given the importance of this receivable to our...
Speaker 4: Before turning to our outlook for 2023, I want to briefly comment on our early Q4 performance.
Before turning to our outlook for 2023 I want to briefly comment on our early Q4 performance our.
Speaker 4: Our October trends continued into the first half of November . While in the back half of November , sales improved and were more in line with last-
Our October trends continued into the first half of November while in the back half of November sales improved and were more in line with last year.
Speaker 4: With that in mind, as we turn to our outlook for 2023, our fourth quarter and four year outlooks have been updated and taken to consideration to continued uncertain consumer and macroeconomic environment.
With that in mind, as we turn to our outlook for 2023, our fourth quarter and full year outlook has been updated and take into consideration the continued uncertain consumer and macroeconomic environments.
Speaker 4: balanced against our quarter-to-date performance, the impact of the $80 million in expense reductions that we will realize, as well as the expected performance of Bonobo.
Balanced against our quarter to date performance the impact of the $80 million in expense reductions that we will realize as well as the expected performance of <unk>.
As a reminder, the full year of 2023 will include a 50 <unk> week with.
Speaker 4: As a reminder, the full year of 2023 will include a 53rd week.
Speaker 4: With the fourth quarter of 2023 consisting of 14 weeks.
With the fourth quarter of 2023, consisting of 14 weeks.
Speaker 4: The 53rd week is estimated to add approximately $25 million of net sales in the fourth quarter.
The 50 <unk> week is estimated to add approximately $25 million of net sales in the fourth quarter.
Speaker 4: Our outlook for Q4 compared to the fourth quarter of 2022 is as follows.
Our outlook for Q4 compared to the fourth quarter of 2022 is as follows.
Speaker 4: net sales of approximately $565 million to $590 million, including the 14th week and approximately $60 million in Vanobos net sales.
Net sales of approximately 565 million to $590 million, including the 14th week and approximately $60 million in <unk> net sales.
Speaker 4: and operating margin of negative mid single digits.
And operating margin of negative mid single digits.
Speaker 4: Our outlook for the full year compared to the full year of 2022 is as follows.
Our outlook for the full year compared to the full year of 2022 is as follows.
Speaker 4: net sales of approximately $1.84 billion to $1.85 five billion, including the 53rd week and approximately $150 million in box net sales.
Net sales of approximately $1 84 billion to 186 5 billion.
Including the 50, <unk> week, and approximately $150 million in <unk> net sales.
Speaker 4: Deluted and lost per share of $46 to $50.
Diluted loss per share of $46 to $50.
Speaker 4: and capital expenditures of approximately $25 million. And now...
And capital expenditures of approximately $25 million.
And now let me turn the call back to Stuart.
Speaker 3: Thanks Mark and thanks for attending the call today. Our team here at Express believes in the full potential of our business, recognizes the current challenges and is actively engaged in driving the changes that will restore liquidity and move the business back to profitability. I'll now turn the call over to the operator and we'll take your questions.
Thanks, Mark and thanks for attending the call today, our team here at express believes in the full potential of our business recognizes the current challenges and is actively engaged in driving the changes that will restore liquidity and move the business back to profitability I will now turn the call over to the operator, and we will take your questions.
Thank you as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to two questions and a follow up.
Speaker 1: Thank you. As a reminder, if you would like to ask a question, please press star, followed by the number one on your telephone keypad. We also ask that you limit yourself to two questions and a follow-up. Your first question comes from the line of Dana Tessley from Tessley Advisory Group. Please go ahead. Good morning.
Our first question comes from the line of Dana Tesla from Chesley Advisory Group. Please go ahead.
Okay.
Good morning, everyone and welcome Stuart Hello, Mark.
Speaker 5: Do it if you've been there now at just a high. If you've been there now just around two months and you mentioned the men and the women's business, what do you see to that? Where are you in the steps to getting the women's business back on track? How you thinking about the men's business? What's the process and what's the prognosis for the timeline?
<unk> been there now.
Hi, as you've been there now just around two months and you mentioned the men's and the women's business. What do you see that where are you in the steps to getting the women's business back on track, how you're thinking about the mens vince's, what's the process and what's the prognosis for the timeline.
Speaker 5: And Mark, when you think about the store base and the online channels of distribution, how do you think about the expense structures of each, what does a opportune store base look like to you? And as we go through this holiday season, how do you think of promotion versus full price and where are you on the merchandise margin journey? Thank you.
Mark when you think about the store base the store base and the online channels of distribution. How do you think about the expense structures of each what does a.
A opportune store base look like to you and as we go through this holiday season, how do you think of promotional promotions versus full price and where are you on the merchandise margin journey. Thank you.
Alright, well Dana Thank you that's that's.
A good set of questions. There, let me pick up on the merchandising strategy. Because this is actually a place where I think we're in we're in pretty good shape and the reason for that is that we've got a new leader of this space.
Micro Ringo who is top notch.
He has already shifted the.
Merchandise strategy and you saw it kick in in this quarter I mean women had a that had historically in the last couple of years had a pretty rough time, we saw a positive comp in women this quarter it was terrific.
Speaker 3: I had historically, the last couple years had a pretty rough time. We saw positive in women in this quarter. It was terrific. Our knit tops delivered better than 20 percent growth, sweaters and woven tops were up. Bottoms were up. I mean, our worst category in women.
Our knit tops deliver better than 20% growth sweaters and woven tops were up bottoms.
We're up I mean, our worst category in women was tailoring and that came in at a minus one so I think broadly women are in good shape manner or in a different place.
Speaker 3: was tailoring and and that came in at at a minus one so i think broadly women are in good shape
Speaker 3: Men are in a different place. They are a lot weaker and the primary reason they are is that last year was such a strong year in in in suit.
They are a lot weaker and the primary reason is that last year was such a strong year in suits.
Speaker 3: and it was a tough comp for men to go up against. But even inside of men, I mean, we looked at sweaters, Michael's team rolled out, a new set of sweaters, and sweater tops. That was a strongly performing category. In the spaces where we've moved more to casual, we're seeing a strong performance, and that's what you're gonna see coming up in the quarters to come. So let's give it a 10 minute just to see if there'sthern
And it was a tough comp for meant to go up against but even inside a man I mean, we looked at sweaters micro's team rolled out.
New set of sweaters.
And sweater tops that was a strongly performing category in the spaces, where we've moved more to casual we're seeing a strong performance and thats, what youre going to see coming up in the quarters to come.
And Dana coming from.
Speaker 4: sticking with the merchandise as we think about the fourth quarter and our promotional stance versus full ticket. You know I would say we continue to be in a highly promotional environment especially here in holiday. What I would say is that we are continuing to see great adoption of our Go Forwards product.
Sticking with the merchandize as we think about the fourth quarter and our promotional stance versus full ticket.
I would say we continue to be in a in a highly promotional environment, especially here in holiday what I would say is that we are continuing to see great adoption of our go forward product and we will continue to focus on that go forward product, but in the midst of holiday coming out of Black Friday and moving into the Christmas period, we do expect to.
Speaker 4: and we will continue to focus on that go forward product. But in the midst of holiday coming out of Black Friday and moving into the Christmas period, we do expect to continue to see a very highly promotional environment. But as we move into next year, and as we've mentioned, the go forward,
We continue to see a very highly promotional environment, but as we move into next year and as we've mentioned the the go forward.
Speaker 4: cost savings that we are expected to see as we move into 2024 and 2025 we will expect to see benefit over time
Cost savings that we are expecting to see as we move into 2024 and 2025, we will expect to see benefit over time.
And then getting to your the second part of your second part of your question as it relates to stores versus E. Com as we mentioned in the prepared remarks, we had a plus 10 comp from an ecommerce standpoint saw great growth, great conversion growth, especially within E com and as we also.
Speaker 4: And then getting to your second part of your question as it relates to stores versus e-com. As we mentioned in the prepared remarks, we had a plus 10 comp from an e-commer standpoint. Saw great growth, great conversion growth, especially within e-com. And as we also mentioned in the remarks, we're going to continue to look at our store fillet. We will continue to evaluate it. And if we have high effort, unprofitable stores, we will look at potentially closing those locations.
And in the remarks, we're going to continue to look at our store fleet. We will continue to evaluate it and if we have high effort unprofitable stores, we will look at potentially closing those locations.
Yes.
Okay.
Got it and then just as soon as you think about the competitive landscape of the express and obviously when you were looking at joining the company where you wanted to take the business. How do you envision what express should look like over the next year or what you think the steps are to reinvigorate and <unk>.
Speaker 5: got it and then just so as you think about the competitive landscape of Express.
Speaker 5: And obviously when you're looking at joining the company where you want to take the business.
Speaker 3: How do you envision what express should look like over the next year, what you think the steps are to reinvigorate and see express be a growth company? Thank you. Yeah, well, great question. I'm gonna reiterate some of the points that I made in the prepared remarks. But first of all, I'm coming to the company. You know, I saw a really strong brand.
<unk> be a growth company.
Yes.
Great question, and I'm going to reiterate some of the points that I made in the prepared remarks, but first of all I'm, telling you the company so really strong brand.
Speaker 3: Express has been around the long time. It's got loyal customer base and I think the sort of missteps here is best I could read the story.
Express has been around a long time.
The loyalty customer base and I think the <unk>.
Missteps here as best I could read the story was that we had gotten a little bit away from where our consumer with was buying and we were serving up a set of products that were not aligned with the customer set of what you've seen more recently, our two changes one us getting back to more of a.
Speaker 3: was that we had gotten a little bit away from where our consumer was buying.
Speaker 3: and we were serving up to set a product that were not aligned with the customer set. What you've seen more recently are two changes. One, us getting back to more of the express basics things that we've sold over time. And two, us moving a little bit more to where the consumer is broadly, that is to say more casual, I think coming out of COVID, that more casual dress has persisted. And our assortment will reflect that.
Express basic things that we sold over time and to us moving a little bit more to where the consumer is broadly that is to say more casual I think coming out of coming out of Covid.
More casual dress is persistent.
Our assortment will reflect that.
Speaker 3: I think that that's part of the journey where I feel very confident because you've got a good strong team.
That's part of the journey, where I feel very confident because we've got a good strong team there.
Speaker 3: In the rest of the businesses, I looked at the business. I saw a broad set of opportunity and that has only been confirmed in the first couple of months here. There's an absolute opportunity here to engage more aggressively with customers through branding and through messaging to customers. And in fact, in the way in which we serve them both online and in stores in their purchase experience.
In the rest of the business as I looked at the business I saw a broad set of opportunity and that has only been confirmed in the first couple of months here. There is an absolute opportunity here to engage more aggressively with customers through branding.
And through messaging to customers and in fact in the way in which we serve them both online and in stores and the purchase.
Experience.
Coming from a deep operations background as well as I look across the business and consider the the ability for us to shorten cycle times for us to get better at operating the business just in terms of.
Moving product around.
Getting.
Speaker 3: getting our stores in fighting shape. I look across the business there are a ton of opportunities then and you will see those as we go through the next few quarters. We've spoken extensively to cost reduction.
Getting our stores in fighting shape I look across the business. There are a ton of opportunity. Then you will see those as we go through the next few quarters. We've spoken extensively to cost reduction and I think the team is already doing a great job that the only thing I'm doing frankly is to try to deepen that an accelerated but we will hit the $200 million Im confident.
Speaker 3: And I think the team's already doing a great job there. The only thing I'm doing, frankly, is to try to deepen that and accelerate it. But we will hit the $200 million. I'm confident of it. And finally, I think if you look at Edmunds.
And finally, I think if you look at inventory.
Speaker 3: You know, we're not turning enough in the business. That inventory needs to move up.
We're not turning up in the business that inventory needs to move.
Speaker 3: Through more quickly, the benefit of that, frankly, is we'll have a lower interest bill and inside of our own operations. You'll see less.
Through more quickly the benefit of that frankly is we will have a lower interest bill and inside of our own operations Youll see less cluttered back backrooms and stores Youll see warehouses that arent jammed up and frankly that will leave us in a place where we're just a much healthier business.
Speaker 3: Cluttered back rooms and stores, you'll see warehouses that on-chammed up. And frankly, that will leave us in a place where we're just a much healthier business.
Thank you.
Yes.
Speaker 1: Your next question comes from the line of Eric Better from FCC Research. Please go ahead.
Your next question comes from the line of Eric better from FCC Research. Please go ahead.
Okay.
Good morning, Eric.
Speaker 6: More Eric. Hi, I'm a couple of other documentaries. If you take out the novos, what was the inventory impact on the, what was the inventory without the novos? And when should we start expecting to see the inventory? I guess with the withoutvenobos, start to come down.
Good morning, Eric a couple of them are on inventories.
You take out <unk>, what was the inventory impact on the what was the inventory without <unk>.
When should we start expecting to see.
The inventory I guess.
Without the numbers start to come down.
Speaker 4: Eric, I can take the, I'll start with the first part of that question. If we exclude Benobos, our inventory was flat compared to last year. So Benobos added roughly $58 million of inventory that obviously was not in our inventory last year.
Yes, Eric I can take the I'll start with the first part of that question. If we exclude <unk>. Our inventory was was flat compared to last year or so <unk> added roughly $58 million of inventory that obviously was not in our inventory last year.
Speaker 3: When it comes to the second part of your question as relates to starting to see that come down, we are intensely focused on improving our working capital and improving our inventory position. So it is a focus of ours to make a meaningful reduction in our overall inventory levels as we move to the end of this year and through 2024. Yeah, I mean, short air, you should start to see that in the first half of 24.
When it comes to the second part of your question as it relates to starting to see that come down we are intensely focused on improving our working capital and improving our inventory position. So it is a focus of ours to make a meaningful reduction in our overall inventory levels as we move to the end of this year and through 2020.
Yes sure.
Sure Eric you should start to see that in the first half of 'twenty four.
Okay.
Okay.
Speaker 6: Question for you. I guess the second question is WHP and the agreement there. I know you mentioned international expansion opportunities.
Okay.
Second question is that new HP and the agreements are you.
You mentioned some international expansion opportunities.
Speaker 6: When do you think those will start to impact? I can see other questions. You know, you had a great acquisition of the NOVOs. And do you have the financial, do you believe you have the financial flexibility to do other acquisitions here in kind of the same structure?
When do you think those will start to impact I guess the other question is no.
You had a great acquisition of de Novo's. So can you have the financial if you can believe you have the financial flexibility to do other acquisitions here and kind of the same structure.
Speaker 3: Well, let me just, let me start at the most important part first. Our primary focus here is driving EXDR back to profitability. That's job one, job two and job three. The WHP partnership is something that will benefit us absolutely over the longer term, both because of the royalty sharing that we spoke of in our prepared remarks.
Well, let me just let me start with the most important part in our primary.
Focus here is driving year to deal back to profitability, that's job one job two and job III.
The <unk> partnership is something that will benefit benefit us absolutely over the longer term.
Both because of the royalty sharing that that we spoke of in our prepared remarks.
Speaker 3: That's a no way distracting to us. These are operations that are separate from our operations. They will be licensed and overseen by the WHP partnership and we will collect the benefit as being an owner of that. So that is broadly just beneficial to us without extraordinary effort from us.
That is in no way distracting to US. These are operations that are separate from our operations.
They will be licensed and overseen by by the <unk> partnership and we will we will collect the benefit is being an owner of that so that is broadly just beneficial to us without without extraordinary effort from us on the second part as it relates to acquisitions.
Speaker 3: On the second part, as it relates to acquisitions, we're going to take that over time. Vanobos was a great opportunity for us. We're super happy that that brand, which is a powerful brand.
We're going to take that over time, but <unk> is a.
Great opportunity for Us, we're super happy that that brand, which is a powerful brand.
Speaker 3: a long runway ahead of it is part of our organization. But right now, job one, two and three is focusing on getting EXPR back to health.
A long runway ahead of it is part of our organization, but right now job one two and three is focusing on getting <unk> back to health.
What are you looking at.
When you look at the what do you think of the potential longer term.
Speaker 6: But you look at the picture, what do you think of the pen shell, longer term, or express in terms of its ability to, what do you mean, the longer term, opportunities are in terms of margin, in terms of the ability of the size of the pieces for express. I know you won't have been there two months, so I'm not expecting you to do that. Yeah, I think so. But what do you think about that?
Our express in terms of its ability.
In the longer term opportunities are in terms of margins in terms of the ability of the size of the pieces core Express I know you've only been there two months so.
Unexpectedly.
What do you think about that.
Speaker 3: Eric, I think it's a great question. Frankly, of course, coming when you make a big change like this, you think carefully about what the possibilities are for the business. I just take you back to 28.
Alright, I think it's a great question frankly.
Frankly of course coming when you make a big change like this.
You think carefully about what the possibilities are for the business I'll just take you back to 2018, I mean 2018 was a healthy year wasn't it wasn't extraordinary year for the business and if I were going to set a benchmark for <unk>.
Speaker 3: I mean, 2018 was a healthy year. Wasn't an extraordinary year for the business. And if I were gonna set a benchmark for, for a place to go back to, that's what I would look to. And you can go back and look at those financials. But you were living with gross margins around 30% and a positive net income. I think that to me is the starting point. But this is a business that has all the right building blocks.
For a place to go back to that that's what I would look look too and you can go back and look at those financials Budd.
You sort of you were living with gross margins around 30%.
A positive net income.
I think that to meet the starting point, but but this is a business that has all the right building blocks.
I think if you gave me the opportunity to sort of get through this next quarter are coming back in at the end of the year. We will give you a good set of expectations for 2024, and give you a little bit more detail on what we think the glide path looks like to to recovering the full potential in the business.
Okay.
Luck for the rest of the holiday season.
Appreciate that thank you all right. Thanks, Eric.
Speaker 1: Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Marnie Shapiro from Retail Tracker. Please go ahead.
Again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Marni Shapiro from retail tracker. Please go ahead.
Speaker 7: Hey everybody, welcome to In a Mark, nice to meet you. I'd like to just dig in a little bit more to the merchandising changes. It sounds a little bit like we're moving the pendulum back a little bit to where Express was, you know, Portofino shirts, key items. If you could just dig into that a little and is...
Hey, everybody welcome Stuart and Mark Nice to meet you.
I'd like to just digging a little bit more to the merchandising changes it sound a little bit like we're moving it depends on back a little bit to where express was quite a fino shirts key items.
If you could just dig into that a little and is.
Speaker 7: Excuse me. Is that visible? I was in the stores all weekend. I'm there all the time. I've seen some changes in the store. Is this what I'm seeing and how much more has to come? And could you also just talk a little bit about what's going on in the outlets? It seems like that customer's definitely the most price sensitive. But other brands have talked about how the outlets have been a bright spot because the consumer's more price sensitive.
Excuse me.
Is that visible in the stores all weekend them. There all the time I have seen some changes in store is this what I'm seeing and how much more is to come and could you also just talk a little bit about what's going on to the outlets.
It seems like that customer is definitely the more price sensitive, but other brands have talked about how the outlets have been a bright spot because the consumers more price sensitive.
Yeah, Okay, well, let me let me take the second half first and then I'm going to give you the benefit of getting a little bit of explanation directly from our chief merchandising officer, because I think he's going to give you a little more granularity, but look on outlets I would say that outlets, a particularly bright spot for us. They are a bright spot just in terms.
Speaker 3: Yeah, okay, well, let me take a second half first, and then I'm gonna give you the benefit of getting a little bit of explanation directly from our chief merchandising officer, because I think he's gonna give you a little more granularity. But, look on outlets, I would say, that outlets weren't a particularly bright spot for us. They are a bright spot just in terms of being part of the profitability of our business. So if you look at the margin structure, outlets are a very good part of our business.
Of.
Being part of the profitability of our business. So if you look at the margin structure.
<unk> are a very good part of our business, but if you looked at this past quarter for US. The winner was E com and we were up 10% in business in E. Comm. The performance was strong there and that's where we that's where we we won women back site I would say that.
Speaker 3: But if you look at this past quarter, for us, the winner was E-Com and we were up 10% in business in E-Com, the performance was strong there.
Speaker 3: And that's where we won women backs. So I would say that's how our third quarter played out. But realistically going forward, each one of the past structures plays a role.
That's how our third quarter played out but.
Realistically going forward each one of the parts of our business plays a role.
Speaker 3: Our list will continue to be an important part of the strategy. If E-Com will get bigger and stronger, I think, certainly there's nothing that's going to slow that down.
Outlets will continue to be an important part of the strategy as E com will get bigger and stronger I think certainly theres nothing thats going to slow that down.
Speaker 3: But for every pipe it's gonna continue to play around with this.
But every product is going to continue to play a role in the business. Michael do you want to talk about the.
Speaker 4: Michael, do you want to talk about the emergency strategy? Yes, sure. Thanks to Rick. Yeah, Maria, I would say that it's all about balance, ultimately. Getting back into certain icons, such as Portofino, Grammar C, is certainly part of the success that we started to see within women.
The merch strategy, yes, sure. Thanks Stuart yes.
Yes, Marty I would say that it's all about balance ultimately getting back into certain icons such as Portofino Gramercy is certainly part of the success that we start to see within women's but that's only part of it.
Speaker 4: But that's only part of it. You know, it's staying balanced across wearing occasions. So as Stewart had said in his prepared remarks, it's leaning a little bit more casual, but it's still being polished within that. We're balancing price points, ensuring that we've got a good structure across good, better best. But then a good part of it is getting back some of the customers within our icons and franchises, things such as Portofino, Grammar C, denim had a strong quarter and that was reliant upon.
It's staying balanced across wearing occasions. So as Stuart had said in his prepared remarks, it's leaning a little bit more casual, but its still being polished within that we're balancing price points, ensuring that we've got a good structure across good better best within a good part of it is getting back some of the customers within our icons and franchises things such as port.
Fino Gramercy denim had a strong quarter and that was reliant upon getting back into skinny re launching <unk>. So I'd say, it's all about our balances and that is not to move back to the days of old Fino.
Speaker 8: getting back into skinny, relaunched in black sex. But I'd say it's all about a balance, but then that it's not to move back to the days of old of Portofino balls, but the Portofino has a strong customer and wanna make sure that the satisfaction is also having a balance of relevant seasonal fashion.
All but the portofino has a strong customer and wanting to make sure that we satisfy her but is also having a balance of relevant seasonal fashion.
Okay that makes a lot of sense and then could you just talk a little bit about the marketing side.
I know, it's a lot of direct marketing, but how are you thinking about this the express brand.
Is there is a lot of love for the brand for the people who love the brand.
About getting the new customers into the brand.
Yes, I mean, I think the health of every of every brand ultimately is building renewal.
And you're absolutely right, we have a very loyal set of customers.
We look to retain <unk>.
During this past quarter.
What was notable was that sequentially, we improved our customer file.
The customer file had been under some pressure and so I was pleased to see that we're headed in the right direction I think theres a lot more work to be done there.
I think also you see start to see that shift in the merchandising strategy, we're going to be pulling in a set of customers into our into our into our stores and online.
Differently than we were in the past because of because of the offering and finally.
It's been a core focus in mind to take a close look at where we're spending marketing and to look at what what results that spend is driving I think the.
To spend the money in marketing you've got to be certain that you understand what returns that's driving what kind of customers. That's that's bringing to you. So this is work for us to do just in terms of broad brand building and I think all those things combined will start to bring that new customer into our store great.
Great Best of luck for the rest of the holiday season.
No I appreciate that thank you marni.
And we have no further questions in our queue at this time I.
I'll now turn the call over to Stuart Glenn Thank week for closing remarks.
Great. Thank you very much well I want to thank all of you for attending our call today.
You've got a company in a group of people who are working.
Hard over the holiday season to make it very successful and we all look forward to sharing our set of holiday results with you at our next call.
You very much.
This concludes today's conference call. Thank you for your participation and you may now disconnect.
Yeah.
Okay.
Yeah.