Express Excites the Street With Brighter '13 Outlook

USA

Apparel maker Express (NASDAQ:EXPR) relieved Wall Street on Wednesday by logging an in-line 6.8% bump in second-quarter profits and boosting its full-year guidance amid surprising optimism about the back-to-school quarter.

The comments stand in contrast with gloomy outlooks from a number of other U.S. retailers and helped send shares of Express rallying more than 8% in early action.

Express said it earned $16.9 million, or 20 cents a share, last quarter, compared with a profit of $15.8 million, or 18 cents a share, a year earlier. Analysts had been calling for EPS of 20 cents after the company issued an upbeat May call for EPS of 17 cents to 21 cents.

Sales increased 6.9% to $486.2 million, essentially matching the Street’s view of $485 million. Same-store sales rose 6%. Gross margins dipped to 31.4% from 32.2% due to higher promotional activity late in the quarter amid increased competition.

"Our customers are responding enthusiastically to our assortments, which are trend-right, differentiated and well-edited.  We are seeing this reflected in improved conversion rates,” Express CEO Michael Weiss said in a statement.

Looking ahead, Express now sees full-year EPS of $1.52 to $1.60, up from $1.48 to $1.58 previously. Analysts had been calling for EPS of $1.59. Same-store sales are expected to grow in the low to mid-single digits.

For the ongoing third quarter, Express forecasted EPS of 21 cents to 26 cents, compared with the Street’s view of 25 cents. Same-store sales are seen rising in the mid-single digits.

“As we move into the second half of the year, we are confident in our product and marketing strategies, and believe we are well positioned for the fall and holiday seasons,” Weiss said.

Shares of Columbus, Ohio-based Express soared 8.33% to $21.45 ahead of Wednesday’s opening bell, putting them on track to extend their 31% 2013 rally.

Unlike Express, a slew of apparel makers and retailers issued downbeat guidance for the third quarter, including teen apparel maker Abercrombie & Fitch (NYSE:ANF), American Eagle Outfitters (NYSE:AEO), department store Macy’s (NYSE:M) and retail king Wal-Mart (NYSE:WMT).