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Will Express Survive Bankruptcy?
Express has filed for bankruptcy, leading to the closure of around 100 stores nationwide. The retailer, which includes brands like Bonobos and UpWest, has entered a non-binding letter of intent with WHP Global and other participants, including Simon Property Group and Brookfield Properties, for the sale of a significant majority of its retail stores and operations.
Express’s recent performance marks a stark contrast to its earlier years. In 2010, it went public as the sixth-largest specialty retail apparel brand in the U.S., and by 2015, quarterly net sales reached $765.6 million. However, the company’s current financial situation paints a different picture.
Despite the challenges, Express has secured $35 million in new financing and intends to continue serving customers through its online platform and remaining retail locations. Mark Still has been appointed as the new chief financial officer and senior vice president.
The company stated in a press release that it “intends to close approximately 95 EXPRESS retail stores and all UpWest stores.” It currently has 10 UpWest locations. The closing sales at affected stores began on April 23. Though Express didn’t state exactly which locations it plans to close in the release, court documents list the affected stores.
Additionally, Express announced it may close its Ohio corporate offices at 1 Express Drive near Easton Town Center and 235 N. Fourth St. Downtown, potentially affecting over 600 employees.
The looming layoffs are highlighted in a Worker Adjustment and Retraining Notification (WARN) notice filed with the state. If the restructuring efforts fall through or the potential buyer doesn’t offer enough jobs to current employees, all 614 Ohio office workers could face permanent layoffs. The layoffs are projected to take place in late June.
Despite the uncertainties surrounding the bankruptcy and potential sale, Express assured that the WARN notices are precautionary. It emphasized that the notices don’t necessarily indicate immediate terminations but rather comply with state and federal laws regarding possible job losses during restructuring processes.
What Led to the Downfall of Express?
In December of last year, Express discussed its earnings, highlighting both challenges and improvements in its merchandise strategy. CEO Stewart Glendinning acknowledged difficulties, particularly with women’s apparel, but pointed to progress in merchandising under Chief Merchandising Officer Michael Rangel. The quarter showed positive comparable sales for women, with knit tops increasing by over 20% and sweaters, woven tops, and bottoms also showing growth.
Conversely, the men’s segment faced challenges due to strong suit sales the previous year. However, categories like sweaters showed promise with the successful launch of a new line. Casual apparel also performed better, indicating a positive trend for future quarters.
Despite a 5% rise in consolidated net sales to $454.1 million for the third quarter of 2023, Express and UpWest Brands experienced a 7% decrease in net sales, and comparable sales dropped by 6%. Additionally, Express retail stores saw a 16% decrease in comparable sales, while e-commerce sales increased by 10%. Comparable outlet sales also declined by 13%.
The net loss for the quarter amounted to $36.8 million, or $9.83 per diluted share, with a negative EBITDA of $17.1 million. Express also reported an operating loss of $67.5 million for fiscal 2022, compared to an operating income of $0.8 million in fiscal 2021. Despite these setbacks, Glendinning remained optimistic about Express’ potential, highlighting the company’s strong brand portfolio, a promising partnership with WHP, and a premier omnichannel platform as key strengths.
The company has seen declining demand for several quarters as consumers have reduced discretionary spending or shifted toward online shopping platforms like Amazon and SHEIN.
The company’s stock price has plummeted nearly 90% year-to-date. On March 6, the New York Stock Exchange delisted Express due to its share price failing to rise above $1 over six months. Furthermore, data from Creditsafe indicates that Express struggled with timely bill payments, with late payments skyrocketing from 42.05% in February to 90.33% in March.
Along with efforts to revive its fortunes by acquiring men’s fashion brand Bonobos for $75 million in May 2023 and expanding its Express Edit stores, the company also focused on strengthening its social media presence and improving its omnichannel capabilities.
Several factors contribute to Express’s financial woes. Rising inflation, with prices up 3.5% from a year ago, has led some consumers to cut back on nonessential spending. Additionally, analysts point to issues within Express’s core business, including its product assortment and competitive positioning.
Neil Saunders, managing director for GlobalData Retail, highlighted Express’s declining sales as a major concern. “Sales have been cratering for a long period of time and there are few signs that revenue has reached rock bottom. This has put the company under a lot of financial strain and has resulted in some significant loss,” he said.
He also explained that Express’s failure to adapt to changing consumer preferences has contributed to its decline. “The offer and assortment remain poor in that [they are] overpriced, lack differentiation and come across as very bland,” he stated. “As a result, the Express brand itself has become less relevant to shoppers.”
Discussion Questions
How can Express strategically leverage its remaining assets, such as its online platform and select retail locations, to not only navigate its current financial crisis but also emerge as a competitive force in the rapidly evolving retail landscape?
In light of Express’s struggles, what critical lessons can other retail industry players draw from its downfall regarding product assortment, competitive positioning, and adapting to shifting consumer preferences?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
I am sure Express will survive bankruptcy; after all, there is already an offer from WHP on the table. However, surviving is not the same as thriving or even stability and, even under new leadership, Express has a lot of work to do to put itself on a sure footing. Yes, poorly performing stores can be closed, debt can be restructured, and management can be reshuffled: but none of these things remedies the root cause of the ills – a brand that has become less relevant and has fallen out of favor. Nothing short of a complete overhaul of the proposition is needed.
The company has seen declining demand for several quarters as consumers have reduced discretionary spending or shifted toward online shopping platforms like Amazon and SHEIN. This sums up the situation, quite clearly, doesn’t it? As always in these type of situations – “these type” being retailers with seeming irreversable problems – the question is: what will they do differently going forward? If the answer is ‘the same thing’ – only with millions of legal fees added in – then the answer (to the titular question) is “no”.
They may survive as an online entity (some company purchases the name) but not from a brick and mortar aspect. The problem was that they did not remain relevant(or really try to) to the customer. I purchases a lot from Express many moons ago, because i thought they were cool and hip. I don’t think that transferred over to present day. Much like Sears or JCPenney’s, all the insight and change we discuss and gradually see, won’t right the ship. Iceberg dead ahead.
There are several factors at play in Express’ financial troubles. In recent years, the formal and smart casual market for men and women has weakened as more people work from home and fashion has become more casual.
Despite this, Express failed to adapt to the changing trends. How many times have we seen that movie before? Too often.
Poor decisions exacerbated its problems. One of them is the decision to hire someone from the meat industry as CEO. Huh? They did. I believe the new CEO was out of Tyson Foods.
The Board of Directors must have made that decision over a fried chicken dinner. Ya think? Db
With SPG and Brookfield as part of the restructuring, one can guess which stores will stay open and which will not. Their investment is likely not real cash but simply a swap of debt for equity.
The decline didn’t happen in the last several quarters; it has been happening for the last several years. The nail in the coffin may have been the acquisition of Bonobos just a year ago. This is an indication that management was delusional.
With SPG and Brookfield involved, it isn’t yet time to write the obituary. But the restructuring participants will make their money and then sell what they have left. A turnaround isn’t in the cards.
The financial mechanics of emerging from bankruptcy are probably the easy part. Setting the strategic direction going forward is the hard part, the really hard part. A recent posting from Placer.ai reported that office visits in March of 2024 are still down almost 33% from March of 2019. That’s tilt of the earth’s axis stuff for some businesses. That’s a profound shift in the ‘wearing moment’ profile of the Express brand promise. The solution does not lay in tweaking the assortments. Express will need a make over and reinvention on the scale of Abercrombie & Fitch. An evolved brand promise. So let’s be reminded of how long it took ANF to accomplish their reinvention. This is not next season or next year stuff. There is urgency, but that doesn’t mean it can happen overnight. Time is never the friend of a business emerging from bankruptcy.
“Surviving” can take many forms, some of which irradicate the need for a brick-and-mortar presence. Were WHP the only suitor, Express could easily morph into a digital-only intellectual property play. With trusty Simon and Brookfield in the mix, at least some Express stores are likely safe, even if others end up in outlet malls run by S&B. Blaming Express for not keeping up with the times is a bit rough given Shein’s direct attack on the types of apparel Express specializes in. Express is a destination for affordable suiting and career separates, for example – a category that many value-oriented competitors abandoned long ago and Shein was all too happy to grab. The WHP, Simon, Brookfield trio is probably the best possible acquirer for Express. They understand the business and have real estate and retail holdings in their collective holdings that guarantee product placement.
Casual Friday, and then Casual Everyday, negated the need for sharp professional clothing sold by Express and numerous others before it. Only a rebrand can restore Express’s relevance.
The investment by Simon and Brookfield (in order to keep their centers reasonably full of tenants) was able to salvage JCPenney but was unable to make it relevant again. I can see the same fate for Express — using Chapter 11 to dump the least profitable leases, but without a clear roadmap for success. Unless Express fixes the internal missteps that put them into this bind, it will continue to lose share to newer and more nimble competitors.
I have no doubt they’ll pull through bankruptcy for now, but there are a lot of opportunities to do better. Particularly when it comes to data. While they, like A&F have added more product attributes, there are still opportunities for improvement. One would be to make them more visible online rather than hiding them under ‘Filters’. And another would be to expand them, especially given the highly intentional nature of online shopping. For example, in dresses, not every dress has a fabric associated with it, you still can’t filter by ‘Pattern’ (solid, print, stripes, floral, color block, etc.), Straps (spaghetti, strapless, etc.), Waistline (empire, natural, drop, asymmetrical, etc.). All of these attributes would both help the customer, and have predictive demand value for future inventory planning. It’s also important to understand the ratio of digital demand signals (how often stock availability was checked for an item – including local availability) to orders, as this can also have predictive value.
Express will survive bankruptcy and have a recovery plan in place, as countless other retailers have done in the past. The challenge and question is, even with the lifeline offered by an investor group that includes WHP Global, Simon Property Group, and Brookfield Properties, will Express be able to regain its brand relevance and equity in a challenging and competitive retail marketplace?
The challenges that Express has experienced are not uncommon for mall-based retailers, as we are experiencing the casualization of fashion. Consumer behaviors and fashions have dramatically shifted with the hybrid corporate model, and Express’s casual wear assortment strategies no longer resonate with the changing workforce.
Those companies that could shift their models and compete in this new casual yet trendy world, such as Abercrombie & Fitch Co., have mounted a comeback. Unfortunately, the strategy, assortment, and product changes have not been swift enough for Express.
Surviving bankruptcy isn’t the same as being successful. It is a financial solution. It will take Express much more than that to have a future.
As I noted in my comment, I completely agree. In all honesty, it might be best if a lot of these legacy retailers disappeared and allowed others to mop up their market share. Naturally, I don’t wish people lose their jobs and it’s horrible anyone caught up in the disruption, but you have to ask what future do they have? With Express I see – to date at least – no firm plan for revival. And the CEO comes from the meat industry; no disrespect, but the problems with Express relate to fashion!
They will come out of bankruptcy and “survive” however, this is an extremely boring store environment. No excitement. Just…stuff. For their sake I hope they survive because Bonobos is definitely worth saving!
Whenever I do mall visits, Express is almost aways empty. The store environment, as you note, is incredibly dull!
They will surely have to “express” themselves differently to survive. Then, become far more agile and adaptable to thrive. This may be an uphill battle.