Express Inc EXPR
December 21, 2021 - 4:40pm EST by
2021 2022
Price: 3.10 EPS 0 0
Shares Out. (in M): 67 P/E 0 0
Market Cap (in $M): 201 P/FCF 0 0
Net Debt (in $M): 34 EBIT 0 0
TEV (in $M): 234 TEV/EBIT 0 0

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Oh no, not another cheap retailer. Who cares about last year’s earnings or Covid earnings? Have you seen the chart…Its down 72% in the last 5 years. A mall concept? $50 mm tax refund coming on $284 mm EV (ignore the capital leases). Hold on, that same pig can do $2 bb in sales and is above 2019 sales (3% yoy growth), and the EV was roughly $410 mm this time 2 years ago (ignoring cap leases). Alright, so less leverage and lower market cap. I guess I’ll listen. Thanks!

We don’t love retail, but if we have to, it better be cheap. I present to you Express. Today the company does 73% of its sales through its mall locations (365 B&M) and online vs 27% of its sales through outlet stores (207). It has stated its goal (and reaffirmed in last Q) of achieving $1.0 bb / $100 mm (Sales / EBIT) by 2024.

Though EXPR recently lost its CFO to 99 Cents store (that wasn’t easy to type), we believe Baxter and the team are on an achievable path to increasing shareholder returns. Cost structure is continuing to be rationalized and the last two consecutive quarters of profitability is evidence of marked improvement on what has been a long road. We all want to find the next $kirk or $dxlg. Even as cheap as some of these names are, we are not as bullish on $kirk, but we’ll save that discussion for a different day. We have tried to narrow our search to those that have pricing power. A quarter does not make a trend, but it was encouraging to see AUR in Retail and Outlet increase 27% and 17% respectively. Gross margins are respectable at 33.2% and if the Company even half hits its ’24 targets, this thing is stupid cheap.

If you annualize the last 2 quarters which some will rightly argue seasonality, we get $128 mm in EBITDA on an EV of $234. Listen to the last conference call: brand, traffic, pricing power are all going the right direction. This name like many others got incinerated in the last month. 15% jump on earnings and then right back in line with the chart. You’re welcome.

Q3 Call:

If you listen to our last earnings call, you heard me summarize our second quarter performance in one word, acceleration. And that acceleration continued into the third quarter. Our strong third quarter results reflect the second consecutive quarter of profitable growth and positive comparable sales compared to 2019.

Digital advancements are also driving our mobile app, as we add features and functionality to bring it closer to parity with the website experience. In the third quarter, app demand was up 48%, traffic increased 35% and conversion was 40 basis points higher versus 2019. We now have over 2.2 million app users, our most highly engaged customers making four more visits and spending $200 more each year than customers who only shop through our website or in one of our stores.

Agreed that there are better businesses out there, but there is a huge margin of safety and that’s pretty important when evaluating any retail investment.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.



Tax refund

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