Express Inc. Down to Strong Sell - Analyst Blog

Zacks Investment Research downgraded Express Inc. ( EXPR ) to a Zacks Rank #5 (Strong Sell) on Jan 07. Estimates have been falling ever since the company reported weaker-than-expected earnings in the third quarter of fiscal 2013 and a cut in fiscal 2013 guidance on Dec 4.

Why the Downgrade?

Express' third quarter earnings of 23 cents per share increased 15% from the prior-year quarter and were within the company's guidance range of 21-25 cents. However, earnings fell 8% short of the Zacks Consensus Estimate of 25 cents. The lower-than-expected earnings can be attributed to heightening competition with retailers like Abercrombie & Fitch Co ( ANF ) and Ann Inc. ( ANN ) for holiday sales.

Sales were impacted by the highly volatile environment and lower consumer spending. Sales in the Thanksgiving week also did not meet company's own expectations; suggesting that the top line will be weak once again in the fourth quarter.

Retailers like Express remained extremely focused this holiday season in order to make the most of small opportunities. Be it the early-hour store openings, promotional events, free shipping on online purchases or heavy discounts, retailers tried all tricks to boost sales. The company also spent heavily on promotions and offered deeper discounts to entice cautious and budget-constrained consumers. However, the weak response from the consumers led to lower-than-expected sales during the entire holiday season, including Thanksgiving.

Express' muted Thanksgiving sales, which along with high promotional expenses resulted in a guidance cut for fiscal 2013. The company now expects its comparable store sales to grow in low single-digits compared with the previous expectation of low to mid-single-digit growth. The company also lowered its fiscal 2013 earnings guidance and expects it to be in the range of $1.46-$1.51 per share, much lower than $1.52-$1.60 per share expected earlier.

This specialty retailer witnessed sharp downward estimate revisions after announcing its third quarter fiscal 2013 results. The Zacks Consensus Estimate for the fourth quarter decreased 11.5% and that for fiscal 2013 went down 6.3% over the last 60 days.

Other Stock to Consider

Not all stocks are performing as poorly as Express Inc. Finish Line Inc ( FINL ) is a better-ranked retailer with a Zacks Rank #1 (Strong Buy).

ABERCROMBIE (ANF): Free Stock Analysis Report

ANN INC (ANN): Free Stock Analysis Report

EXPRESS INC (EXPR): Free Stock Analysis Report

FINISH LINE-CLA (FINL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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