Express 2014 Annual Report Download - page 2

Dear Fellow Stockholder:
I stepped into my new role, that of President and CEO of Express, on January 30, 2015. This is
my first time writing to you, and it is a privilege to do so. I joined Express in 1999 and have worked
here for much of my career, moving across departments and assuming additional responsibilities
along the way. It has been an extraordinary experience and I am honored by the confidence placed in
me by the Board of Directors.
I think it is important for you to know that my commitment to the brand is as strong today as
it was when I first arrived at Express. Of greater importance is the fact that my belief in the brand has
never been stronger. This company has evolved over the past 35 years to consistently remain fresh
and relevant, and I have confidence in our ability to succeed over the coming decades.
Fiscal 2014 ended on a much brighter note than it began. We acted decisively to ensure that
our Spring and Fall collections would be new and in tune with our customers’ desires. Our success is
evidenced by the trend in our comparable sales, which advanced from a negative 11% in the first
quarter to a negative 2% in the final quarter of the year, an improvement of 900 basis points. In
addition, our merchandise margin during the third and fourth quarters improved by 30 and 70 basis
points, respectively, impacted by us successfully taking a more disciplined approach to promotions.
While I am optimistic about the future, there is no denying that the past few years have been
challenging for many specialty apparel retailers including us, and our financial results were impacted.
On a full year basis, our net sales decreased 2% to $2.17 billion in 2014 from $2.22 billion in 2013 and
our comparable sales decreased 5% in 2014 compared to a 3% increase in 2013. Net income was
$68.3 million, or $0.81 per diluted share in 2014, compared to net income of $116.5 million, or $1.37
per diluted share, in 2013.
We are committed to recovering lost ground. Throughout 2014, we continued to invest in
our business and to execute against our growth pillars to position the business for a stronger future.
A few highlights include the following:
• We opened 41 Express Factory Outlet stores, including 22 stores that were converted from
retail stores, which generated approximately $55 million in incremental revenue;
• We grew our e-commerce business by 4% and set the stage for increased growth in fiscal
2015 as we introduced responsive web design, began to showcase our assortment in a
more impactful manner, and improved the ease of navigation and check-out across
desktop, tablet, and mobile platforms;
• We elevated the standing of Express and brought new customers into the brand by working
with impactful brand ambassadors Kate Upton and Anastasia Ashley;
• We selected 50 full-priced retail stores for closure between fiscal 2015 and 2017, which will
help boost the profitability of our store fleet;
• We identified cost reductions that saved us approximately $15 million in fiscal 2014 and
going forward, are expected to save us approximately $18 million annually; and
• We increased the number of our franchise locations by 31%, which included opening our
first shop-in-shop locations in South Africa.
As fiscal 2015 began, we continued working to strengthen the business. In March, we
completed the early redemption of our 8
3
⁄ 4 % Senior Notes, which eliminated approximately $200
million of indebtedness and will eliminate approximately $19 million of annual interest expense. We
did so using internally generated cash and we are now debt free. Our balance sheet continues to be
very strong.