Express 2014 Annual Report Download - page 31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis summarizes the significant factors affecting the consolidated operating
results, financial condition, liquidity, and cash flows of our company as of and for the periods presented below.
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements
and the related Notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-
looking statements that are based on the beliefs of our management, as well as assumptions made by, and
information currently available to, our management. Actual results could differ materially from those discussed
in or implied by forward-looking statements as a result of various factors, including those discussed below and
elsewhere in this Annual Report on Form 10-K, particularly in the section entitled “Risk Factors.” All references
herein to “2014,” “2013,” and “2012” refer to the 52-week period ended January 31, 2015, the 52-week period
ended February 1, 2014, and the 53-week period ended February 2, 2013, respectively. Comparable sales for
2013 were calculated based on the 52-week period ended February 1, 2014 compared to the 52-week period
ended February 2, 2013. Comparable sales for 2012 were calculated based upon the 53-week period ended
February 2, 2013 compared to the 53-week period ended February 4, 2012.
Overview
Express is a specialty apparel and accessories retailer offering both women’s and men’s merchandise. We have
over 30 years of experience offering a distinct combination of style and quality at an attractive value, targeting
women and men between 20 and 30 years old. We offer our customers an assortment of fashionable apparel and
accessories to address fashion needs across multiple wearing occasions, including work, casual, jeanswear, and
going-out occasions.
In 2014, our financial performance was negatively impacted by the highly promotional retail environment,
however, we made progress against our growth pillars, continued investing in our omni-channel initiatives and
systems improvements to further our growth pillars, and implemented cost saving measures, all of which we
expect to lead to improved results in 2015.
In 2014, net sales decreased $53.6 million to $2.17 billion compared to $2.22 billion in 2013. This represents a
2% decrease. The decrease in sales combined with our continued investment in initiatives essential to our long-
term growth had a negative impact on our operating margin and net income. In 2014, operating income declined
to $136.6 million, a 36% decrease versus 2013, and net income decreased by $48.2 million to $68.3 million.
Earnings per diluted share were $0.81, compared to $1.37 per diluted share in 2013.
For 2015, we are focused on advancing our growth pillars and increasing profitability through the combination of
an increase in net sales, margin improvement, and expense leverage. Our other priorities for 2015 include
elevating our customer experience, sharpening our brand position, investing in systems to support our growth
pillars, and continuing to support and develop our associates. We believe that successful execution of these
objectives will position Express for long-term growth.
Update On Our Growth Pillars
Improve Productivity of Our Retail Stores
We were unable to improve the productivity of our retail stores in 2014. Comparable sales, excluding e-commerce
sales, were down 7% in 2014 compared to 2013 and net sales per average gross square foot decreased from $338 in
2013 to $320 for 2014, primarily driven by decreased traffic in our stores and a highly promotional retail
environment, which led us to increase both the depth and duration of our promotions. For 2015, we are focused on
improving comparable sales and increasing our merchandise margin which will in turn improve the productivity of
our retail stores.
27