Express 2010 Annual Report Download - page 51

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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.”
Overview
Express is a nationally recognized specialty apparel and accessory retailer offering both women’s and men’s
merchandise. With over 30 years of experience offering a distinct combination of style and quality at an
attractive value, we believe we are a core shopping destination for our customers and that we have developed
strong brand awareness and credibility with them. We target an attractive and growing demographic of women
and men between 20 and 30 years old. We offer our customers an edited assortment of fashionable apparel and
accessories to address fashion needs across multiple aspects of their lifestyles, including work, casual, jeanswear,
and going-out occasions. We entered 2010 with considerable uncertainty regarding our results due to the volatile
retail environment. Our continued focus on our growth strategy and expense management enabled us to increase
our net income in 2010 to $127.4 million compared to $75.3 million in 2009. In addition, we increased our
diluted earnings per share to $1.48 in 2010 from $1.00 in 2009. We plan to continue in 2011 to focus on the
growth strategies that aided our improvements in financial performance in 2010. Our growth strategies and a
summary of our execution of these strategies is presented below:
Improve Productivity of Our Retail Stores
Our comparable sales increased 10%, including e-commerce sales (7% excluding e-commerce sales) in 2010
compared to 2009, and was driven by an increase in transactions and growth in average dollar sales. We attribute
our sustained positive comparable sales in existing stores along with improved product margins in the current
challenging economy to our consistent application of our go-to-market strategy whereby we aggressively chase
into winning trends through data-driven decision making. We believe we are in good position to continue this
trend given the multiple merchandise categories presented in our stores that include wear-to-work, casual,
jeanswear, and going out. We are also able to emphasize categories and optimize our performance based on
seasonal needs and, importantly, as trends dictate. Also in 2010, we invested additional dollars in marketing to
increase our brand recognition. Our increased marketing investment resulted in a significant increase in
impressions during this year versus last year. To broaden our awareness and gain new loyal customers, we have
focused our marketing campaigns on brand-building initiatives, including national print advertising and
continued testing of local advertising in key markets such as New York, Chicago, and Los Angeles. Over time,
we expect this increased marketing investment to result in higher traffic and transactions at our stores and online.
Expand Our Store Base
In 2010, we opened 23 new stores operated by us and closed five stores. As of January 29, 2011, we operated 591
locations, 547, or 93%, of which are in our dual-gender format. In 2011 we expect to open an additional 25 to 27
stores and close nine stores. Our projected store openings include five to seven stores in Canada. Our projected
store closures are related to dual gender store conversions for the few locations where we still operate both
women’s and men’s stand alone stores, along with exiting underperforming stores as their respective leases
expire.
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