Express 2011 Annual Report Download - page 39

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. We have over 30 years of experience offering a distinct combination of style and quality at an
attractive value to 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 aspects of their lifestyles, including
work, casual, jeanswear, and going-out occasions. We entered 2011 following a strong year of growth in 2010.
We continued our momentum into 2011 through maintained focus on our growth strategy and expense
management. This focus enabled us to exceed $2 billion in sales and increase our net income to $140.7 million in
2011 compared to $127.4 million in 2010, representing a 10% increase. In addition, we increased our earnings
per diluted share to $1.58 in 2011 from $1.48 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 6% in 2011 compared to 2010, and was driven by growth in average dollar sales.
We attribute our sustained positive comparable sales in existing stores along with improved product margins to
our consistent application of our go-to-market strategy whereby we aggressively chase into winning trends
through data-driven decision making. In 2011, we continued to invest significant dollars in marketing to increase
our brand recognition. Additionally, we piloted a new loyalty program in approximately 90 stores that enables
participation by all customers, regardless of payment method. 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 2011, we opened 27 new company-operated stores, including 6 stores in Canada, and closed 9 stores. As of
January 28, 2012, we operated 609 locations, 576, or 95%, of which are in our dual-gender format. In 2012 we
expect to open approximately 30 additional stores in the United States and Canada, and close 12 stores. Our
projected store openings include 7 to 10 new stores in Canada. The planned store openings include two
Company-owned flagship stores in the United States, which we anticipate will result in approximately $8 million
in incremental pre-opening expenses. 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, shopping center
redevelopments, and exiting underperforming stores as their respective leases expire.
Expand Our e-Commerce Platform
In 2011, our e-commerce sales increased 39% over 2010. The growth in e-commerce sales was driven by
increased sales volume across our assortment. E-commerce sales represented 10% of our total net sales in 2011.
Sales growth over last year was relatively consistent by quarter, and we expect to see this channel grow to 13% to
15% of net sales in the longer term.
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