Express 2013 Annual Report Download - page 25

Table of Contents
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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 "2013", "2012", and "2011" refer to the 52-week period ended February 1, 2014, the 53-week period ended February 2, 2013, and the 52-
week period ended January 28, 2012, 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.
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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.
The results of 2013 were mixed, combining progress against 3 of our 4 growth pillars with financial results that did not meet our expectations:
•E-commerce Growth: increased sales by 25% over 2012, representing 15% of total net sales;
•New Store Growth: added 7 new stores, net of closures, including one new flagship in Union Square in San Francisco;
•International Expansion: opened 10 franchise stores in Latin America as well as 1 additional franchise store in the Middle East, net of closures;
entered into a new franchise arrangement to bring the Express brand to South Africa;
•Progress against our fourth growth pillar, improve existing store performance, was not achieved, with comparable sales, excluding e-commerce sales,
down low single digits compared to 2012, driven by decreased traffic in our stores and a heightened promotional environment.
In 2013, net sales increased $61.9 million to $2.22 billion over $2.16 billion in 2012. Prior year net sales included approximately $27.0 million associated
with the fifty-third week. This represents a 3% increase. However, operating income declined to $214.3 million versus 2012, a 15% decrease, and net income
decreased by $22.7 million to $116.5 million. Earnings per diluted share were $1.37, compared to $1.60 per diluted share in 2012 with the fifty-third week
contributing approximately $0.04 to the prior year earnings per diluted share.
Improve Productivity of Our Retail Stores
Net sales per average gross square foot decreased from $349 for the year ended February 2, 2013 to $338 for the year ended February 1, 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.
Net sales per average gross square foot is determined by dividing net sales (excluding e-commerce sales and other revenue) for the period by average gross
square feet during the period. We saw a decrease in men's product margin this year due to the previously mentioned promotional environment, while the
women's product margin remained essentially flat to last year.
Expand Our Store Base
In 2013, we opened 16 new company-operated stores, including 4 stores in Canada, and closed 9 stores in the United States. As of February 1, 2014, we
operated 632 locations. In 2014, we expect to open approximately 10 retail stores, including 2 in Canada, and close approximately 15 in the United States. The
planned store openings include one new flagship in New York City's Times Square, which opened in February 2014. 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 under-performing stores as their respective leases expire. In addition to our retail store openings, we plan to open
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