Express 2013 Annual Report Download - page 26

Table of Contents
approximately 31 new Express Factory Outlet Stores with approximately 15 of these openings being conversions from existing retail stores.
Expand Our e-Commerce Platform
In 2013, our e-commerce sales increased 25% over 2012, which was on top of a 32% increase over 2011. The growth in e-commerce sales in 2013 was driven
by increased sales of both men's and women's merchandise. A significant contributor to our increase in e-commerce sales in 2013 was the continued movement
towards more seamless omni-channel capabilities, including increasing our online assortment and a full year of online ordering capabilities in our stores. We
believe the other significant drivers of our continued e-commerce growth were as follows: improving the overall functionality of our website; offering a larger
product assortment, with certain sizes, colors, and styles available exclusively online; and implementing free shipping every day with a minimum purchase of
$125. In 2014, in addition to continuing these initiatives, a key focus will be improving the mobile shopping experience. We plan to accomplish this through
improved mobile web shopping and additional capabilities in our mobile app experience. In addition, we are looking to make significant enhancements in the
overall e-commerce experience to make it easier for our customer to find the fashion looks, as well as the basics, they desire. E-commerce sales represented
15% of our total net sales in 2013.
Expand Internationally
In 2013, we made steady progress on our international expansion strategy with additional franchise store openings in the Middle East and in Latin America.We
also entered into a new franchise arrangement to bring the Express brand to South Africa. At year end, we were earning revenue from 26 franchise locations, a
net increase of 11 stores from year end 2012. In 2014, we plan to open 3 to 6 franchise store locations.
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In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales,
comparable sales and other individual store performance factors, gross profit, and selling, general, and administrative expenses.
Net Sales. Net sales reflects revenues from the sale of our merchandise, less returns and discounts, as well as shipping and handling revenue related to e-
commerce, sell-off revenue, gift card breakage, and revenue earned from our franchise agreements.
Comparable Sales and Other Individual Store Performance Factors. Comparable sales are calculated based upon stores that were open at least thirteen full
months as of the end of the reporting period. We include e-commerce in our comparable sales, as this is the way we manage our business internally. We also
believe it provides a more comprehensive view of our year over year performance. In 2013, comparable sales were calculated based upon the 52-week period
ended February 1, 2014 compared to the 52-week period ended February 2, 2013. 2012 comparable sales were calculated based on the 53-week period ended
February 2, 2013 compared to the 53-week period ended February 4, 2012. A store is not considered a part of the comparable sales base if the square footage of
the store changed by more than 20% due to remodel or relocation activities or if we execute a phased remodel whereby a portion of the store is under
construction and, therefore, that portion of the store is not productive selling space. Under the latter scenario, the store is excluded from comparable sales
during the construction period only, and is then considered a comparable store when construction is complete. We also review sales per gross square foot,
average unit retail price, units per transaction, dollars per transaction, traffic, and conversion, among other things, to evaluate the performance of individual
stores and on a company-wide basis.
Gross Profit. Gross profit is equal to net sales minus cost of goods sold, buying and occupancy costs. Gross margin measures gross profit as a percentage of
net sales. Cost of goods sold, buying and occupancy costs include the direct cost of purchased merchandise, inventory shrinkage, inventory adjustments,
inbound freight to our distribution center, outbound freight to get merchandise from our distribution center to stores, merchandising, design, planning and
allocation and manufacturing/production costs, occupancy costs related to store operations (such as rent and common area maintenance, utilities, and
depreciation on assets), and all logistics costs associated with our e-commerce business.
Our cost of goods sold, buying and occupancy costs increase in higher volume quarters because the direct cost of purchased merchandise is tied to sales.
Buying and occupancy costs related to stores are largely fixed and do not necessarily increase as volume increases. Changes in the mix of our products, such
as changes in the proportion of accessories, which are higher margin, may also impact our overall cost of goods sold, buying and occupancy costs. We review
our inventory levels on an on-going basis in order to identify slow-moving merchandise and generally use markdowns to clear such merchandise. The timing
and level of markdowns are driven primarily by seasonality and customer acceptance of our merchandise. During 2013 we used third-party vendors and
company-owned outlet stores to dispose of marked-out-of-stock merchandise. The primary drivers of
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