Express Stock Forecast

Express Stock Forecast: Generation Z has never experienced a world without constant web connectivity. For nearly a decade now, mobile devices have been in almost every hand. Those who grew up in the 80s remember a completely different way of life. Teens, tweens, and 20-somethings went to malls to do their shopping, and a variety of fashion retailers competed for their dollars.

In malls across America, The Gap, Express, Benetton, Esprit, and Limited had storefronts alongside KayBee Toys, Sam Goody, and Sharper Image. Each brand had a slightly different take on fashion trends, and all were must-have labels in any well-rounded wardrobe throughout the 80s and 90s.

The “retail apocalypse” destroyed profits for many of these companies. They simply couldn’t compete in an increasingly digital world.

Some couldn’t handle the downward pressure on prices from massive online giants like Amazon.

Others were unable to integrate the e-commerce options that customers expected. Perhaps the biggest issue is an overall change in consumer preferences, with many people prioritizing experiences over possessions. No matter the reason, the fact is that fashion brands are struggling.

Express has managed to hold on, unlike many of its 80s peers, but investors aren’t sure how much longer it can survive. Is Express stock a buy when today’s consumers are moving away from brick-and-mortar fashion retailers?

Cost-Cutting Is Now A Focus For Express

Express launched in 1980 with a mission of delivering fashion for every occasion. That goal hasn’t changed much in 40 years.

The company is still focused on its core beliefs: “living for the moment, dressing for the moment and having a strong individual style.” It’s fashion for those who aren’t particularly comfortable in the world of haute couture. Express operates under the philosophy that fashion should be “effortless, approachable, and fun.”

Today, Express has more than 650 brick-and-mortar locations around the world, and it employs 18,000 people. However, based on results in recent years, business leaders have decided that it is time to pursue a new approach.

In the January 2020 earnings call, the company focused on its strategy adjustments. Specifically, over the next three years, the company will execute on reducing costs.

Approximately $80 million in annualized savings have been identified and included in the plan. This covers $25 million in savings through inventory optimization and process improvements, as well as $55 million in savings through restructuring of the workforce.

The company intends to close an estimated 100 stores by 2022. While this action will reduce sales by a projected $90 million, it will prompt roughly $15 million in improved EBITDA.

This updated strategy, which the company has dubbed “The EXPRESSway Forward”, is an effort to return the company to profitable growth.

Investors responded favorably to the announcement, and share prices rose 25 percent in a matter of hours. That’s good news for shareholders, who have watched stock value plummet over the past three years. During that period, shares lost approximately 50 percent of their value.

While it appears that Express is taking decisive action to ensure a profitable future, some are concerned that the current strategy is merely delaying an inevitable descent into obsolescence. Could they be right, what is the Express stock forecast?

Is Express Stock a Buy?

Management announced Express’ third quarter 2019 results in January 2020, and there was quite a bit of discussion about the company’s new direction.

The results and fourth quarter 2019 guidance were reassuring for many shareholders, but the data falls short of demonstrating that the business is certain to turn things around.

Prior to the call, fourth quarter earnings per share guidance had been between $0.16 and $0.21, and the company narrowed this projection to $0.17 to $0.19.

Express indicated that it expects to see a third consecutive quarter of improvement in comparable store sales, but the actual comp figures are projected to decrease by 3 percent.

Considering the busy holiday season is included in these estimates, it appears there is still cause for concern.

All in all, the recent rally may be a good opportunity for current shareholders to sell, but there isn’t much to recommend Express as a strong buy. After all, the specific financial trends reported for third quarter 2019 are simply the result of larger issues that create risk for investors.

What are the Risks of Buying Express?

There is substantial risk in any of the old-school retailers, for the simple reason that as a whole, the industry is struggling. Competition in fashion and apparel is particularly fierce, making investment in any retail fashion brand risky. Express has identified some of its challenges and made plans to turn things around. However, there are analysts who believe the company hasn’t correctly pinpointed all of the issues, which leads to the conclusion that the new strategy won’t have its intended impact on profitability.

For example, when examining fourth quarter 2018 data, Express noted that comparable sales went down. This was attributed to lower levels of traffic in retail locations, as well as an over-dependence on a promotional pricing model. This trend wasn’t evident among many industry peers, which indicates Express has a more serious problem.

Some experts suggest that the company’s line of apparel for women is out of touch with consumer preferences. Others have indicated Express is failing to launch the sorts of events and initiatives that bring customers in.

Perhaps the greatest concern of all is the fact that Express has transformed many of its full-price locations to outlet stores. There is a general sense that this has weakened the brand, which once stood for high-quality, cutting-edge fashion.

Express Stock Forecast Summary

Overall, most analysts are suggesting to current shareholders that it’s time to sell, despite Express leadership assertions that the company has a path forward. The general consensus is that cutting losses is the only logical option, as the business model doesn’t inspire a lot of confidence.

Under the circumstances, buying Express stock is only suitable for those investors willing to bet on a long-shot. Better choices in the clothing and fashion industry may be Nike, Louis Vuitton, Adidas, and H&M.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.