Express CEO Admits Product Assortment Failed to Connect With Customers

This quarter, fashion retailer Express is looking at merchandise discounts to draw in more shoppers.

During the latest earnings call, CEO Stewart Glendinning acknowledged the retailer’s recent challenges, particularly in its merchandise strategy.

“I mean, women had a — historically, in the last couple of years, had a pretty rough time,” Glendinning said during the call with analysts on Thursday (Nov. 30) to discuss the company’s latest earnings.

However, he also highlighted significant improvements in Express’ merchandising strategy under the leadership of Chief Merchandising Officer Michael Rangel. Glendinning pointed out that this quarter witnessed favorable comparable sales for women, with knit tops experiencing remarkable growth of over 20%. Positive growth was also observed in sweaters, woven tops and bottoms.

Conversely, Glendinning said weakness in the men’s segment this year was due to strong performance of suits in the previous year, creating a tough comparison. Nevertheless, specific categories within men’s wear, especially sweaters, exhibited promise. Glendinning noted that Rangel’s team introduced a new line of sweaters and sweater tops, resulting in a strong performance.

Additionally, Glendinning said their line of casual apparel showed a better performance, indicating a positive trend expected to continue in the upcoming quarters.

Furthermore, the CEO highlighted that the decline in the Express brand’s top-line was influenced by underperforming retail and outlet stores, partially mitigated by a 10% rise in online sales. Despite unit sales aligning with expectations, Glendinning mentioned that a heavier reliance on discounts became necessary to move inventory, leading to a deeper erosion of the gross margin.

The Common Narrative This Quarter

In this quarter, there is a clear trend among brands and retailers, such as Express, focusing on offering discounts to customers to encourage spending.

Read more: Retailers Play the Value Card to Capture Consumer Spend

Similarly, Nordstrom is leveraging its Nordstrom Rack operations to attract customers. Despite its past reputation for luxurious runway presentations and exceptional service, Nordstrom has been strategically incorporating discounts in response to financial challenges, PYMNTS reported.

During the third quarter, Nordstrom launched 11 new Rack stores, with an additional one introduced in the early fourth quarter, bringing the total to 19 for the year. CEO Erik Nordstrom shared this update with analysts during the third-quarter earnings report earlier this month. The CEO said that the new store openings have received a robust customer response.

“We also know that our Rack customers value convenience, and we believe our stores are underpenetrated,” Nordstrom said.

Despite the growing demand for off-price retailers, Nordstrom’s emphasis on discounts and value-oriented selections, particularly through Nordstrom Rack, has not flourished as expected.

Indeed, Nordstrom Rack recored a 1.8% decrease in net sales year over year, prompting inquiries about the product assortment within the retailer’s network of 258 Nordstrom Rack locations across the U.S.

Read more: Nordstrom’s Off-Price Destination Falls Short on Value

Express by the Numbers

Despite the quarterly results, Express’ CEO was optimistic.

“During the past three months, I have had the opportunity to assess our operating capabilities, organizational structure and processes, marketing and customer acquisition abilities, and merchandise and product strategies,” Glendinning said in a statement. “Express has the right building blocks in place with a strong portfolio of brands, a high-potential partnership with WHP and a premier omnichannel platform. Our efforts to unlock our full potential and improve our performance are already underway.”

In the third quarter of 2023, Express reported a 5% increase in consolidated net sales to $454.1 million. However, within the Express and UpWest Brands, there was a 7% decrease in net sales, with comparable sales down by 6%. Express retail stores experienced a 16% decrease in comparable sales, while eCommerce sales saw a 10% increase. Comparable outlet sales also declined by 13%.

For the Bonobos Brand, net sales were $52.1 million, with a gross margin decrease to 24.1% of net sales. This decline was primarily due to increased promotional activity and royalty expenses related to a joint venture.

Despite a reduction in selling, general and administrative expenses, Express reported an operating loss of $28.7 million, including a non-cash impairment charge. The income tax expense reflected adjustments related to return-to-provision, a refund claim under the CARES Act, and an additional valuation allowance. The net loss for the quarter was $36.8 million, or $9.83 per diluted share. Earnings before interest, taxes, depreciation and amortization (EBITDA) was negative $17.1 million.