Targeting mainly men and women in the 20 – 30 age group, Express, Inc. (EXPR) offers apparel and accessories through its e-commerce website, mobile app and retail and factory outlet stores. The stock surged to hit its 52-week high of $13.97 on January 27, 2021 on a short squeeze triggered by Reddit’s WallStreetBets forum. In other words, the “meme” stock frenzy led to the stock’s price increase.
Among recent developments at the company, it launched a #ExpressReentry campaign and TikTok Hashtag Challenge on May 17 to help consumers reconnect with style as they resume some of their pre-pandemic routines.
The stock has gained 59.5% over the past three months to close Friday’s trading session at $4.29. However, the stock looks expensive at this price level considering its fundamentals and near-term growth prospects. The stock has lost 52.1% over the past three years and 70.4% over the past five years. It regained compliance with NYSE’s listing standards on February 3; It received a notice in September 2020 that the average closing price of its shares had remained at less than $1 per share over 30 consecutive trading days.
Here’s what I think could influence EXPR’s performance in the near term:
EXPR Unlikely to Gain even as the Economy Reopens
EXPR’s target audience is young men and women in the 20 – 30 age group, hence, its offerings include mainly work casuals, denim wear and occasion apparel. However, several e-commerce companies’ offerings, including those of Amazon.com, Inc. (AMZN), are much more broad-based making it difficult for EXPR to differentiate itself. Also, in January 2021, the company entered a definitive loan agreement with Sycamore Partners as lead lender, along with Wells Fargo & Company (WFC) and Bank of America Corporation (BAC), that strengthened EXPR’s liquidity position by an additional $140 million. However, this loan increases EXPR’s debt.
EXPR’s net sales for its fiscal fourth quarter, ended January 30, 2021, declined 29.1% year-over-year to $430.34 million as its results continued to be impacted negatively by the COVID-19 pandemic. Its comparable retail sales, which include Express stores and e-commerce, decreased 28% year-over-year. Its gross profit for the quarter came in at $71.41 million, down 56.4% year-over-year. The company’s net loss was $53.28 million compared to $141.62 million in the prior-year period. Its non-GAAP loss per share was $0.66 compared to non-GAAP EPS of $0.21 in the year-ago period.
In terms of trailing-12-month gross profit margin, EXPR’s 30.1% is lower than the 34.6% industry average. Its trailing-12-month levered free cash flow margin is negative compared to the 7.7% industry average. Moreover, the stock’s trailing-12-month return on common equity and trailing-12-month return on total assets are negative compared to the 10.9% and 3.4% respective industry averages.
Consensus Price Target Indicates Downside
EXPR is currently trading at $4.29. Wall Street analysts expect the stock to hit $1.33 in the near term, which indicates a potential 69% decline.
POWR Ratings Reflect Bleak Prospects
EXPR has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. EXPR has a D grade for Quality, which is justified given its lower-than-industry profitability ratios. It has a D grade for Sentiment also, which is in sync with unfavorable analyst sentiment.
The stock has a D grade for Growth. This is consistent with analysts’ expectations that its EPS will remain negative in fiscal 2022 and fiscal 2023. Also, EXPR’s EPS is expected to decline at a rate of 57.1% per annum over the next five years. It also has an F grade for Stability.
Better than EXPR: Click here to access several other top-rated stocks in the same industry.
EXPR’s stock soared over the past few months thanks to the “meme” stock frenzy, but its current price level doesn’t justify its fundamentals. It has been taking loans to sustain its operations and analysts expect its EPS to remain negative in its fiscal years 2021 and 2022. So, we think it’s wise to avoid the stock now.
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EXPR shares were trading at $4.57 per share on Tuesday morning, up $0.28 (+6.53%). Year-to-date, EXPR has gained 402.20%, versus a 12.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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