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Consumers are ‘anxious to get out, celebrate, and look good’: Express CEO

In this article:
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  • EXPR

Express CEO Tim Baxter discusses the retailer's positive outlook on growing e-commerce and reacting to supply chain trends.

Video Transcript

[BUZZING, WHOOSHING]

BRIAN SOZZI: 'Tis the season for shopping for a few new turtlenecks just like the ones worn by our very own Brian Cheung. And judging by the latest earnings from retailer express, shoppers have been headed there for turtlenecks, suits, and dresses. The company said this week that third quarter sales rose 47% from a year ago. Execs also reiterated their outlook for $1 billion in online sales by 2024. One of those executives is Tim Baxter, the CEO of Express, who joins us now. Tim, always nice to see you. Happy holidays. We are right in the middle of the holiday season. How have things started for you guys?

TIM BAXTER: Well, you know, in addition to obviously having strong second and third quarter results. We are off to a very, very strong start in the holiday season. And, you know, I'm very confident in the outlook that we shared yesterday for the fourth quarter and the balance of the year.

BRIAN SOZZI: What are-- you know, the pandemic is very much raging on and that much we were-- we've been reminded of the past week or so. What are folks buying from you? Are they still buying that return to work suit that they've come to know you guys for?

TIM BAXTER: Yeah, what's been-- the reason we've really seen such an acceleration in the business is that those categories that we have been well-known for, to your point, Brian, like suits-- men's suits, dresses, have really seen a resurgence as we move through the back half of the second quarter and into the third quarter. We posted over a 20% increase in men's suits, over 20% increase in women's dresses, so really seeing a resurgence in those. I would actually characterize those things as occasion-based categories versus wear to work categories. I think we are absolutely seeing our customer base anxious to get out, and celebrate, and look good while they're doing it.

But we've also balanced those categories that we've long been known for where we're seeing a resurgence with other categories that we're also seeing growth in. Denim, I guess, would be the best example. We actually had a 12% increase in denim in the third quarter. And we've put a stake in the ground in that category, knowing that denim is the foundation for any modern wardrobe and how versatile denim is. So we're also seeing growth there and in categories like our Express Essentials, which are also incredibly versatile knit tops.

JULIE HYMAN: Hey, Tim, it's Julie here. You sound pretty upbeat--

TIM BAXTER: I do.

JULIE HYMAN: --and yet the stock today, I'm sorry to say, is down about 12%. And I wonder what you think The Street is missing here. I mean, the forecast-- you guys had a big increase in comps this last quarter, but your forecast for the fourth quarter is for low single-digit increase. Do you think that's what's responsible for the disappointment there?

TIM BAXTER: Well, I think there's an important clarification there. You know, we picked up 47% versus 2020 but 3% versus 2019, which is fantastic. You know, I feel very, very good about our comp increase versus 2019 pre-pandemic levels. And the outlook that we gave for the low single-digit comp is against 2019. So--

JULIE HYMAN: Got you.

TIM BAXTER: --I'm expecting, you know, a quarter that is just as good, if not better, in the fourth quarter than the third quarter. And I always-- I would rather join you guys on a day when the stock is up 15%, like it was yesterday, versus a day like today where we're experiencing this decline.

BRIAN CHEUNG: That's, kind of, how stocks go, I guess. It's Brian Cheung here. I wanted to ask about supply chain. When it comes to just, kind of, how you're managing right now, what are you seeing in terms of the ability or not the ability to stock up your stores? And what's interesting is that for retailers that also have outlets, how do you, kind of, managing the flow in and out of your regular retail brick and mortar stores to the outlets based off of the supply chain issues that you've been facing?

TIM BAXTER: Yeah, you know, I think our teams have done a very good job mitigating the supply chain challenges. We actually started to take action against the challenges that we were forecasting back in the spring season. And we actually came into the fourth quarter with 9% more inventory than we had in 2019 and that was done very, very strategically. And we were able to move a lot of those deliveries forward without utilizing airfreight and without incurring a tremendous amount of additional expense. So we are very well-positioned in both our retail stores and our outlet channel to capitalize on the demand that we see in the fourth quarter.

That being said, there are some-- there were some, obviously, receipts that we could not get and have had a challenge getting. And, as it relates to the outlet business, you know, we have some best-selling sweater backups, for example, that were scheduled to come in at the beginning of December. And since they weren't going to be able to get to us until the third week of December, we're actually going to pack that product up. It's fantastic product. We're going to pack and hold that and that will fuel our outlet business next year in the late third and early fourth quarter. So, you know, it's a balancing act between the product that we've been able to pull forward to meet consumer demand and some of the challenges we have pushed out.

BRIAN SOZZI: Tim, you said something on the earnings call that caught my attention. You said you-- "Express is playing a very distinctive role in American retail right now." What role do you think you're playing?

TIM BAXTER: Look, we are-- you know, first of all, we're a dual gender-- but, you know, we serve men and women. And they're-- we're very unique in the fashion landscape. And I think we're doing things that other retailers are not doing. And we are delivering quality, and value, and fashion that the consumer is really responding to. And that's very distinctive.

You know, I think that there are players who do fashion that is-- that-- and the quality just isn't what our quality is. And there are contemporary brands who have similar quality, but the prices are significantly higher than our price points. And our customer responds to that value. So they're responding to the fashion product and they're responding to the value that they see when they compare our product to other contemporary brands out there in the market.

BRIAN CHEUNG: Tim, last question here. I want to ask about just the year in review from a financial standpoint. I mean, yes, we were talking about the stock being down today, but the stock is up 272% year-to-date. You had a meme stock bump earlier in the year, you benefited from that. How do you view think about-- or how do you think about the transformation or the other opportunities when you think about maybe share buybacks because of an elevated stock price compared to where you started off when we hit the new year nine months ago-- or 11 months ago.

TIM BAXTER: Yeah, well, you know, when-- you know, as I think about this, we are always focused on returning shareholder value. And we will continue to be focused on returning shareholder value. Obviously, you know, our stock price-- we're playing a long game here. You know, we are in the middle of a transformation and it's going to take time for that transformation to take hold and for investors have confidence. This was our second consecutive quarter of positive comp growth versus 2019.

We delivered, you know, $0.17 EPS versus losses in both 2019 and 2020. That's the second consecutive quarter we've been able to do that. Our outlook has us doing that. So I think as we move into the new year, we will have demonstrated-- this team will have demonstrated that the Express way forward strategy is working. And there is a tremendous amount of value to be realized as we march toward our goal of delivering $100 million in operating profit by 2024.

BRIAN SOZZI: Well, good luck for the rest of the holiday season. Tim Baxter, the CEO of Express. We'll talk to you soon.