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Express CEO Tim Baxter joins Yahoo Finance Live to discuss the company’s second-quarter earnings, remodeling its stores and trends in the retail space amid the pandemic.
BRIAN SOZZI: Turnaround at Express appears to be continuing, even as the Delta variant weighs on the return to offices and nights out on the town. Express said this week comparable sales for the second quarter rose 3% from the second quarter of 2019. Gross profit margins gained 580 basis points versus the second quarter of 2019.
Joining us now is Express CEO Tim Baxter, fresh off his closely watched Investor Day. Tim, good to see you again. Let's start with quarter-to-date trends. You did not hide from the fact that business has continued to accelerate from mid-July. What is driving the inflection point in your business? And are you still seeing double-digit sales gains in August?
TIM BAXTER: Yes, we are. I used one word in our earnings call to describe the second quarter, and that was acceleration. We saw consistent acceleration throughout the quarter. To your point, we, in the period after the 4th of July, drove an 11% increase versus the same time period in 2019. And we have seen that double-digit comp increase continue into August. So really excited about the traction that our strategy is gaining, and consumers are responding incredibly favorably to what we're doing.
BRIAN SOZZI: What categories are driving those gains this month?
TIM BAXTER: What's really exciting, Brian, is we set out to build a much more versatile assortment. And at the beginning of the quarter, we were seeing incredible comp increases in categories like denim. We know that denim is the foundation of any modern wardrobe. We drove a 21% comp increase over 2019 in our denim category. And that was consistent throughout the quarter.
We also have been driving incredible comp increases in categories like knits, one of the most versatile categories for both men and women. Our Body Contour Collection in women's has been really a game changer for us. And both of those categories were incredible throughout the quarter.
But the real change in momentum came late in the quarter as we began to see a real acceleration in categories that we've long been known for, like men's suits, men's dress shirts, women's dresses. Those categories, while they were down 12% for the total quarter, the real change in momentum happened when those categories started performing closer to flat. And we've also seen that trend continue into August.
JULIE HYMAN: Hey, Tim, it's Julie here. So you're talking about the change that you guys have been making in the stuff in the stores. I want to talk to you about the stores themselves as well--
TIM BAXTER: Yep.
JULIE HYMAN: --and what shoppers can expect in terms of what their store experience is going to be like, how it may change, and what the store footprint overall is also going to be like.
TIM BAXTER: So let me start with the store footprint. We have two things that we're doing as a part of fleet optimization. And we announced a strategy to close 100 stores. We've gotten about 93-- we'll have about 93 of those closed by the end of the year. But we're also, our mall-based fleet, we've been experimenting with making our fleet more productive.
Our King of Prussia store outside of Philadelphia, we actually shrunk the store by 45%, completely remodeled it. And we saw a 12% increase in that store versus 2019 in 45% less space. So we know that we can be much more productive in our mall-based fleet. And we are right now remodeling our Northpark store. You're seeing images right now on the screen of that store in King of Prussia. And so we're going to continue to do that.
The second piece of our optimization strategy is the Express Edit concept. We've got about five of these smaller stores open now. They are smaller footprints, all less than 4,500 square feet. And these are off-mall locations in heavily trafficked foot areas. And we've seen incredible response.
This that you're seeing on the screen now is one of those Express Edit stores in Washington, DC. We've seen incredible response in these stores. They're exceeding our expectations. The most incredible thing that we're seeing in these stores is that 50% of the customers at these locations are new to Express, which is really exciting.
In terms of the experience itself, customers can expect much cleaner stores. And by cleaner, I mean more spacious, easier to navigate stores. They tell us that's what they want. They can expect larger fitting rooms, more comfortable fitting rooms.
We're starting to install call buttons in all of our fitting rooms so that they can get associate help whenever they need it. They can expect to find new lounge areas, because they continue to tell us they want places to sit. So some things that are really, really simple but we're moving forward with to improve the in-store experience.
MYLES UDLAND: And Tim, staying on the topic of stores, I'm curious about the outlet footprint. You guys are only looking to close, I think, five stores there in 2021 versus 24 for the regular retail outlets.
TIM BAXTER: Yeah.
MYLES UDLAND: Where's the outlet kind of fit in in the future of retail here? I remember when I was a kid, it was the greatest thing I'd ever seen, this outlet mall. And it's had some evolutions the last 20 years. How do you guys think about it?
TIM BAXTER: Yeah. Look, our outlook business, we spent a tremendous amount of time, and actually, the second quarter is the first time we actually got our outlet assortments. You know, we really focused on our retail assortments first, and then started focusing on our outlet assortments. And it's the first time we really got our outlet assortments aligned with the Express Edit merchandising and design philosophy.
And the results were incredible. We had a record second quarter in outlets. We drove a 7% comp increase in the outlet business. And what's really exciting about all of this is as you think about our larger strategy, we're going to continue to pull back on major deep site-wide and store-wide promotions in our retail business. And as we do that, the outlet channel becomes much more viable.
You talk about it was the greatest thing you ever found, that was because the value there was incredible. So what we're doing is improving the product and still delivering incredible value there. And the customer's responding. I mean, it's that same kind of feeling that you had when you used to shop at outlets.
So we're bullish on our outlook business as we continue to elevate in our regular priced stores. We drove a 25% increase in average unit retail in the second quarter. And so as we continue to do that, the outlet business is going to become more and more important as the value channel for the Express consumer.
JULIE HYMAN: Tim Baxter, Express CEO. Thank you so much for joining us this morning, Tim. Appreciate it. And Express shares have been waning a little bit in recent days, but they had had definitely a resurgence this year, as you can see, and then some, 578%.
Tim, Thanks so much for being here. Good to catch up with you. We will talk to you again soon as you continue on these store revamps and some of the other endeavors that you've been doing.