Express stock soars more than 50% following earnings
Yahoo Finance Live anchors discuss the rise in stock for Express following quarterly earnings.
Video Transcript
JULIE HYMAN: We're going to dive into it right now because--
BRAD SMITH: Right now.
JULIE HYMAN: --I am so confused about what's going on there. It was plunging earlier. Now it's up by 59% here, Express soaring. And the company did report-- oh, [INAUDIBLE].
BRIAN SOZZI: Express on over here. Welcome back.
JULIE HYMAN: OK, it's reporting an 8% drop in sales in the third quarter, $30 million operating loss. Customer cost cutting hitting the clothing retailer hard. It's also announcing a joint venture with a company called WHP that has brands like Toys 'R' US and Anne Klein, Joe's Jeans. And as part of that joint venture, WHP is going to invest $235 million for a 60% ownership in the joint venture. Express is going to own 40% of that thing. I'm a little confused about exactly what this joint venture is. I know you've been looking at it, Sozz.
BRIAN SOZZI: Full disclosure, this is something I need to look into a little bit more. This is a little bit of a complicated release because you do have two things coming here from Express. As you mentioned, Julie, a challenging quarter, I would say some challenging guidance from the company. Inventory not where it needs to be. Tim Baxter, who's been on with us many times, talking about his turnaround plan, calling out some misses in the women's side of the business.
But this deal essentially makes WHP almost a 7 and 1/2% owner of Express. So it looks like they get a cash infusion and a new owner. But again, there's a lot more to unpack here. But I think it's this strategic decision by Tim and his management team to get a new investor here, get some cash-- more cash into the business. That's why the stock is rising the way it is.
BRAD SMITH: For what we've discussed and continued to try and unpack with Express over the past two quarters now, it's really a question of what part of the market do they want to play in within retail. And of course, there has been a lot of the discounting that retail broadly has had to move forward. But for Express and the categories that they are competing within, it's hard to say that they would be a category leader.
However, in some of the different areas that they are putting forward some of the fashion, some of the apparel, this stuff feels good. I'm going to be real, as a customer. But at the same time, I go to them for the discounts, for the deals. I'm not prioritizing them at the high end kind of purchase that I'm looking to move forward with.
So they're going to have to continue to look at some of the inventory, heavy promotional environment that they're still going to be in, not just through the holiday season, but for an extended period of time. I just wonder what brands they think are going to grow out of this deal that would allow them to paint a different consumer sentiment picture as well.
JULIE HYMAN: Well, it's their own brand is what it sounds like that they're just-- so I'm looking at this a little bit more. So basically what they are-- they are going to have an omnichannel platform to drive accelerated long-term growth through the acquisition operation of a portfolio of brands. So I guess there will be multiple brands.
However, they're also forming an intellectual property joint venture intended to scale the Express brand through new domestic category licensing and international expansion opportunities. I don't know that the brand, as it is, is that well known in order to do that kind of thing. I mean, we also have some folks chiming in our Slack channel that the quality of Express is not necessarily strong. You get what you pay for, right, to your point about you go there for the discounts.
BRIAN SOZZI: I think they improved the quality. And it is a different--
BRAD SMITH: But at that price point.
BRIAN SOZZI: At the price point.
BRAD SMITH: Yeah. I bought some $25 boots from Express over the summer, off season, off cycle. Bought the boots, $25. I am happy with the $25 boot purchase because it was from Express and because the quality held up for $25. But if I had to pay $50 for the boots, I wouldn't have got them.
BRIAN SOZZI: Interesting.
BRAD SMITH: And I wouldn't have been happy with them.
BRIAN SOZZI: But you made a good point. It is a challenging industry out there. There is a lot of-- the whole apparel industry is awash, absolutely awash in inventory. We learned that from VF Corp this week when they reported. I mean, this is not going to-- this is going to last. This issue is going to last well into the spring of next year.
BRAD SMITH: They've had some interesting partnerships that they moved forward with during the NIL period as well. They had some college football players that they partnered with. And we've seen that in the past, them prioritizing some of those sports partnerships because of the cuts of what they are making. But I think, yeah, with this strategic partnership, I mean, and the deal that they've made, what really comes forward to turn the-- I don't want to say Ever Given. That sounds really mean, but what really comes forward to turn the boat around here.
JULIE HYMAN: That would imply a size that they do not have, I don't really think. Sorry. I mean, you know. Anyway--
