Express to close its 17 stores in Canada; following these closings,
Express will continue to operate 635 stores in the U.S.
Actions aligned with strategic focus on improving profitability and
optimizing the store footprint
COLUMBUS, Ohio–(BUSINESS WIRE)–Express, Inc. (NYSE:EXPR) (the “Company”) today announces an additional
measure as part of its continued strategic approach to improving
profitability and managing and optimizing its store footprint.
As part of this plan, Express intends to close all 17 Canadian stores
and discontinue its Canadian operations through its Canadian subsidiary,
Express Fashion Apparel Canada Inc. (“Express Canada”). This morning, as
a part of that process, Express Canada filed an application for
protection under the Companies’ Creditors Arrangement Act (the
“CCAA”) with the Ontario Superior Court of Justice (Commercial List) in
David Kornberg, Express, Inc. president and chief executive officer
noted that, “The challenging Canadian retail environment, coupled with
unfavorable exchange rates prevented us from meeting the expectations we
had when we entered the market in 2011. While difficult, this action is
best for the future of Express and we are committed to carry it out in a
way that reflects our respect and appreciation for employees who are
impacted. Our overriding focus remains to invest in and direct our
resources towards those areas that can generate the greatest return,
including growing our e-commerce business, relaunching our customer
loyalty program, and continuing to build our omni-channel capabilities
to allow our customers to engage with our brand and shop wherever,
whenever, and however they want. The decision to exit Canada is
consistent with our long-term strategy and will have no impact on our
operations in the U.S., which remain in a solid financial position.”
For the fiscal year ended January 28, 2017, Express Canada had net sales
of approximately $34 million in U.S. dollars ($45 million in Canadian
dollars) and contributed a net loss of approximately $6 million in U.S.
dollars to the Express, Inc. consolidated financial statements.
Express Canada currently has 17 stores across Alberta, British Columbia,
and Ontario. To facilitate an orderly wind-down, Express Canada intends
to conduct store closing sales beginning mid-May. Subsequent to the
closings, Canadian customers will continue to be able to make purchases
through the Company’s e-commerce website, www.express.com,
as well as through the Express mobile app. As part of its application,
Express Canada is seeking the appointment of Alvarez & Marsal Canada as
Monitor in the CCAA proceedings to oversee the liquidation and wind-down
process for Express Canada.
As a result of the CCAA filing, Express, Inc. has determined that
Express Canada will be deconsolidated from Express, Inc. financial
statements as of the date of the filing. As shown in the table below and
detailed as follows, Express, Inc. expects this to impact pre-tax profit
on its consolidated financial statements in the range of $28 to $34
million in 2017, driven primarily by the write-down of its investment in
Express Canada along with costs associated with exiting Canada. The
Company will incur charges of approximately $6 million in the first
quarter of 2017 and the remaining $22 to $28 million of exit costs in
the second quarter of 2017. In addition, the Company anticipates tax
benefits related to exiting Canada in the range of $14 to $16 million,
of which approximately $7 million is expected in the first quarter of
2017 and the remaining $7 to $9 million in the second quarter of 2017.
As a result, Express, Inc. expects to report an impact to net income in
the range of $14 to $18 million in 2017, of which approximately a $1
million benefit is expected in the first quarter of 2017 and an impact
of $15 to $19 million expected in the second quarter of 2017. Total
after tax cash costs to exit Canada are expected to be in a range of $8
to $12 million. The impact of these exit costs was not included in the
Company’s most recently provided guidance.
The Company plans to release first quarter fiscal 2017 results on
Thursday, June 1, 2017.
The expected impact of Express Canada’s CCAA Filing on the Express, Inc.
consolidated financial statements is as follows:
|First Quarter 2017||Second Quarter 2017||Full Year 2017|
|Income (Loss) Before Tax||(~$6 million)(1)||($22 to $28 million)(2)||($28 to $34 million)|
|Income Tax Benefit(3)||~$7 million||$7 to $9 million||$14 to $16 million|
|Net Income (Loss)||~$1 million||($15 to $19 million)||($14 to $18 million)|
|Total After-Tax Cash Costs||($8 to $12 million)|
Driven primarily by a non-cash asset impairment charge of
approximately $6 million in the first quarter of 2017.
Driven primarily by the write-down of the investment in Express
Canada along with costs associated with exiting Canada in 2017.
|(3)||Anticipated tax benefits related to exiting Canada.|
About Express, Inc.:
Express is a specialty apparel and accessories retailer of women’s and
men’s merchandise, targeting the 20 to 30- year-old customer. Express
has more than 35 years of experience offering a distinct combination of
fashion and quality for multiple lifestyle occasions at an attractive
value addressing fashion needs across work, casual, jeanswear, and
going-out occasions. The Company currently operates more than 650 retail
and factory outlet stores, located primarily in high-traffic shopping
malls, lifestyle centers, and street locations across the United States,
Canada, and Puerto Rico. Express merchandise is also available at
franchise locations and online in Latin America. Express also markets
and sells its products through its e-commerce website, www.express.com,
as well as on its mobile app.
Certain statements are “forward-looking statements” made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include any statement that does not
directly relate to any historical or current fact and include, but are
not limited to, the Company’s plans to improve profitability and to make
certain investments in the business and results from such plans and
investments, as well as the plan to discontinue Canadian operations and
expected financial impacts. Forward-looking statements are based on our
current expectations and assumptions, which may not prove to be
accurate. These statements are not guarantees and are subject to risks,
uncertainties, and changes in circumstances that are difficult to
predict, and significant contingencies, many of which are beyond the
Company’s control. Many factors could cause actual results to differ
materially and adversely from these forward-looking statements.
Additional information concerning these factors can be found in Express,
Inc.’s filings with the Securities and Exchange Commission. We undertake
no obligation to publicly update or revise any forward-looking statement
as a result of new information, future events, or otherwise, except as
otherwise required by law.
Vice President, Investor Relations
Robin Hoffman, 614-474-4834