Description of Business and Basis of Presentation |
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Oct. 29, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description of Business and Basis of Presentation |
Business Description Express, Inc., together with its subsidiaries (“Express” or the “Company”), is a modern, multichannel apparel and accessories brand grounded in versatility, guided by its purpose - We Create Confidence. We Inspire Self-Expression. - and powered by a styling community. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a part of some of the most important and culture-defining fashion trends. The Express Edit design philosophy ensures that the brand is always ‘of the now’ so people can get dressed for every day and any occasion knowing that Express can help them look the way they want to look and feel the way they want to feel. The Company operates 566 retail and factory outlet stores in the United States and Puerto Rico, the express.com online store and the Express mobile app. Express is comprised of the brands Express and UpWest. As of October 29, 2022, Express operated 364 primarily mall-based retail stores in the United States and Puerto Rico as well as 202 factory outlet stores. Fiscal Year The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the unaudited Consolidated Financial Statements and Notes, as well as the remainder of this Quarterly Report, by the calendar year in which the fiscal year commences. All references herein to the Company's fiscal years are as follows:
All references herein to “the third quarter of 2022” and “the third quarter of 2021” represent the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively. Basis of Presentation The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X and therefore do not include all of the information or footnotes required for complete financial statements. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the Company's 2022 fiscal year. Therefore, these statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended January 29, 2022, included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 24, 2022. Principles of Consolidation The unaudited Consolidated Financial Statements include the accounts of Express, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Segment Reporting The Company defines an operating segment on the same basis that it uses to evaluate performance internally. The Company has determined that, together, its Chief Executive Officer and its President, Chief Operating Officer are the Chief Operating Decision Maker, and that there is one operating segment. Therefore, the Company reports results as a single segment, which includes the operation of its Express and UpWest brick-and-mortar retail and outlet stores and eCommerce operations. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expense during the reporting period, as well as the related disclosure of contingent assets and liabilities as of the date of the unaudited Consolidated Financial Statements. Actual results may differ from those estimates. The Company revises its estimates and assumptions as new information becomes available. Going Concern and Management’s Plans The Company’s revenues, results of operations and cash flows have been materially adversely impacted in the third quarter of 2022 reversing the trend seen into the second quarter of 2022. The challenging macroeconomic, consumer and competitive environments, which became more pronounced as the quarter progressed, significantly impacted the Company's performance. Net sales in the third quarter of 2022 decreased approximately $37.8 million compared to the third quarter of 2021 and this decline drove gross margin and operating income below the Company's expectations. For the thirty-nine weeks ended October 29, 2022, the Company reported a net loss of $39.3 million and negative operating cash flows of $95.9 million. Subsequent to October 29, 2022, the Company refinanced its capital structure and expanded liquidity access. The Amended Revolving Credit Facility contains certain affirmative and negative covenants. Refer to Note 7 in the Company's unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further details regarding the Amended Revolving Credit Facility. The Company is currently in compliance with its covenants, however, due to the uncertainty in the Company’s business, the Company could experience material further decreases to revenues and cash flows and may experience difficulty remaining in compliance with financial covenants under the Amended Term Loan Facility and the Amended Revolving Credit Facility. When conditions and events, in the aggregate, impact an entity's ability to continue as a going concern, management evaluates the mitigating effect of its plans to determine if it is probable that the plans will be effectively implemented and, when implemented, the plans will mitigate the relevant conditions or events. The Company's plans are focused on improving its results and liquidity through sales growth and cost reductions. The Company has contingency plans which would further reduce or defer additional expenses and cash outlays, should operations weaken beyond current forecasts. The Company believes these plans are probable of being successfully implemented, which will result in adequate cash flows to support its ongoing operations and to meet its covenant requirements for one year following the date these financial statements are issued. Please refer to Note 11 in the Company's unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for subsequent events related to the proposed partnership with WHP Global. The accompanying unaudited Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
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