Description of Business and Basis of Presentation |
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| 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 multi-brand fashion retailer whose portfolio includes Express and UpWest. The Company operates an omnichannel platform, including both physical and online stores. Grounded in a belief that style, quality and value should all be found in one place, Express is a brand with a purpose - We Create Confidence. We Inspire Self-Expression. - powered by a styling community. UpWest is an apparel, accessories and home goods brand with a purpose to Provide Comfort for People & Planet. As of April 29, 2023, the Company operated 545 retail and factory outlet stores in the United States and Puerto Rico, the Express.com online store, the Express mobile app and the UpWest.com online store. As of April 29, 2023, the composition of Express operated stores was as follows:
1.As of April 29, 2023, retail store count includes 10 Express Edit stores WHP Strategic Partnership In the fourth quarter of 2022, Express closed the strategic partnership with WHP Global (“WHP”), a leading global brand management firm. The mutually transformative strategic partnership advances the Company's omnichannel platform which is expected to drive accelerated, long-term growth through the acquisition and operation of a portfolio of brands. In connection with the closing of this transaction in January 2023, the Company and WHP also formed a joint venture (the “Joint Venture”), intended to scale the Express brand through new domestic category licensing and international expansion opportunities. Refer to Note 5 for further discussion regarding the WHP strategic partnership. 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 first quarter of 2023” and “the first quarter of 2022” represent the thirteen weeks ended April 29, 2023 and April 30, 2022, 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 future interim periods or 2023 fiscal year. Therefore, these statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended January 28, 2023, included in the Annual Report. Express, Inc., through its indirect, wholly owned subsidiaries, including Express Fashion Operations, LLC, conducts the operations of the Company and Express Fashion Investments, LLC which owns a 40% economic interest with significant influence in the Joint Venture. Principles of Consolidation The unaudited Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. The Company indirectly holds a 40% equity method interest in the Joint Venture, which is majority owned by WH Borrower, LLC, an affiliate of WHP. 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 its Chief Executive Officer is 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 by negative macroeconomic factors beginning in the third and fourth quarters of 2022 and continuing into the first quarter of 2023. The persistently challenging macroeconomic and retail apparel environments, including reduced consumer spending and increased price sensitivity in discretionary categories, has significantly impacted the Company's performance. Net sales during the first quarter of 2023 decreased approximately $67.5 million compared to the first quarter of 2022 and this decline, coupled with an increase in promotional activity, drove gross margin and operating loss below the Company's expectations. For the first quarter of 2023, the Company reported a net operating loss of $70.1 million and negative operating cash flows of $80.6 million. As of April 29, 2023, the Company was in compliance with the covenants under the agreements governing its indebtedness, 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 such covenants. Refer to Note 8 for further details regarding the terms of the ABL Credit Agreement and the Revolving Credit Facility provided to the Company thereunder. 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 additional expense savings and improved sales trends as we move through the balance of fiscal year 2023. The Company is committed to finding significant additional expense savings which are expected to benefit the second half of fiscal 2023 and full fiscal year 2024, and has engaged external advisors to assist in analyzing and identifying both potential margin expansion and further expense saving opportunities. Additionally, 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 financial covenant requirements under the agreements governing its indebtedness for at least one year following the date these financial statements are issued. 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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