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, Bonobos 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. Bonobos is a menswear brand known for exceptional fit and an innovative retail model. UpWest is an apparel, accessories and home goods brand with a purpose to Provide Comfort for People & Planet. As of July 29, 2023, the Company operated 601 stores in the United States and Puerto Rico, the Express.com online store, the Express mobile app, the Bonobos.com online store and the UpWest.com online store. As of July 29, 2023, the composition of Express operated stores was as follows:
Bonobos Acquisition On May 23, 2023, the Company completed the acquisition of the operating assets of Bonobos, a menswear brand known for exceptional fit and an innovative retail model. The acquisition is intended to expand the Company's brand portfolio and leverage the Company's fully integrated omnichannel operating platform to drive financial efficiencies, operational synergies and additional economies of scale. Refer to Note 6 for further discussion regarding the acquisition. WHP Strategic Partnership In the fourth quarter of 2022, Express closed the strategic partnership transaction 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 an intellectual property 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. Reverse Stock Split and Recasting of Per-Share Amounts On August 14, 2023, the Company’s Board of Directors (the "Board") approved the implementation of a 1-for-20 reverse stock split of the Company’s common stock, par value $0.01 per share (“Common Stock”), and a corresponding proportional reduction in the number of authorized shares of Common Stock. The reverse stock split was effected after market close on August 30, 2023 (the “Effective Date”), and shares of Common Stock began trading on a split-adjusted basis as of market open on August 31, 2023. All shares of Common Stock, stock option awards and per share amounts contained in the unaudited Consolidated Financial Statements and Notes have been retroactively adjusted to reflect the 1-for-20 reverse stock split. Refer to Note 12 for further discussion regarding the reverse stock split. 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 second quarter of 2023” and “the second quarter of 2022” represent the thirteen weeks ended July 29, 2023 and July 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. The financial results of Bonobos have been included in the unaudited Consolidated Financial Statements from the date of the completion of the acquisition on May 23, 2023. 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, Bonobos 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 Assessment 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 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 twenty-six weeks ended July 29, 2023 decreased approximately $97.1 million compared to the twenty-six weeks ended July 30, 2022 and this decline, coupled with aggressive promotional activity, drove gross margin and operating loss below the Company's expectations. For the twenty-six weeks ended July 29, 2023, the Company reported a net operating loss of $109.7 million and negative operating cash flows of $60.8 million. As of July 29, 2023, the Company was in compliance with the financial covenants under the agreements governing its indebtedness, however, due to ongoing negative macroeconomic factors and their uncertain impacts on the Company’s business, results of operations and cash flows, the Company could experience further material decreases to net sales and operating cash flows and materially higher operating losses and may experience difficulty remaining in compliance with such covenants. Refer to Note 9 for further details regarding the terms of the ABL Credit Agreement (as defined therein) and the Revolving Credit Facility provided to the Company thereunder. Under GAAP, management is required to perform an initial assessment of an entity’s ability to continue as a going concern. When conditions and events, in the aggregate, raise substantial doubt about an entity's ability to continue as a going concern, management considers the mitigating effect of its plans to the extent it is probable that the plans will be effectively implemented within the assessment period and, when implemented, it is probable the plans will mitigate the relevant conditions or events and alleviate substantial doubt. Management's plans are focused on improving its results of operations, operating cash flows and liquidity through expense reduction initiatives and improved sales trends during the balance of fiscal year 2023 and fiscal year 2024. Additionally, the Company is conducting a comprehensive review of its business model to identify actions that are expected to meaningfully reduce pre-tax costs and enable a more efficient and effective organization and has engaged external advisors to assist in this effort. Management believes these plans are probable of being effectively implemented and, when implemented, that it is probable they will mitigate the negative impacts of the current ongoing negative macroeconomic conditions on the Company’s business. On September 5, 2023, the Company entered into a definitive loan agreement with ReStore Capital for a $65.0 million first-in-last-out asset-based term loan, receiving $32.5 million in gross proceeds from the term loan upon entering into the agreement, with the remaining $32.5 million to be funded on or prior to September 13, 2023. Additionally, the Company has contingency plans which would further reduce or defer additional expenses and cash outlays should its results of operations weaken beyond management’s current forecasts. Consequently, management believes that cash flows from operations, together with the proceeds from the new FILO Term Loan Facility (refer to Note 13 for further details regarding the terms of the FILO Term Loan Facility), will result in adequate cash flows to support the Company’s ongoing operations and to meet its obligations as they become due under the agreements governing its indebtedness for at least one year following the date these interim 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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