Express (EXPR)

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Express, Inc. is a publicly owned corporation that specializes in current fashion trends for both men and women. Having just under 600 stores in the United States, “Express is the sixth largest specialty retailer of men’s and women’s apparel in the United States.” ^[1]

Business Summary

With 30 years of success, Express is currently the sixth largest retailer of specialty men’s and women’s clothing in the United States. Express stores have clothing that embodies current fashion trends. Going into an Express store, a shopper can expect to find clothing that fits a variety of purposes. They have clothing appropriate for work atmospheres, going out on the town, and even day to day casual wear; all at an attractive value for customers. Shoppers can find Express stores all across the United States, Puerto Rico, as well as online at Express.com. As of the end of 2010 Express will have a total of 590 stores in operation which are strategically located in high traffic shopping areas. ^[2] "As of October 30, 2010, the Alshaya Trading Co. operated six Express stores located in Saudi Arabia, Kuwait and the United Arab Emirates." ^[3]

2010 was also a big year for Express, Inc. because they announced their intention of the sale of common stock. On May 12, 2010 Express converted from a limited liability company (LLC) to a corporation changing their name from Express Parent LLC ("Express Parent") to Express, Inc. This change was made in connection to the announcement of their initial public offering of stock. Six days later on May 18, 2010 Express completed their initial public offering by selling 10,500 shares of newly issued common stock.^[3]. The net sales reported for Express, in thousands covering a 39 week period ending October 30, 2010 was $1,284,316. Express’ mission is to be first and foremost committed to their customers and products embodied in what is Express. They also are committed to being recognized as a world-class fashion authority. ^[4]

“Express is not about a single point in time, but rather a spirit, energy, and a belief that we can and will be the best retail fashion brand in the world.” Michael Weiss President and CEO ^[1]

Business Segments and Product Portfolio

Retail Stores

Top states with 10 or more Express stores

US Express Stores Concentration

Express store located in an outdoor shopping mall in Michigan

Express’s retail segment targets an attractive and growing demographic of women and men between 20 and 30 years old. Its stores are "designed to create an exciting shopping environment that reflects the sexy, sophisticated, and social brand image Express aims to capture". ^[3] Women sales represented 66% of Express’s net sales and men sales represented 34% of net sales for Express in FY 2010.^[3] In comparison, J.Crew's apparel sales breakdown for FY2010 was 65% women, 19% male, and 12% children while the Limited's sales breakdown is almost 100% female apparel sales due to the nature of the products sold.

As of October 31, 2010 EXPR owned and operated 582 stores in 47 states.^[3] Of the 582 stores, 539 were dual gendered, 25 were solely dedicated for women, and 18 were solely dedicated for men.^[3] EXPR stores are mainly concentrated in large suburban areas where high traffic shopping malls and lifestyle centers are present. Express retail stores average two-three items per transaction.^[3]

The states with 10 or more Express stores -- which account for 447 of their 582 stores-- are primarily concentrated in the Mid-West and East Coast. The two outlier states are California and Texas, which, ironically, are the two states with largest number of stores. California boasts 71 Express stores making it the state with the most number of retail locations, Texas second with 52, followed by Florida 39, New York 39, and Illinois 32 to round out the top five for the most number of Express locations.^[3] Express tends to operate more stores in warmer climate regions in order to position themselves in outdoor "lifestyle" malls because there has been a growing trend and appeal for these shopping districts. Express is still highly concentrated in Illinois and New York because of the population densities in its largest cities.^[3] ‎ As a surprise to some investors, Michigan—though decimated by the restructuring of the auto-industry-- holds the 6th most number of Express locations (20), of which are primarily located in Oakland County, the tenth richest county in the United States, according to a 2010 Forbes report.^[5] Similarly, Novi, a city of 55,000 residents in Oakland County, MI and the home of two Express Stores in Twelve Oaks Mall, was recently ranked 5th in the entire country in spending for clothing, while three California suburbs and a Dallas suburb were the top four.^[6]The top four suburbs had mean household incomes of $120,000+. ^[6]

What may also come as a surprise is that Forbes Magazine ranked Houston and Dallas Texas as the number one and two shopping cities in the U.S. in a 2010 report, thus providing a reasonable explanation for Express's heavy presence in Texas. In the past ten years, Texas has experienced a 21% population growth according to U.S. Census data. ^[7] However, Express has not been the only company to take advantage of this population growth. Guess operates 62 stores (retail, accessory, outlet, and department store locations) ^[8] in Texas with 15 between Dallas/Houston, J. Crew operates 19 stores in Texas with four between Houston/Dallas ^[9], GAP operates 48 are between Houston/Dallas ^[10], and the Limited operates 82 Victoria Secret stores in Texas, of which 14 are in the Dallas/Houston area. ^[11] If Texas's population growth continues, watch for these companies to further invest in the region.

Express is the only retailer out of Gap, J.Crew, Limited, and Guess to not have outlet factory stores. This could be a strategic move in order to secure its pricing in its stores. Similarly, operating factory outlet stores in close proximity to retail locations could dilute the business in the primary stores. Deciding not have factory outlet stores also shows that the company is extremely cognizant of its inventory levels in relation the seasons of the business and effectively uses sales to minimize inventory levels.

Express plans to open an average of 30 stores across the United States and Canada over each of the next five years, which represents annual store growth of approximately 5%, with slightly less than 30 stores in the earlier years and slightly more than 30 stores in the latter years. ^[3] Also, Express plans to continue consolidating its gender specific stores into dual-gendered stores in order to better compete. Express contributes its increase in net sales per gross square foot from $260 in 2001 to $321 in 2009 to store consolidation since it has significantly improved efficiency in stores, improved productivity, lowered store expenses, and reduced total gross square footage by 30%.^[3] The average Express store is 8,700 square feet in size and for FY 2010, Express's retail stores occupied a total 5,022,000 square feet. ^[3]

Product Portfolio

Women's section in an Express store in Michigan

Men's section in an Express store in Michigan

Express’s stores and website were designed to create an exciting shopping environment that reflects the sexy, sophisticated and social brand image that they seek to project. Express features dual gender stores offering both women’s and men’s apparel and accessories.^[1]

Women’s Apparel

Express offers high-end fashionable women’s clothing making up 66% of Express’s net sales.^[3] These types of clothing include: dresses, sportswear, underwear, jackets, jeans, pants, shorts, shirts, shoes, skirts, suits, sweaters, swimwear. In addition to clothing they also offer many accessories such as handbags, belts, scarves, hats, tights, hair accessories, and sunglasses. Finally, Express offers perfumes and fragrances.^[12]

Men’s Apparel

While there seems to be more diversity in products for women, men’s clothing still makes up for a healthy 33% of Express’s net sales.^[3] They offer men’s T-shirts, Jeans, outerwear and jackets, pants, polos, shirts, shorts, swimwear, suits, sweaters, underwear and ties. Also, like the women, Express offers cologne for men.^[13]

Strategic and Competitive Analysis

Competitor Comparison

Guess store located in an outdoor shopping mall in Michigan

J. Crew store located in an outdoor shopping mall in Michigan

Victoria's Secret store located in an outdoor shopping mall in Michigan

GAP store located in an outdoor shopping mall in Michigan

Store Size and Sales per Square Foot

Note: All three companies build their retail stores “sized to market” which means that they are adjusted to the size of projected revenues from a particular store.

• Guess?(NYSE: GES): earned approximately $425.69 per square foot in their 142 U.S. retail and outlet locations. Guess? averages 5,000 sq. feet in their retail locations. Guess owns a total of 1,992,000 square feet of retail space for its U.S. and Canada operations. ^[14]

• J. Crew (NYSE: JCG): averages 6,500 sq. feet per retail store and outlet location J. Crew earned $577 per average square foot in FY 2010 for its 321 stores (243 retail, 78 factory outlet). ^[15]

• Limited Brands (NYSE: LTD): owns Victoria Secret and Bath and Body Works, operates a total 2,678 retail and outlet stores that average 4,300 sq. feet and average sales of $581 sales per square foot.^[16] The top performing stores on a square footage basis were approximately 6,000 square feet.

• Gap (NYSE: GPS): owns Old Navy, and Banana Republic. Gap stores earned $329 per square foot in FY 2010 for its 1,018 (retail and outlet) stores that average 9,998 square feet.^[17]

Compared to these competitors, Express's sales per square foot ($321) is substantially lower. There are a couple of reasonable explanations for this. First, Express's price points may be relatively low. Second, Express stores may operate with a significant amount of unoccupied selling space. In order to improve its sales per square foot, Express should focus on the reducing excess inventory and focus on a stronger product mix/balance, focus on the specific market segment of 20-30 year olds, and better utilize online marketing to leverage brand loyalty to drive traffic into stores. ^[18]

One thing that Express has traditionally done is create an "open" environment that creates a less intimidating shopping experience for most customers, thus explaining their relatively large stores. Although Express builds easily navigable stores for consumers, the consumers are more concerned about the value on the shelves and racks. In order to increase the gross sales per square foot, Express could focus on providing differentiated and unique merchandise with greater variety and more frequent flow which produces creates excitement, drives traffic and results in conversion of inventory. ^[18]

Comparison of Revenue Structures for 2010

Revenue Structures for FY 2010 Retail vs. E-ecommerce

Compared to it's competitors, Express performs competitively in the retail segment of the business. On the other hand, Express's e-commerce or direct sales are lagging behind the competition.Express’s e-commerce business (express.com) was launched in July 2008 and to provide Express with a direct-to-customer sales channel. From 2008 to 2009, Express’s e-commerce sales increased 231%.^[3] Express believes that its e-commerce channel will allow the company to "monitor real-time customer feedback, enhance product testing capabilities, expand advertising, and create a merchandise clearance channel."^[3] Improving the size of its e-commerce channel and its e-commerce marketing could significantly improve Express's competitiveness and operating income, regardless of the capital requirement.

From a customer's perspective, buying online offers a convenient shopping experience at the click of a button. A majority of the time, online stores offer more larger selection of products than the brick-and-mortar stores do in the shopping malls and lifestyle centers. In addition, online-shopping offers exclusive coupons, shipping rates, and free return policies. By reaching further out into the e-commerce market, Express could realize significant increase in sales.

Porter’s 5 Forces Analysis and the Competitive Landscape

The clothing retail industry is very competitive. However the threat of new entrants to established companies like Express is relatively low. Express and its main competitors have all been in existence since the late 70’s to early 80’s. Because of this established credibility, there exists quite a bit of brand loyalty among consumers. To remain competitive, the main players in the retail industry all have incentives for frequent buyers normally in the form of store credit cards. Express also offers discounts to new customers on purchases when they join their email service. ^[2] One of the prominent reasons for such intense competition between companies is the non-exisitant cost of switching companies. Because customers are constantly looking for the best products at the lowest prices, Express and its competitors are forced to be highly innovative in obtaining and retaining customers.

As said before, Express thrives in a very competitive landscape and the availability of substitutes is a substantial issue that Express must face at all times. There are many companies that not only offer similar products to Express, but also target the same demographic. Express has many competitors, however its main competitors are The Limited, J Crew, Guess, and the Gap.^[19] All of these companies target the same coveted young adults 20-30 age group that is growing so rapidly and making up the majority of these companies' respective net sales. This target demographic is a difficult group to appeal to because of their constantly evolving fashion tastes. A company could have a strong hold on the demographic one season, and completely lose their footing in the next if their fashions aren't updated to fit the new trends. furthering this difficulty, all of these companies have to straddle the line between offering desirable high quality products that are also affordable enough to a demographic that is just transitioning from school into the workforce.

Express and their competitors have all been in business for about 30 years, they each have a piece of the market share. The nature of Express’s target market direction implies that every year there are customers outgrowing the store and leaving the market, and new customers just entering the market with no current brand allegiance. Competition between Express and its competitors for those new customers is intense. To remain competitive, Express uses consistent sales to provide its customers with the highest quality products for the very low prices.^[3]

For large-scale retail companies like Express, the power of one buyer is relatively small. The average customer is not purchasing very large volumes of clothing on a regular basis. However this does not mean that Express or any of its competitors can ignore the customer or view them as insignificant. As stated above, switching from one company to another is as simple as walking into another store. In addition, consumers do not see high-end clothing products as an essential commodity so, its price inelastic. If Express or a competitor raises prices, customers will go find a more affordable option.^[3]

Express outsources all of their suppliers to companies in the Egypt due to the fact that labor there is so inexpensive. Outsourcing saves Express a lot on money on manufacturing costs. Due to the large amount of substitutes that offer low costs, the suppliers do not carry very much power.^[3]

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

Express has a history of offering original, stylish and forward-looking fashion that attracts the trendsetters. The CEO once declared that Express is not a creation or an imitation; it is rather the interpretation of different trends and inspiration from all over the world.^[1] Express uses its very diverse product portfolio to appeal to their target demographic of women and men.^[3]They also use the feasible marketing approach to bring the messages out to the followers. The Express gift card/credit card helps to bolster their existence in the market; however, what Express is best known for is their ability to offer their customers great savings through their consistent sales. Express also has a very accessible website that facilitates efficient navigation through their immense product portfolio with relative ease. Due to an enhanced filtering system, customers can find exactly what article of clothing they are looking for without having to sort through page after page of different products that they do not want.

There are many well-established competitors with a larger market share and possible better brand notoriety. Since Express is only the 6th largest clothing distributer for women, they have five other companies whose market share they need to chip away at. Express is sensitive to consumer spending and general economic conditions, and a continued or further economic slowdown could adversely affect their financial performance. Express is highly dependent upon its ability to identify and respond to new and changing fashion trends, customer preferences and other related factors, and its inability to identify and respond to these new trends may lead to inventory markdowns and write-offs, which could adversely affect their brand image.^[3]

Express has in place a very specific plan to grow their business. They plan to improve productivity of their retail stores by further conversion to dual-gender. This will provide an opportunity to further improve margins by relying on efficiencies in sourcing and continued refinement of the merchandising strategy. Another area Express wants to improve on is recapturing their market share in their core product categories. Five years ago, Express shifted their product mix to a more professional assortment of clothing that included a high volume of tops, casual bottoms and denim. However, when they looked back on previous sales, they saw that there was an opportunity to recapture their sales in casual and party tops, dresses and denim segments. Express also plans on expanding their store base. Despite the significant growth in retail shopping centers in the last decade, Express has focused almost entirely on converting existing stores to the dual-gender format. As a result, there are numerous attractive, high-traffic locations that present opportunities for us to expand their store base. They plan to open an average of 30 stores across the United States and Canada over each of the next five years, which represents annual store growth of approximately 5%, with slightly less than 30 stores in the earlier years and slightly more than 30 stores in the latter years.^[3]

Threats for Express are its main competitors: J Crew, Guess, The Limited and The Gap. These companies are all threats because they all market to the same demographics. Some companies have a competitive advantage in offering their merchandise at a cheaper price. Other companies have a competitive advantage because of non-pricing factors such as a fast delivery time. Also, because of the nature of the retail apparel industry as a whole, there is also the possibility that fashion trends will change and if Express or any of their competitors don’t constantly update their apparel to stay relevant to their target demographic, then they will be left behind.^[3] Staying ahead of the curve is the only way for retail companies like Express to stay afloat in the competitive retail waters.

Marketing Strategy and Supply Chain

Product:

In 1980 when Express opened its first store in downtown Chicago at the time they were known as Limited Express and they specialized in women’s apparel. As the number of stores increased so did the mindset of Express’s CEO Michael Weiss. Express not only continued to cater to the fashion of women but decided to test the water and sell men’s apparel as well. Today, Express is considered a dual-gender brand targeting customers between the ages of 18-30. Fashion styles vary from casual wear, business casual and finally business attire. Learning from their competitors Express focuses primarily on their denim jean products making sure that the assortment of different styles and sizes are always fashionable to their target customers. This has helped Express become the sixth largest clothing apparel retailer in the United States. Express Men apparel all consist of t-shirts, hooded sweatshirts, dress pants, dress shirts and fashionable ties. Women’s clothing varies from blouses, pants, dresses skirts, scarves, and belts. With a plethora of clothing options and styles Express always comes to minds of the younger generation people who are looking for something new and fashionable to wear. ^[3]

Place:

The number one way that express reaches its customers is through their stores. Express has 582 stores throughout the United States. Stores are also located in Puerto Rico and Iraq. Express reaches both domestic and foreign customers also through the online domain wwww.express.com which is visited by approximately 2.5 million people each month. Express does not offer their products at departments like like Macy's or Nordstrom. Express is also one of the very few clothing apparels stores that doesn't have any outlet store locations. Their competitors like Gap and Guess all have outlet locations.

Promotion:

Express pride themselves on keeping in close contact with their customers after a purchase. Through a variety of different marketing strategies Express promotes products with its target customers always in mind. They promote these products mainly through television commercials, emails, and mail and catalogs. Once in the store their advertising takes places on the windows, flyers and finally the employees on the floor who promote the brand by wearing the product.

Price:

The company offers a distinct fashion design and quality for all occasions at attractive prices. Express realizes that since their target market consist of younger groups of people from the ages of 18-30 that there not dealing with customers with tons of money to spend. They offer great deals for this reason consisting of seasonal pricing and volume discounts. This allows them to compete well with competitors like The Gap and Guess.

Supply Chain:

The headquarters of Express is located in both Columbus, Ohio and New York, New York. Designing of the clothes take place in New York City at the Express Design Studio. Express's apparel sourcing function is extremely deep in Asia, which in turn allows them to partner with the best manufacturing companies in the world. They purchase merchandise from over 1,000 different suppliers throughout the world. Once their products are produced the material is sent to a shipping distribution in Ohio. They guarantee that each store has a enough inventory in distribution center and retail store to fully satisfy the customer. ^[3]

Financial Performance

As of January 2010

Express posted revenues of $1.721 billion in FY 2010, down from $1.737 billion in FY 2009. Express also posted a positive operating cash flow percentage change (year over year) of 468.9% in FY 2010, compared to a negative cash flow of -89.62% in FY 2009. ^[20] In addition, Express posted $75 million in net income in 2010, up from $-29 million in 2009. ^[20]

This positive growth in net income is likely to increase as Express has continued to reduce operating costs. This is evident in the growth in Express’s earnings before interest, tax, depreciation, and amortization (EBITDA); this metric provides a level field for comparison of companies and their ability to generate raw cash profits (not to be mistaken with cash flow) in the same industry.^[21] In FY 2009, Express’s EBITDA was $229 million, which represented a 168% increase from $85.9 million in FY 2006.^[3] Compared to several of Express’s competitors EBITDA, such as Guess? ($427.9M)^[14] , J.Crew ($265.73M) ^[20], Gap ($10,073M) ^[17] and Limited Brands($1,278M)^[16] Express appears to be able to meet or exceed the EBITDA of its competitors at its growth rate. ^[20]

Comparing EBITDA to sales ratios, Express's ratio was 68%^[3], Gap 70% ^[17], Guess's 72% ^[14], Limited 75%^[16], and J.Crew 69%.^[20] This suggests that the five companies are all profitable and are very similar in their ability to keep certain expenses, such as fixed costs, are relatively low to earnings. This comparison reveals that Express may have opportunities to reduce certain operating expenses or increase sales, perhaps via e-commerce or investments in factory outlet stores since Express is the only company out of these competitors that do not operate outlets, in order to improve this profitability ratio.

Seasonal Nature of the Retail Business and Gift Cards

The specialty retail business is highly seasonal and, historically, realizes a higher portion of net sales and net income in the third and fourth fiscal quarters due primarily to early Fall selling patterns and the impact of the holiday season. Generally for Express, the annual sales split is approximately 45% for the Spring season (February through July) and 55% for the Fall season (August through January). ^[3]

Working capital requirements are typically higher in the second and fourth quarters due to inventory-related working capital requirements for early Fall and holiday selling periods. Express and its competitors are also subject, at certain times, to calendar shifts, which may occur during key selling periods close to holidays such as Easter, Thanksgiving and Christmas. ^[3] Furthermore, the seasonal nature of the retail business may affect comparisons between periods as well as the number of stores per state.

The number of gift cards outstanding usually is dependent on the size of the companies in terms of number of store locations and brand size. While gift cards offer convenient forms of payment for consumers, they also represent financing for the company with very little cost since the customers are essentially providing them cash to be redeemed at a later point in time. For FY 2010, Express had $21^[3] million in gift card liabilities, Guess $16M ^[14], J.Crew $33M ^[15], Limited $156M^[16], and Gap with $244M^[17]. Gap's large gift card liabilities are largely in part to the size of its store network throughout the world. In terms of the percentage of sales financed through gift cards, Express's gift cards finance 1%^[3] of its sales, Gap 17%^[17], Guess 1%^[14], Limited 2%^[16], and J.Crew 2%^[15]. When looking for low cost financing vehicles for future endeavors, Express could increase gift card sales.

Valuation

When comparing Express’s value against its major competitors (Guess?, J.Crew, Gap, and Limited Brands), it is clear that Express offers value for investors. For example, Express maintained a .9 Price/Sales ratio in FY 2010, suggesting that the stock may be undervalued since the investor is paying less for every unit of sales.^[20] Otherwise, Express’s Price/Sales ratio is consistent with the industry average .9 and below Guess 1.7 ^[14], J.Crew 1.7 ^[15], Gap 1.0 ^[17], and Limited Brands 1.2^[16]. ^[22]

Express’s Price to Earnings ratio (P/E) suggests that compared to its competitors, investors are willing to pay more per share for Guess 15 ^[14], J.Crew 18.1 ^[15], Gap 12.3^[17] and Limited Brands 15.1^[16]. Express’s P/E for FY 2010 was 23.56 while the industry average was 15.7^[20]. J.Crew's P/E ratio was 18.01. ^[22]

As an investor, Express and J.Crew appears to be the more appealing investment to investors due to its high P/E ratio. However, this high P/E ratio may be influenced by a recent fashion trend that Express and/or J.Crew has pioneered or has appealed to. Or, investors in Express or J.Crew may be pleased with their capital structuring for the future of the business and expect long term value from the company.

The risk in investing in companies with such high P/E ratios is that since they are selling at a premium, Wall Street has already taken notice of its performance, and consequently, leaves little flexibility for poor performance, thus putting the investor at risk of losing a lot of money if there is a slide in company performance. Additionally, high P/E ratios may suggest that the stock is overvalued due to a band-wagon effect by investors who are caught up in the hype of companies performance. Regardless, the high P/E ratio for Express indicates that investors feel confident that the company is in position to increases its profits in years to come. ^[23]

Assessing the five brands through the lens of the Enterprise Value/EBITDA multiple provides another perspective on the value of these firms. Express had a multiple of 1.63, Guess 2.47 ^[14], Gap 1.18^[17], J.Crew 2.51 ^[15], and Limited 1.87^[16]. Considering that a low ratio represents a company that is undervalued, Gap and Express appears to be undervalued to potential investors compared to the rest of the competitors. ^[24] There could be multiple reasons why Gap and Express have lower multiples, such as new capital investments such as new stores. This could certainly hold true for Express since it has invested capital in converting its single-gendered stores into dual-gendered stores.

Profitability & Efficiency

Key Ratios for Express Inc. & its competitors - Jan 30th, 2008, Jan 30th, 2010, and Trailing Twelve Months (TTM)^[25] *information not available

Asset turnover for Express and its competitors^[25]

According to Trailing Twelve Months (TTM) data as of 3/2011^[25], Express Inc.'s return on invested capital (ROIC), at 24.03%, is in fourth place behind J. Crew (33.76%), Guess (25.49%), and Gap (25.54%) with Limited (15.22%) coming in fourth. This would suggest that Express Inc. needs to work on more efficiently using its invested capital to generate returns if it wants to compete with J. Crew and Guess. However, asset turnover for Express, Inc. is rather high compared to its competitors. Standing in second place at 2.16% behind J. Crew (2.21%), it seems Express Inc. is doing a good job at generating revenues from its assets, which can be a good sign of profitability. It has been steadily growing since 2008 when it was at 1.75, so current trends suggest future growth.

What really should be noticed as a cause of Express' low ROIC is it's operating margin. Express’ operating margin stands at the lowest at 9.12% behind J. Crew (15.61%), Guess (16.06%), Limited (12.54%), and Gap (13.50%)^[25]. This may suggest that Express needs to work on lowering their operating expenses to compete in the ROIC arena. However, a significant rise in operating margin from .21% in 2008 suggests for Express Inc. that there is much room for growth^[25]. Further growth in earnings per dollar of sales will likely be a future trend if the current trend continues as is has been.

As far as efficiency with cash flows and inventory, Express Inc. stands at the top with a 71 days sales inventory (DSI) and a 33 day cash conversion cycle (CCC)^[25]. Its CCC is especially lower than such competitors like Guess and Limited being at 82 and 60 days, respectively^[25]. This shows a high capability for the firm to efficiently convert its products into cash through sales, which is extremely important for any retailer’s bottom line as it significantly reduces liquidity risk. Express’ DSI also maintains a strong hold against its competitors with the three ranging form 84-94 days, which further suggests the company's high efficiency through its ability to turn its store inventory into cash.

Human Resources

Corporate sectors of Express, Inc. include merchandising, design, sourcing and production, marketing and public relations, visual merchandising, e-commerce, planning and allocation, store operations, brand security/loss prevention, real estate, finance, information technology, human resources, procurement, administration/office support. Their store manager positions include regional, district, and store managers as well as co-managers/assistant store managers. The lower echelon of store positions are the hourly associate positions which consist of sales associate, stock associate, fashion expert, and sales lead. Their sourcing and production team manages raw materials and manufacturing capabilities domestically across the U.S. as well as internationally in Asia, the Middle East, Europe, and South America.^[26]

While all the functions of this business hold equal importance toward growth and profitability, key positions to look for in this industry are in the design sector. Express notes the importance of their designing employees on their website: “The beginning - the concept, the inspiration, the idea. This is where the product begins”. A good design team that continually produces innovative artistic clothing designs that fit the need of an ever-changing fashion industry is key to industry success. Since 93% of revenues come from retail stores, management, sales, and customer service in the physical stores also represent an essential part of the business.^[26]

Key Personnel

• Michael A. Weiss - President & CEO

Currently at the age of 69, Michael A. Weiss has served as Express Inc.’s President and Chief Executive Officer since returning to the company in July 2007. From 2004 to July 2007 he was retired, but returned to the company in connection with the Golden Gate Acquisition. He previously served as Express Inc.’s President and Chief Executive Officer from 1997 to 2004. Prior to that, he served as the Vice Chairman of Limited Brands from 1993 to 1997. He served as Express Inc.’s President from 1982 to 1993 and prior to that served with Express when it was founded, starting as a merchandise manager for what was then an eight store experimental division of Limited Brands. In addition to his prior service as a director at Borders Group, Inc., Chico’s FAS, Inc. and Pacific Sunwear of California Inc., Mr. Weiss currently serves as a director at Collective Brands, Inc., a position he has held since 2005, and is a member of its governance and compensation committees. As a result of these and other professional experiences, Mr. Weiss possesses particular knowledge and experience in retail and merchandising; branded apparel and consumer goods; and leadership of complex organizations that strengthen the board’s collective qualifications, skills, and experience.^[27]

• Matthew C. Moellering - Executive Vice President, Chief Administrative Officer, CFO, Treasurer & Secretary

Currently at the age of 43, Matthew C. Moellering has served as Express Inc.'s Executive Vice President, Chief Administrative Officer, Chief Financial Officer, and Treasurer and Secretary since October 2009. Prior to that, he served as Express' Senior Vice President, Chief Financial Officer, Treasurer and Secretary from July 2007 to October 2009 and as the Vice President of Finance from September 2006 to July 2007. He also served in various roles with Limited Brands from February 2003 to September 2006, most recently as Vice President of Financial Planning. He started with Limited Brands as a Finance Director from 2003 until 2004. Mr. Moellering served in various roles with Procter and Gamble from July 1995 until February 2003 and, prior to that, he served as an officer in the United States Army.^[28]

• Fran Horowitz-Bonadies - Executive Vice President-Women's Merchandising & Design

Currently at the age of 46, Fran Horowitz-Bonadies has served as the Executive Vice President of Women's Merchandising and Design for Express Inc. since December 2007. Prior to that, she served as Express' Senior Vice President and General Merchandise Manager from December 2005 to December 2007. She also served as the Vice President and Merchandise Manager from March 2005 to December 2005. Prior to that, she worked at Bloomingdale's for 13 years in various merchandising roles. Ms. Horowitz-Bonadies also worked early in her career in buying positions at Bergdorf Goodman, Bonwit Teller and Saks Fifth Avenue.^[29]

• Colin Campbell - Executive Vice President-Sourcing & Production

Currently at the age of 51, Colin Campbell has served as Express Inc.'s Executive Vice President of Sourcing and Production since June 2005. From March 1997 to June 2005, Mr. Campbell held a number of leadership positions for various divisions of Limited Brands including Cacique and Limited Stores and was an Executive Vice President of Western Hemisphere Operations at MAST from 2003 to 2005. From 1985 to 1997 Mr. Campbell was Vice President of Operations for the dress division of Liz Claiborne. He has also worked in production leadership positions with Bentwood Brothers LTD in England and Daks-Simpson LTD in Scotland.^[30]

• John J. ("Jack") Rafferty - Executive Vice President-Planning & Allocation

Currently at the age of 58, John J. ("Jack") Rafferty has served as the Executive Vice President of Planning and Allocation for Express Inc. since 1999 after joining Express as Vice President of Planning and Allocation in 1998. Prior to Express, Mr. Rafferty held a number of planning and allocation leadership roles with Limited Brands. These roles included Vice President of Planning and Allocation for Lerner from 1990 to 1998, Vice President of Lane Bryant from 1988 until 1990 and Director of Planning and Allocation for Sizes Unlimited from 1984 to 1986. Mr. Rafferty started his career in various planning and allocation roles with Korvettes, Casual Corner and Brooks Fashion.^[31]

Compensation Structure

Executive Compensation

The compensation structure of Express Inc. has maintained the same compensation levels and similar compensation plans as were in place prior to the Golden Gate Acquisition back in July 2007. Now, following the completion of their IPO, they have established a Compensation and Governance Committee to continually evolve the philosophies and goals of their executive compensation plan as they become more experienced with being a public company.

Under the Executive Compensation Objectives and Philosophy, objectives are listed as to attract, motivate, reward, and retain executive officers that are capable of successfully leading and managing the business, to link cash incentives with measurable performance, and to align the interests of executive officers and equity holders through short- and long-term incentive compensation programs. Three points are also listed under their philosophy as to pay-for-performance, to pay competitively compared to other firms, and to pay equitably and fairly amongst its officers.

Executive officers at Express Inc. are compensated through the following elements: base salary, performance-based cash incentives, equity incentives, and certain additional benefits and perquisites. Of these, base salary, performance-based cash incentives and long-term equity-based incentives are the most significant. Annual compensation for their top paid executives as of January 30th, 2010 are the following:

Executive Compensation as of January 30th, 2010^[3]

The FY 2009 total compensation in dollars and as a percentage of net income of the top five executives of Express and it's competitors is shown in the table below. The order is simply arranged by the highest paid executives. The exact positions held by the executives may vary among companies.

Total Executive Compensation for FY 2009 for Express Inc. and its competitors^{[3][15][14][16][17][32][33][34][35]}

As far as compensation as a percentage of net income, Express Inc. holds the largest percentage of the highest paid executive at 4.94% and the second largest average percentage at 2.22%, trailing behind J.Crew (2.80%). It seems only logical that Michael Weiss, being more than experienced in the business and deserving of such compensation, would stand at the top. Yet, even when excluding the top executive from the average Express still remains in second place, although at quite a bit away from J. Crew. These rates are impressive compared to competitors, but if Express Inc. really wants to lead the market in executive compensation, they may have to consider being a bit more generous to their lower tier execs.

Sales Associate Compensation

Hourly wages of sales associates of Express Inc. and its competitors (posted anonymously by employees and employers) from glassdoor.com^{[36][37][38][39][40]}

According to glassdoor.com, hourly sales associate wages as of March 2011 for Express Inc. average at $8.19 per hour behind J. Crew ($9.04/hr), Guess ($8.52/hr), and Gap ($8.55/hr). Limited ($8.16/hr) stands as the lowest wage. These figures are based on anonymous posts by employees and employers and are therefore subject to certain biases or may vary based on the location or popularity of the website, etc. Despite that fact, it is likely that people will look at this website when searching for jobs at retail clothing stores, and may therefore pursue stores with the higher average wage. Thus, the data suggests Express' potentially lower supply of labor for sales associate positions and the like.

References

1. ↑ ^{1.0 1.1 1.2 1.3} “About Express,” Express, 3/3/2011
2. ↑ ^{2.0 2.1} "Express Home," Express.com, 2/27/2011
3. ↑ ^{3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 3.23 3.24 3.25 3.26 3.27 3.28 3.29 3.30 3.31 3.32} “Prospectus,” Edgar, 3/2/2011
4. ↑ "Investor Overview," Express, 2/27/2011
5. ↑ "Forbes Richest County Report 2010"
6. ↑ ^{6.0 6.1} "Novi Top in Discretionary Spending"
7. ↑ "2010 Texas Census Report"
8. ↑ "Guess Store Locator"
9. ↑ "J.Crew Store Locator"
10. ↑ "Gap Store Locator"
11. ↑ "Victoria Secret Store Locator"
12. ↑ "Express for Her," Express, 3/4/11
13. ↑ "Express For Him," Express, 3/4/11
14. ↑ ^{14.0 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8} "Guess 2010 10-K Annual Report"
15. ↑ ^{15.0 15.1 15.2 15.3 15.4 15.5 15.6} "J. Crew Group 2010 10-K Annual Report"
16. ↑ ^{16.0 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8} "Limited Brands 2010 10-K Annual Report"
17. ↑ ^{17.0 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8} "Gap 2010 10-K Annual Report"
18. ↑ ^{18.0 18.1} "How to Maximize Gross Profit per Square Foot," 3/2/10
19. ↑ "Express Inc.," Google Finance, 3/4/11
20. ↑ ^{20.0 20.1 20.2 20.3 20.4 20.5 20.6} "Express Key Ratios," Morningstar, 3/2/10
21. ↑ "What is EBITDA," Khan Academy, 3/2/11
22. ↑ ^{22.0 22.1} "MSN Money: Express Financials," 3/2/11
23. ↑ "Avoiding Companies With a High Price-Earnings Ratio," The Common Sense Investor, 3/4/11
24. ↑ "EBITDA Multiplier"
25. ↑ ^{25.0 25.1 25.2 25.3 25.4 25.5 25.6} "Morningstar Data," Morningstar, 3/2/10
26. ↑ ^{26.0 26.1} "Express Careers," Express.com, 3/4/11
27. ↑ "Michael Weiss Profile", Forbes.com, 3/4/11
28. ↑ "Matthew Moellering Profile", Forbes.com, 3/4/11
29. ↑ "Fran Horowitz-Bonadies Profile", Forbes.com, 3/4/11
30. ↑ "Colin Campbell Profile", Forbes.com, 3/4/11
31. ↑ "John J. ("Jack") Rafferty Profile", Forbes.com, 3/4/11
32. ↑ "J.Crew 2010 Proxy Report", 3/4/11
33. ↑ "Guess 2010 Proxy Report", 3/4/11
34. ↑ "Limited Brands 2010 Proxy Report", 3/4/11
35. ↑ "Gap 2010 Proxy Report", 3/4/11
36. ↑ "Express Hourly Wages", glassdoor.com, 3/4/11
37. ↑ "J. Crew Hourly Wages", glassdoor.com, 3/4/11
38. ↑ "Guess Hourly Wages", glassdoor.com, 3/4/11
39. ↑ "Limited Hourly Wages", glassdoor.com, 3/4/11
40. ↑ "Gap Hourly Wages", glassdoor.com, 3/4/11