Express lost more than a quarter of its market value on Wednesday as its lower-than-expected results belied a recent uptick in apparel sales that has helped most retailers.
Express (EXPR), which had outperformed many of its peers in a weak apparel market last year, also slashed same-store sales and profit forecasts for the year.
“Earnings were below our guidance, reflecting challenging store traffic,” Chief Executive David Kornberg said on a conference call.
Kornberg also cited a “lack of clarity” across the company’s assortment as there were too many choices, particularly in the women’s line.
Shares of the Columbus, Ohio-based company fell as much as 25.8% to $11.90, setting up the stock for its worst day in more than four years.
Most apparel retailers and department stores reported largely better-than-expected results for the second quarter, helped by favorable weather and targeted promotions.
“Express diverged from the pack in 2Q as the company was unable to take advantage of an improved mall apparel backdrop, in our view, reporting a deeply underwhelming comp,” Deutsche Bank analyst Paul Trussell wrote in a note.
Sales at Express stores open for more than a year fell 8% in the second quarter ended July 30, much steeper than the 4.7% decline expected by analysts on average, according to research firm Consensus Metrix.
Express and larger rival American Eagle Outfitters (AEO) were the rare bright spots among store-based apparel retailers last year as competition from online and off-price retailers intensified.
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Express’s sales growth, however, has lost its momentum this year as its mall-based stores failed to attract more shoppers.
“Results continue to support the belief that Express is a mall-dependent volatile fashion retailer,” Nomura analyst Simeon Siegel wrote in a note.
The company’s net income more than halved to $10.1 million, or 13 cents per share, in the quarter, as the company increased markdowns on products as it prepared for the fall season.
Net sales fell 5.8% to $504.8 million, down for the first time in nearly two years.
Analysts on average had expected a profit of 17 cents per share and sales of $520.95 million, according to Thomson Reuters I/B/E/S.
The company also slashed its full-year adjusted earning forecast to $1.00-$1.14 per share, from $1.41-$1.54, as it expects traffic to remain challenging.