Express has decided to try its hand at owning outlets after seeing its rivals’ success.
Express (EXPR -5.56 percent) recently announced the opening of the first of several Express Clothing. Factory Outlet locations, marking a significant departure from its previous business strategy. The first Clothing, Factory Outlet will open in Tanger Outlets National Harbor in Washington, D.C., and will be one of thirty planned for the year. What are the ramifications for the company’s investors, given that the move constitutes a significant departure from its long-standing business of selling full-priced trendy apparel and accessories?
Express Branding
One of the basic fashion guidelines is to constantly have something fresh for your consumers to want. has traditionally succeeded at this, releasing new apparel lines every season. While the corporation does sometimes conduct Express Coupons based promotions with the odd sale, the degree of the discounts it makes accessible to buyers for its highly coveted items is mostly restricted.
The firm is breaking away from its typical business strategy by offering somewhat out-of-date items at factory-discount pricing, all under the Clothing, Factory Outlet. Express aims to establish 30 more Clothing, Factory Outlet locations around the nation this year, according to its website. While the move may enhance total sales, it may probably divert revenue from the company’s conventional storefronts. To gain a sense of what could happen, we need to look at what has occurred to rivals who have opened factory-outlet outlets.
Outlet Outlets From Competitors
The Gap (GPS -3.12 percent) is the first of Express’ rivals to open Clothing, Factory Outlet, mostly via its Gap and Banana Republic brands. Both businesses have a lot of outlet outlets around the country and have had good achievements. While the company’s outlet-store sector does not reveal financial data, we can get a sense of how its brands are doing. According to the most recent 10-K Annual Report,
We launched 190 Company-operated shops as part of our shift to a global brand structure to support long-term worldwide development, notably via expansion in Asia, growth of our global outlets, and Athlete stores in the United States. In China, we added 34 new Gap shops for a total of 81 specialty and Clothing, Factory Outlet, and we added 17 new Old Navy stores in Japan for a total of 18 locations. We established 58 worldwide outlets, bringing the total number of outlet shops to 532. We also launched 30 Athlete locations, bringing our total to 65 by the end of fiscal 2013. 72 new Clothing, Factory Outlet and five new markets were added by our franchisees.
In addition to the worldwide expansion, the Gap’s development plan for the next years clearly includes the construction of Express Clothing, Factory Outlet. Given the company’s national prominence, this makes logical.
The recent success of H&M is much more instructive in evaluating Express’ entrance into the Clothing, Factory Outlet. H&M’s whole business strategy is based on an outlet-store format. With the bulk of its retail items often priced far cheaper than those of rival. H&M has had positive outcomes from its business model. At the end of fiscal 2013, the firm had slightly under 3,000 H&M brand shops.
H&M’s comparable-store sales were steady year over year, which is excellent considering the firm launched 356 new stores. An increase of more than 10%. When e-commerce sales were subtracted from the data, Express had a 1% same-store sales decrease in fiscal 2013 and a 3% sales decline in fiscal 2012.
Express’ decision to create Clothing, Factory Outlet makes even more sense given that its discount-fashion rivals. TJX (TJX 2.03%) and Ross (ROST -0.11%) continue to expand their earnings and comparable-store sales by leaps and bounds. Both firms specialize in offering trendy clothing at steep discounts months after they reach the market. These businesses’ recent results have been outstanding.
TJX and Ross’s performance clearly support Express’s decision to enter the outlet retail market. It’s too bad the corporation didn’t act sooner.
Express Stupid Takeout
Express has a great motivation to begin selling via Express Clothing, Factory Outlet. TJX and Ross’s success, as well as the fact that The Gap and H&M are following suit, suggest that Express has to at least have a presence as an outlet shop. However. it must do it in a manner that does not undermine its conventional shops. Which are and will continue to be its primary source of revenue for many years to come. As Express’ Clothing, Factory Outlet start operation, naive investors should keep a watch on any changes in retail sales.
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Conclusion
As malls struggle to compete, Express is the latest fashion brand to shut shops. Charlotte Russe liquidated all of its American shops last year, while Forever 21 recently filed for Chapter 11 bankruptcy.
Overall, Express sales at locations established for at least a year dropped around 3% in the fiscal fourth quarter. According to the company’s estimates released Wednesday. Has been developing a turnaround plan of making Express Clothing, Factory Outlet. Since bringing on a new CEO in May. We can’t wait to see what happens with Express Brand soon. With their strategy including a revamp of the company’s loyalty program this autumn, as well as “inventory optimization.”
