Why Express Stock Skyrocketed Today?
Jan 27, 2020 by InvestorDestination Team
Today, shares of Express Inc (NYSE: EXPR) is skyrocketing without any news from the company. By midday, it has gained a whopping 300%.
Nowadays, random beaten-down stocks gaining double- or triple-digit has become a new normal. Different words such as short squeeze or battle between wall street and main street are used to describe this phenomenon. Irrespective of the terminology, it is just market speculation.
Express is a mall-based retailer that sells casual work apparel to thirty-something men and women. Even before the pandemic, the company was struggling due to sluggish mall traffic and increased competition from more efficient players such as Zara. The pandemic has hit the retail segment hard, but its impact on Express is severe. While working from home and zooming, people are opting for more comfortable clothes. Retail brands such as Aerie are benefiting from this trend. Express is losing sales and burning cash. In the last nine months, the company's sales declined by 45% YOY, and it generated a $5.45 loss per share.
| 2016 | 2017 | 2018 | 2019 | LTM | |
|---|---|---|---|---|---|
| Revenue (in millions) | 2,193 | 2,138 | 2,116 | 2,019 | 1,385 |
| EPS | 0.73 | 0.24 | 0.13 | (2.49) | (7.61) |
| Gross Margin | 30.2% | 28.8% | 29.1% | 27.3% | 6.3% |
| Operating Margin | 4.7% | 1.4% | 1.3% | (10.8%) | (42.1%) |
| FCF % Sale | 4.0% | 2.9% | 1.1% | 2.6% | - |
The pandemic will end, and a new normal will emerge. In the post-pandemic era, we will see an increase in the number of people working remotely. That does not mean people will stop wearing casual work clothes. There will be a demand for casual work clothes. To survive in the post-pandemic world, Express needs to improve its supply chain efficiency and accelerate its digital transformation. If it can improve its business fundamentals, it will survive; otherwise, it will be another closed store in the mall. Stock market speculation will not change the company's fundamentals.
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