Post on 05-Apr-2018
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UBS Global Consumer ConferenceMarch 2012
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Cautionary Statement Regarding Forward-LookingStatements and Non-GAAP Financial Measures
Forward Looking Statements
Certain statements in this presentation are forward-looking statements made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historicalor current fact and may include, but are not limited to, statements regarding Expresss growth opportunities, strategy, and future plans,including plans for new stores, loyalty program, international expansion and new and expanding categories. Forward-looking statementsare based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees andare subject to risks, uncertainties and changes in circumstances that are diff icult to predict. Many factors could cause actual results todiffer materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending andgeneral economic conditions; (2) our ability to identify and respond to new and changing fashion trends, customer preferences and otherrelated factors; (3) fluctuations in our sales and results of operations on a seasonal basis and due to store events, promotions and a
variety of other factors; (4) increased competition from other retailers; (5) our dependence upon independent third parties to manufactureall of our merchandise; (6) our growth strategy, including our international expansion plan; (7) our dependence on a strong brand image;(8) our dependence upon key executive management; (9) our reliance on third parties to provide us with certain key services for ourbusiness; and (10) our substantial indebtedness and lease obligations. Additional information concerning these and other factors can befound in Express, Inc.'s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the yearended January 29, 2011. We undertake no obligation to publicly update or revise any forward-looking statement as a result of newinformation, future events or otherwise, except as otherwise required by law.
Non-GAAP Financial Measures
This presentation contains Non-GAAP financial measures, including Adjusted EBITDA. Adjusted EBITDA should be consideredsupplemental to and not a substitute for f inancial information prepared in accordance with generally accepted accounting principles(GAAP) included in Express, Inc.s filings with the Securities and Exchange Commission and may differ from similarly titled measuresused by others. Please refer to slide 28 for additional information and a reconciliation of these measures to the most directly comparablefinancial measures calculated in accordance with GAAP.
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SINCE 2007
We have significantly changed the Express business model Assembled a strong leadership team
Elevated our brand positioning
Implemented our Go-to-Market Strategy
Identified and executed four robust growth pillars
3
$86
$177
$137
$230
$309
$363
2006 2007 2008 2009 2010 2011
Adjusted EBITDA*
*Reconciliation provided on page 28
Which has dramatically changed the financial architecture of the business
Rigorous testing process
Data based decision making
Consistent improvement in results
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Who We Are
Launched in 1980 as a division of Limited
Brands
Over 30 years of brand history as afashion authority for 20-30 year oldshoppers
Transitioned to a standalone company in2007
One of the largest specialty retail apparelbrands with over $2.0 billion in sales
Distinctive point of view sexy,sophisticated, social
Committed to style and quality at anattractive value
M en's Apparel &
Accessories,
35%
W omen's
Apparel &
Accessories,
65%
Men
s Apparel &
Accessories 36%
Womens Apparel &
Accessories 64%
FY 2011 Sales Breakdown
2011 Financial Highlights
Sales $2.1 Billion
Adjusted EBITDA $363 Million
% Margin 17.5%
Stores 609
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Attractive Market and Customer Demographic
1 Fast growing segment of the population
2 High discretionary spend we believegreater than the average femalespecialty retail shopper
3 Specialty channel continues to increasemarket share
Source: NPD (January 2011); S&P industry reports; BEA, US Census; Wall Street Research.
By Gender By Age By Channel
Specialty Apparel Market is Large
Women
Men
$192B $192B
Mass
Specialty
Other
Dept Store
$43B
18-30
31+
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The Fashion Authority for20-30 Yr Old Shoppers
Casual Jeanswear Going OutWork
Teens
20-30s
Late20s/+30s
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How We Do It
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Express Girl
Young. Smart. Bold.Spirited. Flirty. Social.
23 years old
Loves shopping
Reads Vogue,
Cosmo, Glamour,InStyle
Loves music anddancing
In-the-know about
celebrity news andfashion
Confident. Driven. Charming.Stylish. Active. Cool.
Express Guy
27 years old
Embraces life, lovesthe social scene
Reads Maxim, Details,GQ, Rolling Stone
Tech-savvy and up oncultural trends
Loves hanging outwith his friends
Narrow End Point = Broad Appeal
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Sophisticated Design, Merchandisingand Sourcing Model
25.3% 26.3%
31.7%
35.6% 36.4%
FY2007 FY2008 FY2009 FY2010 FY2011
Design andMerchandising
Sourcing andProduction
Disciplined and data-driven approachto design and merchandising
Go-to-Market strategy tests ~75% ofproduct before ordering
Customer driven productselection
Nimble / Diversified supply chain
Moving production to lower costgeographies
Taking advantage of countries withDuty Free status
Optimizing Air/Ocean mix
20%
~75%
Pre-2007 Now
% Product Tested
Gross Margin
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Growth Opportunities
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Focused Growth Strategies
ExistingStores
E-Commerce
New
Stores
InternationalExpansion
Untapped potential in both U.S. and Canada(minimal new stores in past 10 years)
Opened 27 new stores in U.S. + Canada in 2011
Planning approximately 30 new stores in 2012
Significant international expansion opportunity
Planning additional new stores in 2012through partnership with Alshaya
Selectively exploring opportunities in LatinAmerica, Asia and Europe
Increasing sales productivity and operating margin
Marketing our brand, regaining historical saleslevels across all categories and addingcomplementary assortments (shoes, fragrance,watches)
Launched July 2008, have experienced rapid
growth Currently at 10% of total sales
Potential growth to 13-15% of sales
Sales per Gross Sq. Ft.
Store Growth
Number of Stores
Productivity Growth
e-commerce Growth
% of Sales
OperatingMargin:
~1% ~13%
$282$355
FY2006 FY2011
5%
8%
10%
FY2009 FY2010 FY2011
576 591 609~695
At IPO FY2010 FY2011 FY2014E
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Growth Initiatives
Improve existing store productivity and
expand margins
Continued margin expansion as we leverageimproved productivity
Regain historical sales volume in existingcategories
Introduction of new categories to driveadd-on sales
No structural reason for lower storeproductivity
Go-to-Market strategy has increased relevanceof in-store offering
Expanding brand awareness by launching highimpact marketing initiatives
Rolling out new loyalty program, ExpressNEXT, in Spring 2012
Industry Sales / GSF (1)
Industry EBITDA Margins (2)
$611
$535$497 $494 $468
$413
$328$355
Aeropo
stale
Abercro
mbie
&Fitch
Banana
Rep
ublic
Ame
rican
Ea
gle
Bebe
Gap
NY
&Co
Express
18%
13% 12%
18%
Guess
Gap
American
Eagle
Express
(1) Bebe and NY & Co. as of latest reported LTM. Aeropostale, Abercrombie & Fitch, Banana Republic,
American Eagle, Gap, Express as of FY2011.(2) Guess as of latest reported LTM. Gap, American Eagle, and Express, as of FY2011. EBITDA
adjusted for non-recurring and one-time items.
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Grow e-commerce Platform
Source: Public filings.(1) Across all brands (e.g., Gap, Old Navy, and Banana Republic for Gap); Gap numbers
are US only.
Performance Relative to Peers Launched Express.com in July 2008;
launched mobile application in Q310 andFacebook store in Q211
2011 growth of ~39% to 10% of total sales
Management expects to see channelgrowth up to 13-15% of sales, in-line with
peers
Core customer is an active online shopper
Mobile commerce playing larger role in20-30 year-old demographic
Recently hired a new SVP of e-commerce
% Total Sales
Peers (FY 2011)
10%
20%
12%13%
11%
URBN AEO ANF GPS
FY 2011
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Expand Our Store Base
Minimal new store openings between 2000-2009 as a result of dual-gender conversionprocess
Identified ~250 additional potential newstore locations
~150 malls and lifestyle centers in
U.S.
~100 top malls in Canada
Plan to open 30 to 40 stores per year overthe next several years 3 to 4% averagesquare footage growth
~2/3 in U.S.
~1/3 in Canada(Opened six Canada stores in2011)
Net Sq Ft Growth: 3% 3% 4% 4% 4%
Existing Stores Store Closures New Stores
573591
609
630
660(5)
(9)
(9)
(5)
(5)
23
27
~30
~35
~40
591
609
~630
~660
~695
2010 2011 2012E 2013E 2014E
# of Stores
New Store Potential
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New Store Format
New store design elevates brand while
showcasing end uses in an easier-to-shopformat
Redesigned layout enhances productpresentation and elevates overall shoppingexperience
Provides more space to optimize growth ofmens and accessory categories
Opened two stores in new format in June inKing of Prussia and Kenwood
Initial June testing results favorable
Plan to open all new and remodeled stores inthe new format beginning in late spring 2012
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International Growth Opportunity
Team devoted to international growthopportunities
Matt Moellering (COO)
Ron Young (SVP International)
Flexible store expansion options
Partnerships (similar toMiddle-East with Alshaya)
Joint Ventures
Owned Stores
Ship to over 60 countries currently
Extended to parts of Asia, SouthAmerica and Europe as ofAugust 2011
Global Store Potential
Current Stores Target Areas
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Historical Financials
Adjusted EBITDA ($ in millions)Net Sales ($ in millions)
Stores: 658 609
SPGSF: $282 $355
GM %: ~28% ~36%
$1,749 $1,796 $1,737 $1,721
$1,906
$2,073
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
$86
$177
$137
$230
$309
$363
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
4.9%
9.9%
7.9%
13.3%
16.2%
17.5%
Adj.EBITDA
Margin
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Positive Momentum Continues in 2011
Strong top-line momentum continued in 2011
with sales up 9%
Comparable sales up 6% following a10% increase in fiscal year 2010
Gross margin expansion of 80 bps in 2011 (vs.2010) driven by our evolving go-to-market
strategy
Operating income up 36% to $271 million or13.1% of net sales in 2011 compared to 2010
Paid down $169 million of debt in fiscal 2011
Repurchased $49 million of bonds in Q1and Q2
Prepaid $120 million term loan onDecember 6th
2011 Results Comparison
Adjusted EBITDA
$1,906
$2,073
FY2010 FY2011
Net Sales
10%
6%
FY2010 FY2011
Comparable Sales
$137
$230
$309
$363
FY2008 FY2009 FY2010 FY2011Margin: 7.9% 13.3% 16.2% 17.5%
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Why Invest in Express?
Iconic lifestyle brand targeting an attractive customerdemographic
Advantageous go-to-market strategy driving consistentperformance
Significant opportunities to grow sales and margins
Proven and experienced management team
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EBITDA Reconciliation
($ in millions) February 4, July 7, 2007
Year Ended 2007 through Year Ended Year Ended Year Ended Year Ended
February 3, through February 2, January 31, January 30, January 29, January 28,
2007 July 6, 2007 2008 2009 2010 2011 2012
Net income (loss) $17.5 $29.9 ($40.4) ($29.0) $75.3 $127.4 $140.7
Depreciation & amortization 61.9 25.1 48.2 79.1 69.7 65.1 65.3
Interest expense (net) - - 1.8 33.2 52.7 59.5 35.8
Provision for income taxes 6.5 7.2 0.5 0.2 1.2 14.4 94.9
EBITDA $85.9 $62.2 $10.1 $83.5 $198.9 $266.3 $336.7
Non-cash deductions, losses and charges - - 9.8 21.1 12.1 14.6 14.0
Non-recurring expenses - - 86.9 18.7 5.9 2.1 -
Transaction expenses - - 0.8 3.6 1.7 2.6 -
Permitted advisory agreement fees & expenses - - 3.9 4.2 7.2 12.8 -
Non-cash expense related to equity incentives - - 1.2 2.1 2.1 5.3 10.1
Foreign exchange (gains)/losses recorded in other income - - - - - - (0.4)
Other adjustments- -
2.7 4.0 1.9 5.7 3.0
Adjusted EBITDA $85.9 $62.2 $115.3 $137.2 $229.8 $309.3 $363.4
Adjusted EBITDA is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. EBITDA is defined as consolidated net income (loss)before depreciation and amortization, interest expense (net) and amortization of debt issuance costs and discounts and provision for income taxes. Adjusted EBITDA is calculated in accordancewith our existing credit agreements, and is defined as EBITDA adjusted to exclude the items set forth in the table. Adjusted EBITDA is a measure by which our lenders evaluate our covenantcompliance.
Adjusted EBITDA is not a measure of our financial performance or liquidity under GAAP and should not be considered an alternative to net income as a measure of operating performance,cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be ameasure of free cash flow for managements discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets beingdepreciated and amortized, and exclude certain non-recurring charges that may recur in the future. Management compensates for these limitations by relying primarily on our GAAP results andby using Adjusted EBITDA only supplementally. We strongly encourage investors and stockholders to review our financial statements and publicly filed reports within the SEC in their entiretyand not rely on any single financial measure.
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UBS Global Consumer ConferenceMarch 2012