Weak Q2 sales cost Express shares a 25 percent drop

Shares of Express plummeted 25 percent Wednesday after the retailer reported weaker-than-expected quarterly sales and earnings. The Hong Kong listed fashion retailer argued “challenging store traffic” for the weaker-than-expected sales.

Express reported fiscal second-quarter earnings of 13 cents per share on 505 million dollars in revenue. These figures came short of analysts’ consensus estimate of earnings of 17 cents a share on 521 million dollars in revenue, according to a data gathered by Thomson Reuters.

Express shares have lost 7 percent in value this year

During the fashion label’s second fiscal quarter, net sales decreased 6 percent to 504.8 million dollars from 535.6 million dollars in the same quarter last year. Comparable-store sales, inclusive of e-commerce sales, withdrew by 8 percent, far behind the 7 percent increase the company noted in the same period a year ago.

Commenting the results, Express President and CEO David Kornberg said in a statement the disappointing figures reflected "challenging store traffic."

"This was compounded by a lack of clarity across the assortment," added Kornberg, further explaining that they “believe we have identified the necessary actions to position Express to regain momentum and we are moving on them. Our fall assortment is more cohesive across our wearing occasions, clearly identifying the important trends, and we are aggressively pursuing several marketing initiatives focused on driving new customer acquisition and retention."

On a positive note, the company´s CEO is "pleased" with its overall inventory position as the fall season begins.

"Results were below expectations as weak store traffic and lack of clarity across the merchandise assortment held back results and required increased markdowns to clear," said Stifel analyst Richard Jaffe as quoted by the CNBC. The analyst currently holds a ‘buy’ recommendation on the stock and an 18 dollars target price.

In response to the weak report, Express cut its full-year prediction. The retailer now expects earnings to be between 1 and 1.14 dollars a share, down from its previous prediction of between 1.41 and 1.54 dollars a share, and well behind Wall Street’s predictions of earnings of 1.46 dollars per share.

To date, this Express's shares have dropped 7 percent this year.

Image:Express Jeans, Women’s Collection, www.express.com