Apparel retailer Express Inc. (NASDAQ:EXPR) reported a drop in third-quarter profits as sales declined, but it forecast a stronger than expected fourth quarter profit on record Black Friday sales.
For the quarter ended October 27, net income fell to $17.4 million, or 20 cents per share, from $32.7 million, or 37 cents per share, a year earlier. Revenue fell 4 per cent to $468.5 million.
Analysts had expected a profit of 17 cents on revenue of $469 million, according to Yahoo finance.
"The third quarter was a very challenging one for our company," Express's chairman and CEO Michael Weiss said.
"We were disappointed with our results, which included a net sales decrease of 4% and a comparable sales decrease of 5% compared to the prior year third quarter. However, we believe we have identified the issues impacting our performance and have developed, and begun to execute, a plan to fix them.
"To that end, we re-balanced our sweater assortment, introduced entry price point fashion items in key categories, and began to set and communicate clearer pricing and promotional strategies for our customers. We believe that these actions will position us well for the future."
Express said that in the third quarter, comparable sales decreased 5 per cent, compared to a 5 per cent increase in the third quarter of 2011. Gross margin was 32.3 per cent of net sales compared to 36.2 per cent a year earlier.
At the end of the quarter, the company had 618 locations and 5.4 million gross square feet in operation.
The company is revising its fourth quarter 2012 guidance and currently expects fourth quarter comparable sales to decrease low single digits compared to an increase of 5 per cent in the fourth quarter of 2011.
Looking ahead, Express said that net income is expected in the range of $53 million to $58 million, or $0.62 to $0.68 per diluted share. This compares to adjusted net income of $62.1 million, or $0.70 per diluted share, in the fourth quarter of 2011.
But this is also well ahead of analyst estimates of 56 cents per share for the fourth quarter, according to Thomson Reuters.
"As we begin the fourth quarter, we are pleased to report that our clear promotional messaging contributed to a record Black Friday performance that exceeded our expectations," Weiss added.
"However, we remain cautious on the overall performance of the fourth quarter given that the majority of the holiday season lies ahead."
Shares in the company rose more than 9.7 per cent to $14.25 late Wednesday afternoon.