Express off to slow start in first-quarter, shares fall

Shares of Express, which caters to 20- to 30-year-olds, fell more than 13 percent in early trading, making the stock one of the top percentage losers on the New York Stock Exchange.

"Traffic is down noticeably compared to last year," Chief Executive Michael Weiss said on a call with analysts.

"Consumers appeared cautious due to the macroeconomic environment and uncertainty around budget cuts, and also the impact of higher payroll taxes."

Wal-Mart's results last week showed U.S. consumers were worried about the impact of higher payroll taxes and gasoline prices, along with slow tax refunds that put some spending on hold.

The U.S. Commerce Department reported on Wednesday that receipts at clothing stores gained 0.2 percent in February, half the growth rate in core sales, which strip out automobiles, gasoline and building materials.

Express said it expects same-store sales to remain flat or decline slightly in the first quarter, compared with a 4 percent increase in the same quarter last year, as fewer customers visited its stores and spent less on average in February.

The company expects to earn 34 cents to 38 cents per share in the first quarter. Analysts on average expect a profit of 46 cents per share, according to Thomson Reuters I/B/E/S.

The retailer, which operates more than 620 stores, said it will spend more on store openings and its e-commerce business during the first quarter.

"We are exploring the possibility of partnering with new franchisees that will bring Express to additional markets, our 2013 plans call for us to sign two new deals this year," Weiss said.

Express was left with high inventories in the third quarter after a promotion offering discounts on second purchases failed to win over customers.

"We've clarified our promotional messaging by limiting our 'buy one, get one' offers and communicating a simpler message of either a specified percent off or precise price point," Weiss said on the call.

Revenue rose 8 percent to $728.7 million in the fourth quarter ended February 2. Comparable-store sales including e-commerce rose 1.5 percent.

Net income rose to $63.9 million, or 75 cents per share, from $60.4 million, or 68 cents per share, a year earlier.

Analysts on average had expected earnings of 74 cents per share on revenue of $722.38 million, according to Thomson Reuters I/B/E/S.

Gross margin in the quarter fell to 35.1 percent from 37.2 percent, a year earlier.

Express shares fell to a low of $16.34 before recouping some of the losses and were down 9.07 percent at $17.14 by late morning on Wednesday.