Express (EXPR) - Get Report shares surged Wednesday after the retailer specializing in apparel for twenty-somethings said it would shutter 100 stores as part of a larger plan to boost the company's profitability.
At last check Express's stock jumped 15% to $4.77 after it laid out a sweeping restructuring, which envisions savings of $80 million over three years amid the store closures and other changes. The stock on Wednesday has traded up as much as 25% at $5.20.
The Express website says the Columbus, Ohio, chain currently employs 18,000 people at more than 650 stores in the U.S. and internationally.
Included in the 100 stores are nine that it closed in 2019, the company said.
Express said it expected all the closures to be complete by 2022, including 31 this month and another 35 by the end of January 2021.
The closings will prompt a drop in revenue of $90 million, but Express hopes to offset that decline by leveraging the online infrastructure of the shuttered stores to boost sales.
The combination of reduced operating costs and higher online sales should significantly boost profitability, resulting in a "$15 million annualized increase in earnings before interest, taxes, depreciation and amortization by 2022," Express said..
CEO Tim Baxter said in a statement that the clothing retailer's goal is to "return to a mid-single-digit operating margin." He said reaching the goal "will take some time."
The retailer also took steps to lower investor expectations for its fourth-quarter earnings.
Express forecast a 3% decline in comparable-store sales and said it expected adjusted net income in the $11 million to $12.5 million range. Adjusted diluted earnings per share are expected to ring in at 17 to 19 cents.
"Today we are unveiling our new corporate strategy, called The EXPRESSway Forward, and we are focused on profitable growth," Baxter said.