Remember Express? It was an American mall staple all over the country. The popular retailer was raking in $1 billion in
annual sales from more than 600 stores in 1991. The sprawling stores won over young
professionals with elevated essentials, and the company went public in 2010. Clothing retailer Express, ticker EXPR, celebrating with audacity their recent IPO. They were on the top of people's list in terms of
affordable fashion and luxury. They were expanding significantly, and they felt they
could do things like have a flagship store in San Francisco, New York City, expand internationally. They were making good money. But in April 2024, the company filed for bankruptcy. It wasn't popular anymore, and it didn't make the right
changes to win back consumers and become popular once again. In June 2024, a New York court approved the acquisition
of the company by a new joint venture called Phoenix. So how did Express go from fashion shows in
Times Square to closing its

Times Square location? And now, as an investor group swoops in to save the
brand, could there be another chapter to its story? In the early aughts, mall presence was everything. E-commerce wasn't as big of a deal as it is today. They were places where people went to congregate to do
all of their shopping, do entertainment, things like that. And Express's footprint was primarily in malls,
so they won a lot of that traffic during that time, and it was also a different time in fashion as well. People went to an office five days a week. In 2011, the company crossed $2 billion in net sales
and acquired start up bonobos in 2013. In the years that followed its listing on the
New York Stock Exchange, the stock price fluctuated, something analysts say is the nature of fashion
retailing, where sometimes you miss the mark on trends and styles. The flip side of fashion is you don't want to have a
lot of product, so if it misses, okay, you get rid of

it, you move on, you hit the next trend. Express, unfortunately, did not have the controls and
they would miss and have too much inventory. And when that happened, it would take 2 to 3 quarters
to clear out the product, and the financial results would lag. But it's not just about trends or consumer preferences
changing. Material prices fluctuate too. Nonetheless, the business continued to grow. You had Michael Weiss, the CEO, and he was considered
this mercurial CEO who knew how to run this business. We're really not in the commodity business. We're in the fashion business. So although we do have some product that goes for
years, those products become a bit of a concern, but not much because we buy yarn and we buy
fabric far in advance. It's a unique business where you're trying to be
fashionable and provide an affordable product. That's a tough thing. And Michael had it really down,
and you had significant store growth, you had

significant comp growth, and you actually had significant margin growth at the time. So it was kind of a sexy story. It hit its peak in sales in store count in 2015. That same year, Weiss retired, and it was pretty much downhill from there. Straddling the line of offering high-end products at low prices stopped working. That's a great bargain for the customer, but it does hurt the ability to drive margins, and that's always been kind of the issue with Express. This chart shows the gross margins, a strong measure of the company's performance that Express saw over the years. These lines show the margins for some of its competitors like American Eagle, H&M, and Abercrombie and Fitch. Its products were simply less profitable. That majority mall concept also stopped working as traffic decreased. At the same time, office settings were becoming more casual. Athleisure was huge during the pandemic, and it was the opposite of Express's historical offering.

This chart shows how retailers like Nike and Lululemon exploded after the initial pandemic crash, whereas Express didn't. Its stock price saw a bit of a rebound in 2021 post-pandemic as people returned to work, but it didn't sustain. The problem is that you don't need dozens and dozens of suits. You only need a few. This issue was primarily top line, which means that its sales were just down. It was making things that people didn't want to buy. It was outside of the trends. Its price point was out of whack with what it was selling, with the quality of its clothes. It wasn't managing to attract and retain that core consumer. And there's also just more competition. By October of 2023, the company was buried in debt. Express was routinely struggling to pay its vendors on time at the end of 2023 into the beginning of 2024. Signals issues, especially when there's wild fluctuations in how many days late you are on those

vendor terms, and this can be debilitating for a
retailer that's already on the edge. Your vendors are critical. They're providing the stuff that you sell. If you're not paying your vendors, they're going to
tighten terms. From 2016 to 2022, the retailer store count shrunk by
about 15%. Although it lowered leasing costs a bit, the remaining
storefronts still cost the company hundreds of millions of dollars. They are probably one of the top ten or so stores in
terms of square footage, and most of the malls they are in terms of the specialty retailing side of it, and
that has a very high impact in terms that you have to pay a larger rent. The New York Stock Exchange requires listed companies
to maintain an average global market cap of at least $15 million over a period of 30 consecutive trading
days. Here's a chart of Express's market cap value over the
past two years.

You can see it failed to meet standards here, and in
March of 2024, it was delisted. The company filed for bankruptcy the following month. Bankruptcy is a really effective method for retailers
to clean up their balance sheet and to actually find a path forward and restructure their businesses,
because it allows them to get out of leases. Within a month of being delisted and declaring
bankruptcy, Express received a letter of intent from an investor group led by WHP Global. Express announced it was closing 95 stores on
June 14th, 2024. The court approved the new joint venture to acquire
retail operations of Express. The investor group includes Simon Property Group and
Brookfield Properties, two of the largest mall operators. They own the Express box and so if they are the owners,
then if that store isn't making a lot of money, then it's okay
because they can decide to just keep it open. It's not like you have some other extraneous landlord
that's going to be requiring rent.

It's your own property, so it puts them in a much
better, firmer financial footing. And I would argue that they looked at the cost of
having to close those express stores right now, because they're big, and finding 2 or 3 players to fill them
probably makes it not worthwhile to get that express store closed. Obviously, express still is driving traffic, is still
sells $1 billion plus the product, so it's still driving people into the store. Ultimately, beta thinks that success going forward is
dependent on a couple of key decisions. I would sit there and use the time as a private company
to decide to become either a fast fashion company or a fashion company. I'm going to be a fashion company, cut back on the
inventory significantly, sell it for a higher price. Realize that while I'm private, I can use that time to
kind of change my customer base and move forward that way. I'm a fast fashion company.

Stop trying to be the end all, be all in terms of my
customer, and focus on price and producing the quality within it. So there's two tracks here that's up to new management
to figure out, which one. But trying to do both increasingly in this world just
doesn't work.

How Express Survived Bankruptcy

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