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Why All Analysts Call EXPR a ‘Hold’

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Rating synopsis

Ahead of Express’s (EXPR) upcoming fiscal 4Q17 results, all seven analysts covering it have maintained “hold” ratings on its stock. No analysts have recommended “buy” or “sell” ratings on its stock.

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What made analysts call the stock a “hold”?

Traditional retailers are focused on cutting costs and enhancing productivity across operations to improve profits and bottom line performances in challenging retail conditions.

In 2016, Express took up an extensive cost-cutting effort to boost its margins. Under the plan, the company expects to achieve $44 million–$54 million in savings by 2019. In fiscal 2017, Express expects to achieve $20 million in savings. It also expects to lower its occupancy costs and SG&A (selling, general, and administrative) expenses by improving its store sustainability and its productivity across its operations.

Express has considerably reduced its number of retail store locations and is focusing on its outlet business. Since 2014, the company has taken on the practice of converting certain mall locations with lower volumes into factory outlets.

Express also has a strong brand awareness campaign in place. The company has been collaborating with big names in fashion to enhance its brand visibility. Express has also made many changes to its loyalty membership program, Next.

However, these measures have yet to pay off as the company’s performance over the holiday season turned out to be below expectations, and as a result, it slashed its outlook, keeping analysts on the sidelines. Analysts expect the company to report a 1.2% YoY (year-over-year) rise in its sales compared to the 34.1% YoY growth it saw in fiscal 4Q16. Its adjusted EPS are expected to be ~$0.32, up from the $0.29 it delivered in fiscal 4Q16.

Currently, analysts’ 12-month average target price for Express stock is $9.83, which reflects a 33.9% upside to the stock’s price as of March 9, 2018.

Peers’ ratings

Of the 21 analysts covering Foot Locker (FL), 33% have provided “hold” ratings on its stock. A total of ~86.0% of the seven analysts covering Ascena Retail (ASNA) have provided “hold” ratings on its stock. A total of 80% of 25 analysts have provided “hold” ratings on Gap (GPS).

Currently, analysts’ target price for Foot Locker is $51.68, reflecting a 21.4% upside to its share price as of March 9, 2018. For Ascena Retail, the mean target price is $3.20, which indicates a 59.2% upside to its share price as of March 9. Gap’s target price is $34.38, implying a ~4% upside to its share price as of March 9.

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