A specialty apparel and accessories retailer Express announced its financial results for the fourth quarter and full year 2014. These results cover the 13 and 52 week periods ended January 31, 2015 and compare to the 13 and 52 week periods ended February 1, 2014.
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Fourth quarter 2014 operating results:
Net sales increased to $725.8 million from $715.9 million in the fourth quarter of 2014, an increase of 1%. Comparable sales during the quarter (including e-commerce sales) decreased 2% against a comparable sales increase of 1% in last year's fourth quarter. E-commerce sales rose 4% to $144.3 million.
Merchandise margins grew by 70 basis points as the Company benefited from more targeted promotional activity compared to the prior year. Our buying and occupancy deleverage of 100 basis points, driven by higher rent and depreciation expense, resulted in a gross margin of 31.7% of net sales compared to 32.0% in last year's fourth quarter.
Selling, general, and administrative (SG&A) expenses were $152.7 million versus $144.1 million in last year's fourth quarter, primarily due to incremental marketing activities. As a percentage of net sales, SG&A expenses increased by 90 basis points to 21.0% compared to 20.1% in last year's fourth quarter.
Operating income was $76.5 million, or 10.5% of net sales, compared to $85.4 million, or 11.9% of net sales in the fourth quarter of 2013. Income tax expense was $27.7 million, at an effective tax rate of 39.8%, compared to $31.8 million, at an effective tax rate of 39.9% in last year's fourth quarter.
Net income was $41.8 million, or $0.49 per diluted share. This compares to net income of $47.9 million, or $0.57 per diluted share, in the fourth quarter of 2013.
Fifty-two week period operating results:
Net sales decreased 2% to $2.17 billion from $2.22 billion in the prior year period. Comparable sales (including e-commerce sales) decreased 5%, compared to a 3% increase in 2013. E-commerce sales rose 4% to $354.2 million.
Gross margin was 30.5% of sales compared to 32.3% in the prior year period. Merchandise margin was flat for the year and buying and occupancy costs as a percentage of sales increased 180 basis points. SG&A expenses were $524.0 million versus $504.3 million in the prior year period. This represented 24.2% of net sales, compared to 22.7% in 2013.
Operating income was $136.6 million, or 6.3% of net sales, compared to $214.3 million, or 9.7% of net sales in 2013. The effective tax rate declined to 38.8% compared to 39.7% in 2013. The overall tax rate for 2014 was reduced as a result of the completion of a multi-year tax examination.
Net income was $68.3 million, or $0.81 per diluted share, compared to net income of $116.5 million, or $1.37 per diluted share, in 2013. ■