FINANCE

Express profit down but beats Street in Q2; boosts forecast

BY Dan Berthiaume

Columbus, Ohio – Express Inc. beat Wall Street expectations for both profit and revenue during the second quarter of fiscal 2014. The retailer, which is facing a possible takeover battle, reported better-than-expected net earnings of $6.9 million, down 59% from $16.9 million in the year-ago period. The company also increased its annual profit forecast.

"In light of the difficult environment, we feel very good about the progress made during the second quarter and delivering earnings that exceeded the high end of our guidance, said Michael Weiss, chairman and CEO.

Net sales fell 2% to $481.4 million from $490.1 million, but beat Wall Street predictions for net sales of about $460 million. Same-store sales fell 5%; e-commerce sales rose 3%.

“With 17 of our 20 Express Factory Outlet stores open for approximately four months, we are delighted to see them continuing to exceed our expectations from both a revenue and a margin contribution perspective,” Weiss said. “In our full priced retail stores, we managed promotions in a manner that enabled us to deliver merchandise margins that were better than we initially expected. As new receipts flowed in during the second quarter, certain categories reversed their declines and others grew nicely.”

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FINANCE

Michaels swings to Q2 loss on costs; 21 new stores on tap

BY Marianne Wilson

Irving, Texas – The Michaels Companies Inc. on Wednesday reported a net loss of $48 million in the second quarter of fiscal 2014, compared to net income of $17 million in the year-ago period, as $68 million in costs associated with debt-extinguishment and drove the retailer into the red. Its results, however, beat analysts estimates, and the company raised its full-year outlook. It was Michaels’ first earnings report since it went public again at the end of June.

Net sales for the quarter, ended Aug. 2, increased a better-than-expected 4.9% to $948 million, from $904 million last year. Same-store sales increased by 3.2%.

The retailer plans to open 21 new Michaels stores in the second half of 2014, and expects total annual sales growth of 1% to 2% for the fiscal year.

“We are in the implementation phase of our multi-year strategic plan which is designed to not only improve the experience of our core enthusiast shopper but also to attract the under-served novice customer to Michaels, enabling us to further extend our leadership position within the fragmented arts and crafts industry," Chuck Rubin, CEO, said. "We enter the back half of 2014 confident in our business, our outlook and our initiatives.

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OPERATIONS

Zara uses social media to apologize for big fashion gaffe

BY Marianne Wilson

New York — Fashion powerhouse Zara, owned by Spain’s Inditex, used social media to apologize after complaints poured in via Twitter that the retailer was selling a piece of clothing that closely resembled a uniform worn in Nazi concentration camps during World War II. The item in question, called the “Sheriff,” was a children’s blue-and-white striped top with a prominent six-pointed yellow star.

The top was featured on the retailer’s online site in a select number of countries, including Sweden, France and Israel. It was removed on Wednesday hours after it went on sale. Zara turned to Twitter, issuing apologies in a number of different languages, and said the design of the shirt was styled after shirts worn in Old Western movies.

The company wrote on its Twitter feed:

“We honestly apologize, it was inspired by the sheriff’s stars from the Classic Western firms and is no longer in our stores.”

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