EXPR - Express Inc.

[Arski]

I know most are no favorite of Express but I think it will be a turnaround and could provide a multibagger. I know the fundamentals aren't the best but are still ok. I have followed the new manager for quite some time now and he said they will come out of the pandemic without bankruptcy filing, because they have taken some long-term debt for the first time and have thus enough liquidity for at least a year of losses. They have quite a huge lease liability but they have fixed that they don't have to pay it for some time or extended some payments and will be able to pay it all of when they've got positive cash flow - probably in 2021 autumn.

Love to hear your thoughts about EXPR.

[valueinvestor]

I haven't done much on the company but what makes you think it will be different from Le Chateau, Reitmans, etc.?

 

Clothing is hyper-competitive and unless their AEO, Levi, Canada's Goose (where the majority of their sales is from one timeless product category) it's hard to have staying power. Especially if your business depends on being on the latest trend or creating a new trend.

 

Even then look at Victoria's Secret, Brook's Brothers, GAP

 

It's not a punch card position for sure, and there's plenty of workout investments available such as Scully Royalty and Contura Energy

[Arski]

I haven't done much on the company but what makes you think it will be different from Le Chateau, Reitmans, etc.?

 

Clothing is hyper-competitive and unless their AEO, Levi, Canada's Goose (where the majority of their sales is from one timeless product category) it's hard to have staying power. Especially if your business depends on being on the latest trend or creating a new trend.

 

Even then look at Victoria's Secret, Brook's Brothers, GAP

 

It's not a punch card position for sure, and there's plenty of workout investments available such as Scully Royalty and Contura Energy

I know it looks bad and even Victoria Secret and Gap have a difficult time but that doesn't mean they will not survive. EXPR has implemented a new strategy the EXPRESSway forward. They are focusing on making hip clothing as they did when they strived and the management is quite positive about the result. I know they lost quite some money but that's because of the virus and previous losses were because of the switching manner of operation. With the vaccine, the pandemic should be gone in 6 months and express will make it to positive earnings and could then be trading at $6. They won't strive but will survive in my opinion.

 

Still there's a lot of uncertainty, I know, and I am probably biased in some ways.

[peridotcapital]

I know it looks bad and even Victoria Secret and Gap have a difficult time but that doesn't mean they will not survive. EXPR has implemented a new strategy the EXPRESSway forward. They are focusing on making hip clothing as they did when they strived and the management is quite positive about the result. I know they lost quite some money but that's because of the virus and previous losses were because of the switching manner of operation. With the vaccine, the pandemic should be gone in 6 months and express will make it to positive earnings and could then be trading at $6. They won't strive but will survive in my opinion.

 

Still there's a lot of uncertainty, I know, and I am probably biased in some ways.

 

The pandemic should be gone in 6 months? Please don't make investment decisions based on that underlying assumption. The Pfizer drug is showing 90% effectiveness after 35 days. There is no data beyond that. We have no idea of how effective it will be, if at all, after 3, 6, or 9 months after folks receive it.  What if we find out that effectiveness drops to 45% after 70 days, 20% after 105 days, etc.

 

Rushing these vaccines out makes sense if they are shown to be safe, but we really have no idea how much they will protect us. And the odds are low that the first one will be the best are fairly low. The FDA's threshold for approval will be 50% effectiveness, the same as the flu vaccine. How many annual cases of the flu are there? If there are a similar number of Covid-19 cases annually in the U.S. going forward, will we really all be back to normal and filling our closets with Express clothes by mid-2021?

 

Not trying to be alarmist, and it could certainly all work out just fine next year, but I don't think basing investment decisions on vaccine progress gives one a high margin of safety when we literally are going to be approving vaccines with just 60 days of clinical trial data for the first time ever.