After a tough third quarter, Express is launching a “large-scale transformation” through a new partnership with WHP Global.
According to Express, the two-part deal will see WHP Global invest a total of $260 million into the fashion retail chain to form an intellectual property joint venture and a “mutually transformative” strategic partnership to launch a new omnichannel platform.
The multi-layered deal includes a $235 million investment from WHP Global for a 60% stake in an intellectual property joint venture. Express will retain a 40% stake and said the deal will allow it to scale internationally and into non-core categories by way of licensing deals.
Further, WHP Global will also purchase $25 million worth of Express common stock through a common equity PIPE investment. The brand management company will purchase 5.4 million newly issued shares at $4.60 per share, which represents a 7.4% pro-forma ownership. Express will continue to operate as a publicly traded company on the New York Stock Exchange.
Lastly, the two firms will launch the EXPR omnichannel platform to acquire, operate and grow multiple fashion brands.
The news sent shares for Express up 31.25% on Thursday morning.
“Our ‘EXPRESSway Forward’ strategy has reinvigorated our brand and rebuilt the foundation of our company, paving the way for this bold next chapter in our transformation,” Tim Baxter, CEO of Express, said in a statement. “Our partnership with WHP will drive greater scale and profitability of the Express brand through their category licensing and international expertise and strengthen our balance sheet. We expect to accelerate our growth by acquiring multiple brands in partnership with WHP and operating them on our platform. Both of these are expected to drive shareholder value.”
Yehuda Shmidman, WHP Global chairman and CEO, added that the global growth potential of the Express brand and the EXPR omnichannel platform will give WHP a “distinct competitive edge” as it looks to acquire more consumer brands. “We are excited to partner with Tim and his management team and view this partnership as a huge win for both of our companies,” Shmidman said.
The transaction is expected to close in Express’ fourth quarter of 2022, subject to approvals. The existing Express Inc. management team and board of directors will continue to lead the company, with Baxter serving as a director and CEO and Mylle Mangum serving as chairman of the Express Inc. board. Upon completion of the transaction, the board will be expanded to include Shmidman.
This move follows a disappointing quarter for the retailer. On Thursday, Express reported net sales of $434.1 million in the third quarter of 2022, down 8% from $472 million in the same time last year.
In a separate statement on Thursday, the Express CEO admitted that the third quarter was “tougher” than anticipated and that is “reflected in our results.”
“The macroeconomic, consumer and competitive environments were extremely challenging and became more acute as the quarter progressed,” said Baxter. “Our strategy to elevate our brand through higher average unit retails and reduced promotions, which has driven steady growth for the past five quarters, came up against the consumer’s reduced spending in discretionary categories and increased appetite for deep discounts. At the same time, we had some misses in our women’s business that further impacted our performance. We did, however, post our sixth consecutive quarter of positive comps in our men’s business.”
Express first launched its EXPRESSway Forward strategy in January 2020, which outlined key initiatives based on the company’s four foundational pillars of product, brand, customer and execution. This plan included a new product approach, called “The Express Edit,” and the closing of roughly 100 stores nationwide.
Later that year, in December 2020, Express slashed 10% of its corporate workforce as it adapted its new business model to a post-pandemic retail environment.