Trendy apparel positions Express for strong third-quarter

Wed Aug 28, 2013 1:37pm EDT

(Reuters) - Express Inc (EXPR.N) became one of the few U.S. apparel retailers to say that the rise in its quarterly comparable store sales would continue in the current quarter, helped by its trendier merchandise and an easy comparison with a year earlier.

Its shares rose as much as 12 percent in morning trade.

The company's merchandise, including crop-tops and pencil skirts, has clicked with shoppers, in contrast to that of retailers such as Abercrombie & Fitch Co (ANF.N), whose preppy, logo-centric clothes have fallen out of favor.

Express also raised its full-year profit forecast for the second time this year and Chief Executive Michael Weiss said the company was poised for a healthy current quarter as its merchandise was "dramatically better" than a year earlier.

"What remains to be seen now is how promotional the mall becomes, which, of course, is the wild card we can't control," Weiss said on a conference call with analysts.

"We are, however, prepared for a highly promotional environment."

Retailers from Aeropostale Inc (ARO.N) to Macy's Inc (M.N) have pointed to weak sales in the current quarter as a weak employment market, higher payroll taxes and gasoline prices pressure U.S. consumer discretionary spending.

However, last week, women's apparel retailer Ann Inc (ANN.N) said the rise in quarterly comparable store sales would continue in the current quarter, as shoppers lapped up its merchandise.

Shares of Express rose as much as 12 percent, before paring some gains to trade up 9 percent at $21.68 in afternoon trade. It was the top gainer on the broader U.S. apparel retailers index .DJUSRA.

"WELL POSITIONED FOR FALL"

Express said its same-store sales, including online sales, rose 6 percent in the second quarter ended August 3, and expects it to rise in the mid-single digit percentage range in the third quarter.

"In the near-term, we believe the company is well positioned for fall and holiday with on-trend merchandise and improved marketing strategies," Stifel Nicolaus analyst Richard Jaffe said in a note.

Express has bounced back after its same-store sales rose only 1 percent in the second quarter a year earlier due to weak demand for its knit tops. It fell 5 percent in the third quarter after its promotional strategy to boost sales backfired.

Express, on Wednesday, raised its full-year profit forecast to $1.52-$1.60 per share, from $1.48-$1.58. Analysts were expecting $1.59 per share, according to Thomson Reuters I/B/E/S.

Its net income for the second quarter rose 7 percent to $16.9 million, or 20 cents per share. Revenue rose 7 percent to $486.2 million.

Analysts on average had expected a profit of 20 cents per share, on revenue of $485 million.

(Additional reporting by Aditi Shrivastava in Bangalore; Editing by Saumyadeb Chakrabarty)

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