November 28, 2012 / 1:26 PM / 5 years ago

Express Inc forecasts strong profit after it tweaks promotions

(Reuters) - Apparel retailer Express Inc (EXPR.N) reported a drop in third-quarter same-store sales but forecast strong earnings for the current quarter as lower prices and easy-to-understand discounts led to robust Black Friday sales.

Express shares rose 14 percent to $14.82 on the New York Stock Exchange on Wednesday.

Express, which caters to 20- to 30-year-olds, had slashed its third-quarter earnings forecast last month after promotions failed to clearly communicate value to customers.

"We have simplified our pricing methods with clearer, deep price points and promotions that are easy to understand and don't always require multiple purchases in one category," Chief Executive Michael Weiss said on a post-earnings conference call.

Express, acquired by Golden Gate from Limited Brands Inc LTD.N in 2007, said inventory per square foot decreased 1.3 percent at the end of the third quarter, highlighting the progress of its promotional activity.

"Our clear promotional messaging contributed to a record Black Friday performance that exceeded our expectations," CEO Weiss said in a statement.

The company said e-commerce revenue rose 21 percent during the third quarter and expects it to be a major sales driver.

The e-commerce business, which contributed about 11 percent of the company's sales in the third quarter, could make up 15 percent or more over time as the target demographic is very e-commerce savvy, Wedbush Securities analyst Betty Chen told Reuters.

Express, which operates 618 retail stores, forecast fourth-quarter earnings of 62 cents to 68 cents per share, well above analyst estimates of 56 cents per share, according to Thomson Reuters I/B/E/S.

Express said it remained cautious on the overall fourth-quarter performance and would keep a close eye on deals offered by peers in the specialty retail space as the majority of its sales are not driven by regular customers.

Net income for the quarter ended October 27 fell to $17.4 million, or 20 cents per share, from $32.7 million, or 37 cents per share, a year earlier.

Revenue fell 4 percent to $468.5 million. Same-store sales declined 5 percent.

Analysts had expected earnings of 17 cents per share on revenue of $468.80 million.

Reporting by Juhi Arora and Siddharth Cavale in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian

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