Express, Inc.

Thank you. I would now like to hand it over to Greg Johnson, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our third quarter 2023 earnings conference call. Our third quarter 2023 earnings release can be found at our Investor Relations website, and this call will be available for replay. I'd like to open by reminding you of the company's safe harbor provisions. Today's call may contain forward-looking statements. Any statements made during this conference call, except those containing historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in forward-looking statements due to a number of risks and uncertainties. For a description of the risks that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2022 form 10K and our other filings with the SEC, which are posted on our investor relations website. These risks and uncertainties are further detailed in the earnings release. These statements represent our current judgment. Express assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, we may refer to certain non-GAAP measures. You can locate a reconciliation of any non-GAAP measures discussed in our comments to amounts reported under GAAP in our earnings release. We will also be providing financial comparisons to prior periods, and our prepared remarks today refer to comparisons to the corresponding periods in 2022, unless otherwise noted. Please see the explanatory notes in the earnings release for additional details regarding the definition of certain terms. With me today are Stuart Glenn Denning, Chief Executive Officer, and Mark Still, Interim Chief Financial Officer. I will now turn the call over to Stuart. Thanks, Greg.

Good morning, everyone. Let me begin by thanking the board and the entire Express organization for the opportunity to lead this company. I've been in the consumer products industry for much of my career, managing and growing global brands, as well as serving as the Chief Financial Officer of multinational companies. My experience with consumers, operations, and finance is well suited to the challenges facing Express. After joining the business a little under three months ago, my focus has been on the pathway to recovering the company's full profit potential. This includes accelerating our cost reduction initiatives and launching new ones intended to improve our business performance and liquidity. Today, I'm going to share with you the results from Q3 and then discuss my early thoughts on the path to recovery. Our third quarter sales and diluted loss per share came in below the low end of our outlook ranges. The macroeconomic environment remains challenging and the consumer and competitive landscapes were highly promotional. Operating margin in the third quarter was a negative 6.3% versus a negative 6.8% the same quarter last year. This was driven by weakness in our top line, which was largely offset by strong cost savings performance in SG&A. In brand express, the top line was down 7% driven by weaker results in our retail and outlet stores, partially offset by a 10% increase in online sales. In the express brand, unit sales were consistent with our expectations. However, moving through this inventory required more extensive discounting and led to greater gross margin erosion. Keep in mind that our gross margin includes the royalty expense to WHP, which negatively impacted our gross margin by approximately 370 basis points, as we did not have this expense in the same quarter in 2022. While there's more work to be done to improve year-over-year sales results, there were several positive indicators in the quarter. Our sales performance improved sequentially from Q2. We realized $30 million of cost savings, which drove a 4% reduction in SG&A. And we saw real improvement in women's sales driven by the shift in our merchandising strategy. And while traffic was weaker than expected, our conversion rates were higher than last year. We're now driving improvements in our women's business with a low single-digit positive comp anchored by strong e-commerce sales. Our men's comp was down mid-double digits consistent with Q2 results, as we continue to lap the record 2022 performance, particularly in suits. To offset this decline, we're actively adjusting our assortment architecture through a better balance in wearing occasion, price points, and a focus on more casual tops and bottoms. That said, we retain a strong market position with a high share of men's specialty retail. Up West grew sales by 15% versus the same quarter last year, and Bonobos exceeded our expectations for the third quarter. The addition of Bonobos has allowed us to leverage our back office and is creating increased purchase leverage with suppliers. While Express has broad market reach and penetration, Bonobos with annual revenues in excess of $200 million has a tremendous opportunity for increased awareness and household penetration to build on its existing scale. The combination of in-store fitting and online fulfillment has created strong customer retention and repeat purchase, and we expect to continue to grow the top line. Having said that, we need to reinvigorate our brand express performance and build a stronger foundation on which to realize the company's full potential. Beginning last year, we faced a number of challenges, including declines in our customer file, conversion, and store traffic. driven by missteps in our merchandise strategy, most notably in women's, where we were out of balance across categories, price points, and wearing occasions. This misalignment between our assortment architectures and customer demand significantly impacted our historic sales and margins. We believe strongly there's a path to total company improvement. Four key focus areas are expected to drive the recovery and are already underway, customer engagement, operating excellence, cost reduction, and inventory management. Let me explain a little bit more about each. Understanding consumer motivation, that is providing them with the products they want and delivering a great purchase experience, are all part of ensuring customer engagement. We expect our merchandise assortment to continue to drive increased customer appeal. Our marketing efforts will reinforce our product style and quality, And our associates will ensure a positive shopping experience both online and in our stores. Across the board, we have opportunities to improve our operating execution. This includes cycle times, in-store execution, sourcing and logistics, all parts of our business which allow us to serve customers, lower our cost base, and beat the competition. As part of this effort, we expect some rationalization of our store count as we close high-effort, unprofitable stores. On cost reduction, we're making good progress and expect to meet the commitments we made. In 2023, we identified and implemented $120 million in annualized expense savings. We realized $30 million in Q3 and will realize a total of $80 million for the full year 2023. The remaining $40 million will be realized in the first half of 2024. We are committed to over $200 million in savings by 2025, which is inclusive of the $120 million in annualized savings in 2024. It also includes $50 million in gross margin expansion opportunities by leveraging efficiencies in sourcing, production, and the supply chain. This is a great start and I believe we can do even more. Lastly, we're driving changes to ensure lower inventories and higher turn rates. This will not only reduce our borrowings, it will also enhance our operating effectiveness as store backrooms and warehouses are not hampered by excess product. We expect a meaningful reduction in inventory during 2024. Now, these areas are just the beginning of our efforts to return Express to profitability. In the longer term, We expect to advance our partnership with WHP Global, and the opportunity here is twofold. First, earlier this month, WHP announced the signing of long-term licensing deals to bring the Express brand to Indonesia and Paraguay, grow our presence in Mexico, and expand our retail footprint in Central America with the opening of four new Express retail flagship stores through 2026. Royalties from these ventures, as well as non-core domestic licensing, will now flow into the partnership and Express will receive its 40% share net of costs. The second component of this strategic partnership is pursuing acquisitions. Our first acquisition was Bonobos, which we completed in the second quarter. And since then, Bonobos' sales have exceeded our outlook and they're on track to deliver positive free cash flow for the full year. We expect to leverage this agreement for further acquisitions in the years to come. Let me introduce Mark Still. Mark has been with the company for nearly 20 years and has just assumed the interim CFO role. He will provide further detail on our Q3 results and outlook for the fourth quarter and the full year. Mark?