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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 29, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO ______

Commission File Number 001-34742

EXPRESS, INC.

(Exact name of registrant as specified in its charter)

Delaware						26-2828128
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
1 Express Drive Columbus, Ohio						43230
(Address of principal executive offices)						(Zip Code)

Telephone: (614) 474-4001

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

EXPR

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☐			Accelerated filer			☒
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒

The number of outstanding shares of the registrant’s common stock was 68,306,959 as of November 26, 2022.

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EXPRESS, INC.

INDEX TO FORM 10-Q

FORWARD-LOOKING STATEMENTS									3
PART I						FINANCIAL INFORMATION			5
			Item 1.			Financial Statements (Unaudited)			5
						Consolidated Balance Sheets			5
						Consolidated Statements of Income and Comprehensive Income			6
						Consolidated Statements of Changes in Stockholders' Equity			7
						Consolidated Statements of Cash Flows			8
						Notes to Unaudited Consolidated Financial Statements			9
			Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			26
			Item 3.			Quantitative and Qualitative Disclosures About Market Risk			37
			Item 4.			Controls and Procedures			38
PART II						OTHER INFORMATION			38
			Item 1.			Legal Proceedings			38
			Item 1A.			Risk Factors			38
			Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			40
			Item 3.			Defaults Upon Senior Securities			40
			Item 4.			Mine Safety Disclosures			40
			Item 5.			Other Information			40
			Item 6.			Exhibits			41
SIGNATURES									42

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the “safe harbor” provisions of the Private Securities Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely,” "continue to," and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, and financial results, our plans and objectives for future operations, growth, initiatives, or strategies, plans to repurchase shares of our common stock, the expected outcome or impact of pending or threatened litigation, or our proposed strategic partnership with WHP Global are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

Operational and Industry Risks
▪general economic conditions and changes in consumer spending, including as a result of recent recessionary and inflationary pressures;
▪customer traffic at malls, shopping centers, and at our stores;
▪the COVID-19 pandemic has previously and may again adversely affect our business operations, store traffic, employee availability, financial condition, liquidity and cash flow;
▪competition from other retailers;
▪our dependence upon independent third parties to manufacture all of our merchandise;
▪changes in the availability and cost of raw materials, labor, and freight;
▪labor shortages;
▪supply chain disruption and increased tariffs;
▪geopolitical risks, including impacts from the ongoing conflict between Russia and Ukraine and increased tensions between China and Taiwan;
▪difficulties associated with our third-party owned distribution facilities;
▪natural disasters, extreme weather, public health issues, including pandemics, fire, and other events that cause business interruption; and
▪our reliance on third parties to provide us with certain key services for our business.

Strategic Risks
▪our ability to identify and respond to new and changing fashion trends, customer preferences, and other related factors including selling through inventory at an appropriate price;
▪fluctuations in our sales, results of operations, and cash levels on a seasonal basis and due to a variety of other factors, including our product offerings relative to customer demand, the mix of merchandise we sell, promotions, inventory levels, and sales mix between stores and eCommerce;
▪our dependence on a strong brand image;
▪our ability to adapt to changes in consumer behavior and develop and maintain a relevant and reliable omnichannel experience for our customers;
▪our dependence upon key executive management; and
▪our ability to execute our growth strategy, including but not limited to, engaging our customers and acquiring new ones, executing with precision to accelerate sales and profitability, putting product first, and reinvigorating our brand.

Information Technology Risks
▪the failure or breach of information systems upon which we rely;
▪the increase of our employees working remotely and use of technology for work functions; and
▪our ability to protect our customer data from fraud and theft.

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Financial Risks
▪our substantial lease obligations;
▪restrictions imposed on us under the terms of our current credit facilities, including asset based requirements related to inventory levels, ability to make additional borrowings, and restrictions on our ability to repurchase shares of our common stock;
▪our inability to maintain compliance with covenants in our current credit facilities; and
▪impairment charges on property and equipment and our right of use assets.

Legal, Regulatory and Compliance Risks
▪claims made against us resulting in litigation or changes in laws and regulations applicable to our business;
▪our inability to protect our trademarks or other intellectual property rights that may preclude the use of our trademarks or other intellectual property around the world;
▪changes in tax requirements, results of tax audits, and other factors including timing of tax refund receipts, that may cause fluctuations in our effective tax rate and operating results; and
▪our failure to maintain adequate internal controls.

Risks Related to our Proposed Strategic Partnership with WHP Global
▪the failure to consummate the proposed transaction with WHP Global, including as a result of our failure to satisfy the conditions to the closing of the transaction or that required regulatory approvals to consummate the transaction, such as the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, are not obtained, on a timely basis or at all;
▪our failure to obtain consent from our lender in connection with the consummation of the proposed transaction with WHP Global;
▪our ability to realize success in our strategic partnership with WHP Global and the potential for the relationship with WHP Global to divert resources away from existing operations or expose us to liabilities; and
▪our inability to realize the benefits and synergies of the proposed transaction.

Stock Ownership Risk Factors
▪our inability to pay dividends and repurchase shares;
▪our charter documents and applicable law may discourage or delay acquisition attempts;
▪our shares of common stock may experience extreme volatility and purchases of our common stock could incur substantial losses;
▪our stock price may incur rapid and substantial increases or decreases that may not coincide in timing with the disclosure of news or developments affecting us;
▪potential short squeezes related to our common stock have led to, and could again lead to, extreme price volatility in shares of our common stock; and
▪information available in public media that is published by third parties, including blogs, articles, message boards and social and other media may include statements not attributable to us and may not be reliable or accurate.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. For a discussion of these risks and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Item 1A. Risk Factors” included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended January 29, 2022 (“Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on March 24, 2022. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

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PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

EXPRESS, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except Per Share Amounts) (Unaudited)

			October 29, 2022						January 29, 2022
ASSETS
Current Assets:
Cash and cash equivalents			$	24,592					$	41,176
Receivables, net			16,669						11,744
Income tax receivable			1,532						53,665
Inventories			422,666						358,795
Prepaid rent			5,964						5,602
Other			26,100						19,755
Total current assets			497,523						490,737
Right of Use Asset, Net			533,506						615,462
Property and Equipment			1,002,902						975,802
Less: accumulated depreciation			(869,910)						(827,820)
Property and equipment, net			132,992						147,982
Non-Current Income Tax Receivable			52,278						—
Other Assets			4,672						5,273
TOTAL ASSETS			$	1,220,971					$	1,259,454
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term lease liability			$	190,874					$	196,628
Accounts payable			229,661						231,974
Deferred revenue			31,947						35,985
Short-term debt			4,500						11,216
Accrued expenses			118,984						110,850
Total current liabilities			575,966						586,653
Long-Term Lease Liability			437,091						536,905
Long-Term Debt			230,861						117,581
Other Long-Term Liabilities			9,454						17,007
Total Liabilities			1,253,372						1,258,146
Commitments and Contingencies (Note 9)
Stockholders’ Equity:
Preferred stock – $0.01 par value; 10,000 shares authorized; no shares issued or outstanding			—						—
Common stock – $0.01 par value; 500,000 shares authorized; 93,632 shares and 93,632 shares issued at October 29, 2022 and January 29, 2022, respectively, and 68,306 shares and 67,072 shares outstanding at October 29, 2022 and January 29, 2022, respectively			936						936
Additional paid-in capital			221,898						220,078
Retained earnings			22,872						77,093
Treasury stock – at average cost; 25,326 shares and 26,560 shares at October 29, 2022 and January 29, 2022, respectively			(278,107)						(296,799)
Total stockholders’ (deficit)/equity			(32,401)						1,308
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	1,220,971					$	1,259,454

See Notes to Unaudited Consolidated Financial Statements.

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EXPRESS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Amounts in Thousands, Except Per Share Amounts) (Unaudited)

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
Net Sales												$	434,145					$	471,981					$	1,349,849					$	1,275,367
Cost of Goods Sold, Buying and Occupancy Costs												313,528						315,173						944,031						890,448
GROSS PROFIT												120,617						156,808						405,818						384,919
Operating Expenses:
Selling, general, and administrative expenses												150,090						141,055						434,461						395,010
Other operating expense/(income), net												36						(501)						(443)						(565)
TOTAL OPERATING EXPENSES												150,126						140,554						434,018						394,445
OPERATING (LOSS)/INCOME												(29,509)						16,254						(28,200)						(9,526)
Interest Expense, Net												4,668						2,879						11,962						12,246
Other Income, Net												(509)						—						(1,385)						—
(LOSS)/INCOME BEFORE INCOME TAXES												(33,668)						13,375						(38,777)						(21,772)
Income Tax Expense												780						289						549						227
NET (LOSS)/INCOME												$	(34,448)					$	13,086					$	(39,326)					$	(21,999)
COMPREHENSIVE (LOSS)/INCOME												$	(34,448)					$	13,086					$	(39,326)					$	(21,999)
EARNINGS PER SHARE:
Basic												$	(0.50)					$	0.20					$	(0.58)					$	(0.33)
Diluted												$	(0.50)					$	0.19					$	(0.58)					$	(0.33)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic												68,272						67,006						67,878						66,244
Diluted												68,272						69,856						67,878						66,244

See Notes to Unaudited Consolidated Financial Statements.

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EXPRESS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Amounts in Thousands) (Unaudited) 

			Common Stock															Treasury Stock
			Shares Outstanding			Par Value			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares			At Average Cost			Total
BALANCE, January 29, 2022			67,072			$	936		$	220,078		$	77,093		$	—		26,560			$	(296,799)		$	1,308
Net loss			—			—			—			(11,914)			—			—			—			(11,914)
Exercise of stock options and restricted stock			1,520			—			(5,038)			(11,935)			—			(1,520)			16,973			—
Share-based compensation			—			—			2,393			—			—			—			—			2,393
Repurchase of common stock			(570)			—			—			—			—			570			(1,890)			(1,890)
BALANCE, April 30, 2022			68,022			$	936		$	217,433		$	53,244		$	—		25,610			$	(281,716)		$	(10,103)
Net income			—			—			—			7,036			—			—			—			7,036
Exercise of stock options and restricted stock			242			—			(636)			(2,035)			—			(242)			2,671			—
Share-based compensation			—			—			2,620			—			—			—			—			2,620
Repurchase of common stock			(19)			—			—			—			—			19			(66)			(66)
BALANCE, July 30, 2022			68,245			$	936		$	219,417		$	58,245		$	—		25,387			$	(279,111)		$	(513)
Net loss			—			—			—			(34,448)			—			—			—			(34,448)
Exercise of stock options and restricted stock			96			—			(123)			(925)			—			(96)			1,048			—
Share-based compensation			—			—			2,604			—			—			—			—			2,604
Repurchase of common stock			(35)			—			—			—			—			35			(44)			(44)
BALANCE, October 29, 2022			68,306			$	936		$	221,898		$	22,872		$	—		25,326			$	(278,107)		$	(32,401)

			Common Stock															Treasury Stock
			Shares Outstanding			Par Value			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares			At Average Cost			Total
BALANCE, January 30, 2021			64,971			$	936		$	222,141		$	114,732		$	—		28,661			$	(328,120)		$	9,689
Net loss			—			—			—			(45,724)			—			—			—			(45,724)
Exercise of stock options and restricted stock			1,934			—			(6,477)			(15,659)			—			(1,934)			22,136			—
Share-based compensation			—			—			2,523			—			—			—			—			2,523
Repurchase of common stock			(647)			—			—			—			—			647			(2,167)			(2,167)
BALANCE, May 1, 2021			66,258			$	936		$	218,187		$	53,349		$	—		27,374			$	(308,151)		$	(35,679)
Net income			—			—			—			10,639			—			—			—			10,639
Exercise of stock options and restricted stock			998			—			(4,659)			(6,566)			—			(998)			11,225			—
Share-based compensation			—			—			2,881			—			—			—			—			2,881
Repurchase of common stock			(284)			—			—			—			—			284			(1,335)			(1,335)
BALANCE, July 31, 2021			66,972			$	936		$	216,409		$	57,422		$	—		26,660			$	(298,261)		$	(23,494)
Net income			—			—			—			13,086			—			—			—			13,086
Exercise of stock options and restricted stock			119			—			(622)			(719)			—			(119)			1,341			—
Share-based compensation			—			—			2,452			—			—			—			—			2,452
Repurchase of common stock			(41)			—			—			—			—			41			(213)			(213)
BALANCE, October 30, 2021			67,050			$	936		$	218,239		$	69,789		$	—		26,582			$	(297,133)		$	(8,169)

See Notes to Unaudited Consolidated Financial Statements.

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EXPRESS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands) (Unaudited)

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(39,326)					$	(21,999)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			45,076						51,964
Loss on disposal of property and equipment			57						74
Share-based compensation			7,617						7,856
Landlord allowance amortization			(310)						(319)
Changes in operating assets and liabilities:
Receivables, net			(4,925)						523
Income tax receivable			(145)						57,992
Inventories			(63,871)						(119,228)
Accounts payable, deferred revenue, and accrued expenses			(4,865)						95,621
Other assets and liabilities			(35,177)						5,800
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES			(95,869)						78,284
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(24,340)						(18,095)
NET CASH USED IN INVESTING ACTIVITIES			(24,340)						(18,095)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under the revolving credit facility			252,000						73,000
Repayment of borrowings under the revolving credit facility			(143,000)						(154,050)
Proceeds from borrowings under the term loan facility			—						50,000
Repayment of borrowings under the term loan facility			(3,375)						(43,263)
Repayments of financing arrangements			—						(769)
Costs incurred in connection with debt arrangements			—						(471)
Repurchase of common stock for tax withholding obligations			(2,000)						(3,715)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			103,625						(79,268)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(16,584)						(19,079)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			41,176						55,874
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	24,592					$	36,795

See Notes to Unaudited Consolidated Financial Statements.

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EXPRESS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

									Page
Note 1						Description of Business and Basis of Presentation			10
Note 2						Revenue Recognition			12
Note 3						Earnings Per Share			14
Note 4						Fair Value Measurements			14
Note 5						Income Taxes			15
Note 6						Leases			16
Note 7						Debt			17
Note 8						Long-Term Incentive Compensation			20
Note 9						Commitments and Contingencies			23
Note 10						Stockholders' Equity			23
Note 11						Subsequent Events			24

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NOTE 1 | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Business Description

Express, Inc., together with its subsidiaries (“Express” or the “Company”), is a modern, multichannel apparel and accessories brand grounded in versatility, guided by its purpose - We Create Confidence. We Inspire Self-Expression. - and powered by a styling community. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a part of some of the most important and culture-defining fashion trends. The Express Edit design philosophy ensures that the brand is always ‘of the now’ so people can get dressed for every day and any occasion knowing that Express can help them look the way they want to look and feel the way they want to feel.

The Company operates 566 retail and factory outlet stores in the United States and Puerto Rico, the express.com online store and the Express mobile app. Express is comprised of the brands Express and UpWest. As of October 29, 2022, Express operated 364 primarily mall-based retail stores in the United States and Puerto Rico as well as 202 factory outlet stores.

Fiscal Year

The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the unaudited Consolidated Financial Statements and Notes, as well as the remainder of this Quarterly Report, by the calendar year in which the fiscal year commences. All references herein to the Company's fiscal years are as follows:

Fiscal Year						Year Ended						Number of Weeks
2022						January 28, 2023						52
2021						January 29, 2022						52

All references herein to “the third quarter of 2022” and “the third quarter of 2021” represent the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and the U.S. Securities and Exchange Commission’s Article 10, Regulation S-X and therefore do not include all of the information or footnotes required for complete financial statements. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments (which are of a normal recurring nature) necessary to state fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the Company's 2022 fiscal year. Therefore, these statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended January 29, 2022, included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 24, 2022.

Principles of Consolidation

The unaudited Consolidated Financial Statements include the accounts of Express, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segment Reporting    

The Company defines an operating segment on the same basis that it uses to evaluate performance internally. The Company has determined that, together, its Chief Executive Officer and its President, Chief Operating Officer are the Chief Operating Decision Maker, and that there is one operating segment. Therefore, the Company reports results as a single segment, which includes the operation of its Express and UpWest brick-and-mortar retail and outlet stores and eCommerce operations.

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Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenue and expense during the reporting period, as well as the related disclosure of contingent assets and liabilities as of the date of the unaudited Consolidated Financial Statements. Actual results may differ from those estimates. The Company revises its estimates and assumptions as new information becomes available.

Going Concern and Management’s Plans

The Company’s revenues, results of operations and cash flows have been materially adversely impacted in the third quarter of 2022 reversing the trend seen into the second quarter of 2022. The challenging macroeconomic, consumer and competitive environments, which became more pronounced as the quarter progressed, significantly impacted the Company's performance. Net sales in the third quarter of 2022 decreased approximately $37.8 million compared to the third quarter of 2021 and this decline drove gross margin and operating income below the Company's expectations. For the thirty-nine weeks ended October 29, 2022, the Company reported a net loss of $39.3 million and negative operating cash flows of $95.9 million.

Subsequent to October 29, 2022, the Company refinanced its capital structure and expanded liquidity access. The Amended Revolving Credit Facility contains certain affirmative and negative covenants. Refer to Note 7 in the Company's unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further details regarding the Amended Revolving Credit Facility. The Company is currently in compliance with its covenants, however, due to the uncertainty in the Company’s business, the Company could experience material further decreases to revenues and cash flows and may experience difficulty remaining in compliance with financial covenants under the Amended Term Loan Facility and the Amended Revolving Credit Facility. When conditions and events, in the aggregate, impact an entity's ability to continue as a going concern, management evaluates the mitigating effect of its plans to determine if it is probable that the plans will be effectively implemented and, when implemented, the plans will mitigate the relevant conditions or events.

The Company's plans are focused on improving its results and liquidity through sales growth and cost reductions. The Company has contingency plans which would further reduce or defer additional expenses and cash outlays, should operations weaken beyond current forecasts. The Company believes these plans are probable of being successfully implemented, which will result in adequate cash flows to support its ongoing operations and to meet its covenant requirements for one year following the date these financial statements are issued.

Please refer to Note 11 in the Company's unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for subsequent events related to the proposed partnership with WHP Global.

The accompanying unaudited Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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NOTE 2 | REVENUE RECOGNITION

The following is information regarding the Company’s major product categories and sales channels:

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Apparel												$	389,338					$	419,965					$	1,207,572					$	1,129,198
Accessories and other												31,888						38,721						103,060						111,840
Other revenue												12,919						13,295						39,217						34,329
Total net sales												$	434,145					$	471,981					$	1,349,849					$	1,275,367

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Retail												$	302,652					$	339,369					$	943,822					$	901,436
Outlet												118,574						119,317						366,810						339,602
Other revenue												12,919						13,295						39,217						34,329
Total net sales												$	434,145					$	471,981					$	1,349,849					$	1,275,367

Other revenue consists primarily of revenue earned from our private label credit card agreement, shipping and handling revenue related to eCommerce activity, sell-off revenue related to marked-out-of-stock inventory sales to third parties and revenue from gift card breakage.

Merchandise Sales

The Company recognizes sales for in-store purchases at the point-of-sale. Revenue related to eCommerce transactions is recognized upon shipment based on the fact that control transfers to the customer at that time. The Company has made a policy election to treat shipping and handling as costs to fulfill the contract, and as a result, any amounts received from customers are included in the transaction price allocated to the performance obligation of providing goods with a corresponding amount accrued within cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income for amounts paid to applicable carriers. Associate discounts on merchandise purchases are classified as a reduction of net sales. Net sales excludes sales tax collected from customers and remitted to governmental authorities.

Loyalty Program

The Company maintains a customer loyalty program in which customers earn points toward rewards for qualifying purchases and other marketing activities. Upon reaching specified point values, customers are issued a reward, which they may redeem on merchandise purchases at the Company’s stores or on its website. Generally, rewards earned must be redeemed within 60 days from the date of issuance. The Company defers a portion of merchandise sales based on the estimated standalone selling price of the points earned. This deferred revenue is recognized as certificates are redeemed or expire. To calculate this deferral, the Company makes assumptions related to loyalty point and certificate redemption rates based on historical experience. The loyalty liability is included in deferred revenue on the unaudited Consolidated Balance Sheets.

						Thirteen Weeks Ended												Thirty-Nine Weeks Ended
						October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
						(in thousands)
Beginning balance loyalty deferred revenue						$	8,754					$	8,814					$	10,918					$	8,951
Reduction in revenue/(revenue recognized)						462						1,083						(1,702)						946
Ending balance loyalty deferred revenue						$	9,216					$	9,897					$	9,216					$	9,897

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Sales Returns Reserve

The Company reduces net sales and provides a reserve for projected merchandise returns based on prior experience. Merchandise returns are often resalable merchandise and are refunded by issuing the same payment tender as the original purchase. The sales returns reserve was $11.0 million and $9.8 million as of October 29, 2022 and January 29, 2022, respectively, and is included in accrued expenses on the unaudited Consolidated Balance Sheets. The asset related to projected returned merchandise is included in other assets on the unaudited Consolidated Balance Sheets.

Gift Cards

The Company sells gift cards in its stores, on its eCommerce website, and through third parties. These gift cards do not expire or lose value over periods of inactivity. The Company accounts for gift cards by recognizing a liability at the time a gift card is sold. The gift card liability balance was $22.2 million and $25.1 million, as of October 29, 2022 and January 29, 2022, respectively, and is included in deferred revenue on the unaudited Consolidated Balance Sheets. During the thirteen weeks ended October 29, 2022 and October 30, 2021, the Company recognized approximately $2.9 million and $2.7 million of revenue that was previously included in the beginning gift card contract liability, respectively. During the thirty-nine weeks ended October 29, 2022 and October 30, 2021, the Company recognized approximately $10.4 million and $8.8 million of revenue that was previously included in the beginning gift card contract liability, respectively. The Company recognizes revenue from gift cards when they are redeemed by the customer. The Company also recognizes income on unredeemed gift cards, referred to as “gift card breakage.” Gift card breakage is recognized proportionately using a time-based attribution method from issuance of the gift card to the time when it can be determined that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit unredeemed gift cards to relevant jurisdictions. The gift card breakage rate is based on historical redemption patterns. Gift card breakage is included within the other revenue component of net sales in the unaudited Consolidated Statements of Income and Comprehensive Income.

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Beginning gift card liability												$	22,753					$	20,734					$	25,066					$	23,478
Issuances												5,575						5,762						18,188						15,600
Redemptions												(5,601)						(5,561)						(18,923)						(16,860)
Gift card breakage												(561)						(482)						(2,165)						(1,765)
Ending gift card liability												$	22,166					$	20,453					$	22,166					$	20,453

Private Label Credit Card

The Company has an agreement with Comenity Bank (the “Bank”) to provide customers with private label credit cards (the “Card Agreement”) which was amended on August 28, 2017 to extend the term of the arrangement through December 31, 2024. Each private label credit card bears the logo of the Express brand and can only be used at the Company’s store locations and eCommerce channel. The Bank is the sole owner of the accounts issued under the private label credit card program and absorbs the losses associated with non-payment by the private label card holders and a portion of any fraudulent usage of the accounts.

Pursuant to the Card Agreement, the Company receives amounts from the Bank during the term based on a percentage of private label credit card sales and is also eligible to receive incentive payments for the achievement of certain performance targets. These funds are recorded within the other revenue component of net sales in the unaudited Consolidated Statements of Income and Comprehensive Income. The Company also receives reimbursement funds from the Bank for certain expenses the Company incurs. These reimbursement funds are used by the Company to fund marketing and other programs associated with the private label credit card. The reimbursement funds received related to private label credit cards are recorded within the other revenue component of net sales in the Consolidated Statements of Income and Comprehensive Income.

In connection with the Card Agreement, the Bank agreed to pay the Company a $20.0 million refundable payment which the Company recognized upon receipt as deferred revenue within other long-term liabilities in the Consolidated Balance Sheets and began to recognize into income on a straight-line basis commencing January of

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2018. As of October 29, 2022, the deferred revenue balance of $6.2 million will be recognized over the remaining term of the amended Card Agreement within the other revenue component of net sales.

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Beginning balance refundable payment liability												$	6,955					$	9,833					$	8,394					$	11,272
Recognized in revenue												(719)						(719)						(2,158)						(2,158)
Ending balance refundable payment liability												$	6,236					$	9,114					$	6,236					$	9,114

NOTE 3 | EARNINGS PER SHARE

The following table provides a reconciliation between basic and diluted weighted-average shares used to calculate basic and diluted earnings per share:

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Weighted-average shares - basic												68,272						67,006						67,878						66,244
Dilutive effect of stock options and restricted stock units												—						2,850						—						—
Weighted-average shares - diluted												68,272						69,856						67,878						66,244

Equity awards representing 4.8 million and 5.2 million shares of common stock were excluded from the computation of diluted earnings per share for the thirteen and thirty-nine weeks ended October 29, 2022 respectively, as the inclusion of these awards would have been anti-dilutive. Equity awards representing 0.7 million and 8.2 million shares of common stock were excluded from the computation of diluted earnings per share for the thirteen and thirty-nine weeks ended October 30, 2021 respectively, as the inclusion of these awards would have been anti-dilutive.

Additionally, for the thirteen weeks ended October 29, 2022, approximately 3.2 million shares were excluded from the computation of diluted weighted average shares because the number of shares that will ultimately be issued is contingent on the Company’s performance compared to pre-established performance goals which have not been achieved as of October 29, 2022.

NOTE 4 | FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

■Level 1 - Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

■Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

■Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

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Financial Assets

As of October 29, 2022 and January 29, 2022 the Company did not have any Level 2 or 3 financial assets recorded on the unaudited Consolidated Balance Sheets.

The carrying amounts reflected on the unaudited Consolidated Balance Sheets for the remaining cash and cash equivalents, receivables, prepaid expenses, and payables as of October 29, 2022 and January 29, 2022 approximated their fair values.

Non-Financial Assets

Store Asset Impairment

Property and equipment, including the right of use assets, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur indicating the carrying value of these assets may not be recoverable, an impairment test is required. These events include, but are not limited to, material adverse changes in projected revenues, present cash flow losses combined with a history of cash flow losses and a forecast that demonstrates significant continuing losses, significant negative economic conditions, a significant decrease in the market value of an asset and store closure or relocation decisions. The reviews are conducted at the store level, the lowest identifiable level of cash flow.

Stores that display an indicator of impairment are subjected to an impairment assessment. Such stores are tested for recoverability by comparing the sum of the estimated future undiscounted cash flows to the carrying amount of the asset. This recoverability test requires management to make assumptions and judgments related, but not limited, to management’s expectations for future cash flows from operating the store.

▪The key assumption used in the undiscounted future store cash flow models is the sales growth rate.

An impairment loss may be recognized when these undiscounted future cash flows are less than the carrying amount of the asset group. In the circumstance of impairment, any loss would be measured as the excess of the carrying amount of the asset group over its fair value. Fair value of the store-related assets is determined at the individual store level based on the highest and best use of the asset group.

▪The key assumptions used in the fair value analysis may include discounted estimates of future store cash flows from operating the store and/or comparable market rents.

Impairment charges are recorded in cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income.

During the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, the Company did not recognize any impairment charges.

NOTE 5 | INCOME TAXES

The provision for income taxes is based on a current estimate of the annual effective tax rate, adjusted to reflect the effect of discrete items. The Company’s effective income tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including the estimate of annual pre-tax income, the related changes in the estimate, and the effect of discrete items. The impact of these items on the effective tax rate will be greater at lower levels of pre-tax earnings.

The Company evaluates whether deferred tax assets are realizable on a quarterly basis. The Company considers all available positive and negative evidence, including past operating results and expectations of future operating income. Accordingly, the Company continues to maintain a full valuation allowance on deferred tax assets as of October 29, 2022.

The Company’s effective tax rate was (2.3)% and 2.2% for the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate for the thirteen weeks ended October 29, 2022 reflects the impact of non-deductible executive compensation and the recording of an additional valuation allowance against the Company's current year losses. The effective tax rate for the thirteen weeks ended October 30, 2021 was driven by

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an improved full-year operational forecast, offset by a reduction to the valuation allowance needed for current year results.

The effective tax rate was (1.4)% and (1.0)% for the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate for the thirty-nine weeks ended October 29, 2022 reflects the impact of non-deductible executive compensation and the recording of an additional valuation allowance against current year losses. The effective tax rate for the thirty-nine weeks ended October 30, 2021 reflects the impact of non-deductible executive compensation and the release of a valuation allowance against forecasted taxable earnings.

The Company's unaudited Consolidated Balance Sheets as of October 29, 2022 and January 29, 2022 reflect $52.3 million of income tax receivable. The Company reclassified the receivable from current to non-current income tax receivable as of April 30, 2022 based on information received from the Internal Revenue Service ("IRS") during the thirteen weeks ended April 30, 2022 that indicated the receivable will not be collected in the next twelve months.

NOTE 6 | LEASES

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of 5 to 10 years; however, most of the leases that are coming to the end of their lease lives are being renegotiated with shorter terms. The current lease term for the corporate headquarters expires in 2026, with one optional five-year extension period. The Company also leases certain equipment and other assets under operating leases, typically with initial terms of 3 to 5 years. The lease term includes the initial contractual term as well as any options to extend the lease when it is reasonably certain that the Company will exercise that option. Leases with an initial term of 12 months or less (short-term leases) are not recorded on the balance sheet. The Company does not currently have any material short-term leases. The Company is generally obligated for the cost of property taxes, insurance and other landlord costs, including common area maintenance charges, relating to its leases. If these charges are fixed, they are combined with lease payments in determining the lease liability; however, if such charges are not fixed, they are considered variable lease costs and are expensed as incurred. The variable payments are not included in the measurement of the lease liability or asset. The Company’s finance leases are immaterial. The Company did not make any amendments to its lease modification policies as a result of the COVID-19 pandemic.

Certain lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company’s lease agreements do not provide an implicit rate, so the Company uses an estimated incremental borrowing rate, which is derived from third-party information available at the lease commencement date, in determining the present value of lease payments. The rate used is for a secured borrowing of a similar term as the lease.

Supplemental cash flow information related to leases is as follows:

			Thirty-Nine Weeks Ended
			October 29, 2022			October 30, 2021
			(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases			$	189,587		$	220,707
Right of use assets obtained in exchange for operating lease liabilities			$	39,958		$	44,516

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NOTE 7 | DEBT

The following table summarizes the Company's outstanding debt as of the dates indicated:

									October 29, 2022						January 29, 2022
									(in thousands)
Term Loan Facility									$	93,362					$	96,737
Revolving Facility									144,000						35,000
Total outstanding borrowings									237,362						131,737
Less: unamortized debt issuance costs									(2,001)						(2,940)
Total debt, net									235,361						128,797
Less: current portion of long-term debt									4,500						11,216
Long-term debt, net									$	230,861					$	117,581
Outstanding letters of credit									$	24,636					$	34,636

Term Loan Facility

On January 13, 2021, Express Holding, LLC, a wholly-owned subsidiary of the Company (“Express Holding”), and its subsidiaries entered into the $140.0 million Asset-Based Term Loan Agreement (the “Term Loan Facility”), among the Loan Parties (as defined therein), Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent and collateral agent, and the other lenders named therein (the “Term Loan Lenders”).

The Term Loan Facility provides for a “first in, last out” term loan in an amount equal to $90.0 million (the “FILO Term Loan”) and a delayed draw term loan facility in an amount equal to $50.0 million (the “DDTL”). The Term Loan Facility is a senior secured obligation that ranks equally with the Loan Parties’ other senior secured obligations.

During the first quarter of 2021, the Company drew down the additional $50.0 million under the DDTL and repaid $43.3 million with proceeds from 2020 CARES Act tax refunds during the first and second quarter of 2021, as required under the Term Loan Facility.

As of October 29, 2022, the Company had $6.7 million in borrowings outstanding under the DDTL and $86.6 million in borrowings outstanding under the Term Loan Facility. The fair value of the $93.4 million total borrowings outstanding under the Term Loan Facility at October 29, 2022 was $91.4 million.

Amounts borrowed under the FILO Term Loan will be repaid in quarterly installments at a rate of 1.25% per quarter based on the original principal amount of the FILO Term Loan, commencing with the first quarter of 2022. During the thirty-nine weeks ended October 29, 2022 we made $3.4 million in mandatory repayments. All remaining amounts of the Term Loan Facility outstanding on the maturity date will be paid in full on the maturity date, May 24, 2024. The Loan Parties must repay amounts incurred under the Term Loan Facility with net proceeds from the incurrence of certain additional debt, after payment in full and termination of the $250.0 million asset-based loan credit facility, when outstanding loans under the Term Loan Facility and asset-based loan credit facility exceed the aggregate borrowing base under the Term Loan Facility and asset-based loan credit facility, and, in the case of the DDTL only, with tax refund proceeds payable to the Company pursuant to the CARES Act. Voluntary prepayments under the Term Loan Facility are permitted at any time upon proper notice and subject to minimum dollar amounts and, in certain instances, a prepayment fee.

Amounts borrowed under the Term Loan Facility bear interest at a variable rate indexed to LIBOR plus a pricing margin ranging from 7.00% to 8.25% per annum, as determined in accordance with the provisions of the Term Loan Facility based on EBITDA (as defined below), as of any date of determination, for the most recently ended twelve month period. Interest payments under the Term Loan Facility are due on the first day of each calendar month. As of October 29, 2022 the interest rate on the outstanding FILO Term Loan was 11.7%.

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The Term Loan Facility is subject to a borrowing base which is calculated based on specified percentages of eligible inventory, credit card receivables, intellectual property and, after the advance of the DDTL, the lesser of the amount of the tax refund claim under the CARES Act and the outstanding amount of the DDTL.

The Term Loan Facility financial covenant requires the Borrower to maintain minimum excess availability of at least the greater of (i) $25.0 million or (ii) 10% of the sum of (x) the Amended Revolving Credit Facility (defined below) loan cap (calculated without giving effect to any term pushdown reserve) plus (y) the lesser of (A) the outstanding principal balance under the Term Loan Facility and (B) the term loan borrowing base. In addition, the Term Loan Facility contains customary covenants and restrictions on the Company’s and its subsidiaries’ activities, including, but not limited to, limitations on the amount of cash that can be held, the incurrence of additional indebtedness, liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, distributions, dividends, the repurchase of capital stock, transactions with affiliates, the ability to change the nature of its business or its fiscal year, and permitted activities of the Company.

The Term Loan Facility includes customary events of default that include, among other things, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Term Loan Facility. Under certain circumstances, a default interest rate will apply on any amount payable under the Term Loan Facility during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate for any principal and 2.00% above the rate applicable for base rate loans for any other interest.

All obligations under the Term Loan Facility are guaranteed by the Loan Parties (other than the Borrower (as defined therein)) and secured by (a) a second priority lien on, substantially all of the Loan Parties’ working capital assets, including cash, accounts receivable, and inventory, and (b) a first priority lien on, substantially all of the Loan Parties’ non-working capital assets, including intellectual property, and the tax refund payable to the Company pursuant to the CARES Act, in each case, subject to certain permitted liens.

The Company recorded deferred financing costs associated with the issuance of the Term Loan Facility. The unamortized balance is $2.0 million as of October 29, 2022. These costs will be amortized over the respective contractual terms of the Term Loan Facility or written off ratably as the Term Loan Facility is extinguished. The Company’s Term Loan debt is presented on the Consolidated Balance Sheets, net of the unamortized fees.

Revolving Credit Facility

On May 24, 2019, Express Holding and its subsidiaries entered into a First Amendment to the Second Amended and Restated $250.0 million Asset-Based Loan Credit Agreement (as amended, the “Revolving Credit Facility”).

On March 17, 2020, the Company provided notice to the lenders under the Revolving Credit Facility of a request to borrow $165.0 million.

On January 13, 2021, Express Holding and its subsidiaries entered into the Second Amendment to the Second Amended and Restated $250.0 million Asset-Based Loan Credit Agreement and the Second Amendment to the Amended and Restated Security Agreement, among the Loan Parties (as defined therein), the lenders party thereto, and Wells Fargo, as administrative agent, as collateral agent, as issuing bank and as swing line lender (the “Revolving Credit Facility Amendment”). The Revolving Credit Facility Amendment amends the Loan Parties’ existing asset-based Revolving Credit Facility (as amended by the Revolving Credit Facility Amendment, the “Amended Revolving Credit Facility”), which is scheduled to expire on May 24, 2024.

The Revolving Credit Facility Amendment added the Company and Express Topco LLC as Loan Parties, fully obligated and bound by all of the respective covenants, representations, warranties and events of default.

Under the Amended Revolving Credit Facility, revolving loans may be borrowed, repaid and reborrowed until May 24, 2024, at which time all amounts borrowed must be repaid. Borrowings under the Amended Revolving Credit Facility bear interest at variable rates that are indexed, at the Borrower’s option, to LIBOR or the base rate as defined in the credit agreement governing the asset-based loan credit facility, in each case plus a pricing margin. The pricing margin for LIBOR loans ranges from 2.00% to 2.25% per annum, and the pricing margin for base rate loans ranges from 1.00% to 1.25% per annum, in each case as determined in accordance with the provisions of the

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Amended Revolving Credit Facility based on average daily excess availability. The Amended Revolving Credit Facility has a maximum borrowing amount of $250.0 million, subject to a borrowing base which is calculated based on specified percentages of eligible inventory, credit card receivables and cash, less certain reserves. Commitment reductions and termination of the Amended Revolving Credit Facility prior to the maturity date is permitted, subject in certain instances to a prepayment fee. As of October 29, 2022, the interest rate on the outstanding borrowings of $144.0 million at LIBOR was approximately 6.2%.

The unused line fee payable under the Amended Revolving Credit Facility is 0.375% per annum when average daily excess availability during an applicable fiscal quarter is greater than or equal to 50% of the borrowing base and 0.20% per annum when average daily excess availability is less than 50% of the borrowing base, payable quarterly in arrears on the first day of each calendar month. The Borrower is also obligated to pay other customary closing fees, arrangement fees, administration fees and letter of credit fees for a credit facility of this size and type.

Interest payments under the Amended Revolving Credit Facility are due on the first day of each calendar month for base rate loans. Interest payments under the Amended Revolving Credit Facility are due on the last day of the interest period for LIBOR loans for interest periods of one and three months, and additionally every three months after the first day of the interest period for LIBOR loans for interest periods of greater than three months.

The Amended Revolving Credit Facility financial covenant requires the Borrower to maintain minimum excess availability of at least the greater of (i) $25 million or (ii) 10% of the sum of (x) Amended Revolving Credit Facility loan cap (calculated without giving effect to any term pushdown reserve) plus (y) the lesser of (A) the outstanding principal balance under the Term Loan Facility and (B) the term loan borrowing base. Subject to certain conditions, the Amended Revolving Credit Facility restricts prepayment of the Term Loan Facility, except in connection with a prepayment made solely from the tax refund payable to the Company pursuant to the CARES Act. In addition, the Amended Revolving Credit Facility contains customary covenants and restrictions on the Company’s and its subsidiaries’ activities, including, but not limited to, limitations on the amount of cash that can be held, incurrence of additional indebtedness, liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, distributions, dividends, the repurchase of capital stock, transactions with affiliates, the ability to change the nature of its business or its fiscal year, and permitted activities of the Company.

The Amended Revolving Credit Facility includes customary events of default that, include among other things, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. The occurrence of an event of default could result in the acceleration of the obligations under the Amended Revolving Credit Facility. Under certain circumstances, a default interest rate will apply on any amount payable under the Amended Revolving Credit Facility during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate for any principal and 2.00% above the rate applicable for base rate loans for any other interest.

All obligations under the Amended Revolving Credit Facility are guaranteed by the Loan Parties (other than the Borrower) and secured by (a) a first priority lien on substantially all of the Loan Parties’ working capital assets, including cash, accounts receivable, and inventory, and (b) a second priority lien on substantially all of the Loan Parties’ non-working capital assets, including intellectual property, and the refund payable to the Company pursuant to the CARES Act, in each case, subject to certain permitted liens.

As of October 29, 2022, the Company had $144.0 million in borrowings outstanding under the Amended Revolving Credit Facility and approximately $47.0 million remained available for borrowing under the Amended Revolving Credit Facility after giving effect to outstanding letters of credit in the amount of $24.6 million and subject to certain borrowing base limitations as further discussed above. The fair value of the Amended Revolving Credit Facility at October 29, 2022 was $137.3 million.

On November 23, 2022, the Company's current $250.0 million Amended Revolving Credit Facility was amended and increased by $40.0 million to $290.0 million. The Amended Revolving Credit Facility will mature on November 26, 2027. The amended and restated Revolving Credit Facility also provides that all obligations under the Amended Revolving Credit Facility are guaranteed by the Loan Parties (other than the Borrower) and secured by (a) a first priority lien on substantially all of the Loan Parties’ working capital assets, including cash, accounts receivable, and inventory, and (b) a second priority lien on substantially all of the Loan Parties’ non-working capital assets, including intellectual property, and the refund payable to the Company pursuant to the CARES Act, in each case, subject to certain permitted liens.

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On November 23, 2022, the Company's current $140.0 million Term Loan Facility was amended by refinancing its $90.0 million FILO Term Loan and terminating its $50.0 million DDTL. The Amended Term Loan Facility will mature on November 26, 2027. The amended and restated Term Loan Facility also provides that all obligations under the Term Loan Facility are guaranteed by the Loan Parties (other than the Borrower (as defined therein)) and secured by (a) a second priority lien on, substantially all of the Loan Parties’ working capital assets, including cash, accounts receivable, and inventory, and (b) a first priority lien on, substantially all of the Loan Parties’ non-working capital assets, including intellectual property, and the tax refund payable to the Company pursuant to the CARES Act, in each case, subject to certain permitted liens.

Letters of Credit

The Company may enter into various trade letters of credit ("trade LCs") in favor of certain vendors to secure merchandise. These trade LCs are issued for a defined period of time, for specific shipments, and generally expire three weeks after the merchandise shipment date. As of October 29, 2022 and January 29, 2022, there were no outstanding trade LCs. Additionally, the Company enters into stand-by letters of credit ("stand-by LCs") on an as-needed basis to secure payment obligations for third party logistic services, merchandise purchases, and other general and administrative expenses. As of October 29, 2022 and January 29, 2022, outstanding stand-by LCs totaled $24.6 million and $34.6 million, respectively.

NOTE 8 | LONG-TERM INCENTIVE COMPENSATION

The Company records the fair value of share-based payments to employees in the Consolidated Statements of Income and Comprehensive Income as compensation expense, net of forfeitures, over the requisite service period. The Company issues shares of common stock from treasury stock, at average cost, upon exercise of stock options and vesting of restricted stock units, including those with performance conditions.

Long-Term Incentive Compensation Plans

On April 30, 2018, upon the recommendation of the Compensation and Governance Committee, the Board unanimously approved and adopted, subject to stockholder approval, the Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”) to replace the previous plan. On June 13, 2018, stockholders of the Company approved the 2018 Plan and all grants made subsequent to that approval have been made under the 2018 Plan. The primary change made by the 2018 Plan was to increase the number of shares of common stock available for equity-based awards by 2.4 million shares.

In the third quarter of 2019, in connection with updates made by the Company to its policy regarding the clawback of incentive compensation awarded to associates, the Board approved an amendment to the 2018 Plan, solely for the purpose of updating the language regarding the recoupment of awards granted under the 2018 Plan.

On March 17, 2020, upon the recommendation of the Committee, the Board unanimously approved and adopted, subject to stockholder approval, a second amendment to the 2018 Plan, which increased the number of shares of common stock available under the 2018 Plan by 2.5 million shares. On June 10, 2020, stockholders of the Company approved this plan amendment.

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The following summarizes long-term incentive compensation expense:

												Thirteen Weeks Ended												Thirty-Nine Weeks Ended
												October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
												(in thousands)
Restricted stock units												$	1,015					$	1,436					$	3,292					$	5,093
Stock options												88						91						263						641
Performance-based restricted stock units												1,501						925						4,062						2,122
Total share-based compensation												$	2,604					$	2,452					$	7,617					$	7,856
Cash-settled awards												3,449						2,427						9,594						7,066
Total long-term incentive compensation												$	6,053					$	4,879					$	17,211					$	14,922

The stock compensation related income tax benefit, excluding consideration of valuation allowances, recognized by the Company during the thirteen and thirty-nine weeks ended October 29, 2022 was $0.1 million and $3.0 million, respectively. The stock compensation related income tax benefit, excluding consideration of valuation allowances, recognized by the Company during the thirteen and thirty-nine weeks ended October 30, 2021 was $0.2 million and $4.2 million, respectively.

The valuation allowances associated with these tax benefits were $0.1 million and $3.0 million for the thirteen and thirty-nine weeks ended October 29, 2022, respectively. The valuation allowances associated with these tax benefits were $0.2 million and $4.2 million for the thirteen and thirty-nine weeks ended October 30, 2021, respectively.

Equity Awards

Restricted Stock Units

During the thirty-nine weeks ended October 29, 2022, the Company granted restricted stock units (“RSUs”) under the 2018 Plan. The fair value of RSUs is generally determined based on the Company’s closing stock price on the day prior to the grant date in accordance with the 2018 Plan. The RSUs granted in 2022 generally vest ratably over one to three years and the expense related to these RSUs will be recognized using the straight-line attribution method over this vesting period.

The Company’s activity with respect to RSUs, including awards with performance conditions granted prior to 2018, for the thirty-nine weeks ended October 29, 2022 was as follows:

			Number of Shares			Grant Date Weighted Average Fair Value Per Share
			(in thousands, except per share amounts)
Unvested - January 29, 2022			3,561			$	2.55
Granted			354			$	2.68
Vested			(1,858)			$	2.82
Forfeited			(156)			$	2.65
Unvested - October 29, 2022			1,901			$	2.30

The total fair value of RSUs that vested during the thirty-nine weeks ended October 29, 2022 and October 30, 2021 was $5.2 million and $8.6 million, respectively. As of October 29, 2022, there was approximately $2.3 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a remaining weighted-average period of approximately 0.6 years.

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Stock Options

The Company’s activity with respect to stock options during the thirty-nine weeks ended October 29, 2022 was as follows:

			Number of Shares						Grant Date Weighted Average Exercise Price Per Share						Weighted-Average Remaining Contractual Life (in years)						Aggregate Intrinsic Value
			(in thousands, except per share amounts and years)
Outstanding - January 29, 2022			2,973						$	5.39
Granted			—						$	—
Exercised			—						$	—
Forfeited or expired			(117)						$	18.91
Outstanding - October 29, 2022			2,857						$	4.84					6.0						$	—
Expected to vest at October 29, 2022			279						$	2.60					6.7						$	—
Exercisable at October 29, 2022			2,577						$	5.09					5.9						$	—

As of October 29, 2022, there was approximately $0.2 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over a remaining weighted average period of approximately 0.7 years.

Performance-Based Restricted Stock Units

During the thirty-nine weeks ended October 29, 2022, the Company granted performance shares to a limited number of senior executive-level employees, which entitle these employees to receive a specified number of shares of the Company’s common stock upon vesting. The number of shares earned could range between 0% and 200% of the target amount depending upon performance achieved over a three-year vesting period. The performance conditions of the award include adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA") targets and total shareholder return ("TSR") of the Company’s common stock relative to a select group of peer companies. A Monte Carlo valuation model was used to determine the fair value of the awards. The TSR performance metric is a market condition. Therefore, fair value of the awards is fixed at the measurement date and is not revised based on actual performance. The number of shares that are expected to vest will change based on estimates of the Company’s Adjusted EBITDA performance in relation to the pre-established targets. The 2022 target grant currently corresponds to approximately 1.9 million shares, with a grant-date fair value of $3.97 per share. As of October 29, 2022, $10.3 million of total unrecognized compensation cost is expected to be recognized on performance-based restricted stock units over a remaining weighted-average period of 2.0 years.

Cash-Settled Awards

Time-Based Cash-Settled Awards

During the thirty-nine weeks ended October 29, 2022, the Company granted time-based cash-settled awards to employees that vest ratably over three years. These awards are classified as liabilities and do not vary based on changes in the Company's stock price or performance. The expense related to these awards will be accrued using a straight-line method over this vesting period. As of October 29, 2022, $14.8 million of total unrecognized compensation cost is expected to be recognized on cash-settled awards over a remaining weighted-average period of 1.5 years.

Performance-Based Cash-Settled Awards

In March 2020, the Company granted performance-based cash-settled awards to a limited number of senior executive-level employees. Due to the significant disruption caused by the COVID-19 pandemic on the Company’s business operations, as well as its adverse impact on consumer confidence and demand, the Committee delayed setting performance targets for the 2020 long-term performance-based awards until February 2021. While the 2020 long-term performance awards remain subject to a three-year vesting cliff, these awards are subject to a two-year performance period instead of a three-year performance period. These awards are classified as liabilities, with the amount to be paid out estimated each reporting period. Expense is being recognized in proportion to the completed requisite period up until date of settlement. The amount of cash earned could range between 0% and 200% of the

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target amount depending upon performance achieved over a two-year performance period commencing on the first day of the Company’s 2021 fiscal year and ending on the last day of the Company’s 2022 fiscal year. The performance condition of the award is Adjusted EBITDA. The amount of cash earned will change based on estimates of the Company’s Adjusted EBITDA performance in relation to the pre-established targets. As of October 29, 2022, $2.3 million of total unrecognized compensation cost is expected to be recognized on performance-based cash-settled awards over a remaining weighted-average period of 0.5 years.

NOTE 9 | COMMITMENTS AND CONTINGENCIES

In a complaint filed in January 2017 by Mr. Jorge Chacon in the Superior Court for the State of California for the County of Orange, certain subsidiaries of the Company were named as defendants in a representative action alleging violations of California state wage and hour statutes and other labor standards. The lawsuit seeks unspecified monetary damages and attorneys’ fees.

In July 2018, former associate Ms. Christie Carr filed suit in Alameda County Superior Court for the State of California naming certain subsidiaries of the Company as defendants in a representative action alleging violations of California State wage and hour statutes and other labor standard violations. The lawsuit seeks unspecified monetary damages and attorneys’ fees.

On January 29, 2019, Mr. Jorge Chacon filed a second representative action in the Superior Court for the State of California for the County of Orange alleging violations of California state wage and hour statutes and other labor standard violations, which was removed to federal court by the Company and is now pending in the United States District Court for the Central District of California (the “District Court”). The lawsuit seeks unspecified monetary damages and attorneys' fees. In June 2021, a portion of Mr. Chacon’s claims in this action were certified as a class action. Plaintiff and the Company both filed Motions for Summary Judgment on February 28, 2022.

In June 2022, as a result of a mediation process overseen by an independent mediator, the parties agreed, subject to approval by the District Court, to settle these matters for an amount not material to the Company. The proposed settlement will resolve the Chacon and Carr matters in their entirety and also provide for a broad release of claims asserted therein on behalf of the Company’s current and former employees in California for wage and hour violations.

As of October 29, 2022, the Company's unaudited Consolidated Balance Sheet includes an estimated liability based on its best estimate of the outcome of the unresolved matters.

The Company is subject to various other claims and contingencies arising out of the normal course of business. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s results of operations, financial condition, or cash flows.

NOTE 10 | STOCKHOLDERS' EQUITY

Share Repurchase Programs

On November 28, 2017, the Company's Board of Directors ("Board") approved a share repurchase program that authorizes the Company to repurchase up to $150.0 million of the Company’s outstanding common stock using available cash (the "Repurchase Program"). The Company may repurchase shares on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, through block purchases, or otherwise in compliance with applicable laws, including Rule 10b-18 of the Exchange Act of 1934. The timing and amount of stock repurchases will depend on a variety of factors, including business and market conditions as well as corporate and regulatory considerations. The share repurchase program may be suspended, modified, or discontinued at any time and the Company has no obligation to repurchase any amount of its common stock under the program. During the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, the Company did not repurchase shares of its common stock. As of October 29, 2022, the Company had approximately $34.2 million remaining under this authorization.

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ATM Equity Offering Sales Agreement

On June 3, 2021, the Company entered into an ATM Equity Offering Sales Agreement (the "Sales Agreement") with BofA Securities, Inc. ("BofA"), as the sales agent to sell up to 15.0 million shares of the Company's common stock, par value $0.01 per share, through an “at-the-market” offering program. Such shares are issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-253368) filed with the SEC on April 6, 2021.

During the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, the Company did not sell any shares under the Sales Agreement. On December 2, 2022, the Company delivered written notice to BofA Securities to terminate the Sales Agreement. The termination of the Sales Agreement was effective as of December 7, 2022. The Company exercised its option to terminate the Sales Agreement due to the fact that the Company no longer intends to utilize the Sales Agreement. There are no penalties associated with the termination of the Sales Agreement. Prior to its termination, the Company did not issue or sell any shares of its Common Stock pursuant to the Sales Agreement.

NOTE 11 | SUBSEQUENT EVENTS

Proposed Partnership with WHP Global

Investment Agreement

On December 8, 2022, the Company, entered into an investment agreement (the “Investment Agreement”) with WH Borrower, LLC, a Delaware limited liability company (“WHP”), relating to the issuance and sale of shares of the Company’s common stock, par value $0.01, in a private placement to WHP. Pursuant to the Investment Agreement, the Company will issue and sell 5.4 million shares of common stock to WHP (the “Purchased Shares”) for a purchase price of $4.60 per share, or an aggregate purchase price of $25.0 million (the “Stock Purchase”). The Investment Agreement contains customary representations, warranties and covenants of the Company and WHP. The closing of the Stock Purchase (the “Closing”) is subject to the satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Closing will also require the consent of our lender under the Revolving Credit Facility.

Registration Rights Agreement

At the Closing, in connection with the Investment Agreement, the Company and WHP will enter into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company will grant WHP certain registration rights. Under the Registration Rights Agreement, the Company is required to register the resale of the Purchased Shares by July 1, 2026.

Membership Interest Purchase Agreement

On December 8, 2022, the Company entered into a membership interest purchase agreement (the “Membership Interest Purchase Agreement”), by and among the Company, WHP and Express LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Seller”). Pursuant to the Membership Interest Purchase Agreement, (a) Seller and wholly owned subsidiary of Seller (“Contribution Co”) will enter into a contribution agreement (the “Contribution Agreement”) with EXP TOPCO, LLC (the “Joint Venture”), pursuant to which Seller will contribute certain of its intellectual property assets to the Joint Venture in exchange for 100% of the limited liability company interests of the Joint Venture, after which Seller will assign a 1% limited liability company interest to Contribution Co and (b) at least two days following the closing of the transactions contemplated by the Contribution Agreement, WHP will purchase from Seller a 60% ownership interest in the Joint Venture. The closing of the Membership Interest Purchase Agreement will take place simultaneously with the Closing.

Intellectual Property License Agreement

At Closing, the Company and the Joint Venture will enter into an Intellectual Property License Agreement (the “License Agreement”). The License Agreement provides the Company with an exclusive license in the United States to the intellectual property contributed in connection with the Membership Interest Purchase Agreement and certain

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other intellectual property. The initial term of the License Agreement is 10 years, and the License Agreement automatically renews for successive renewal terms of 10 years (unless the Company provides notice of non-renewal at least 24 months prior to the end of the initial or applicable renewal term). Except for the Company’s right not to renew the License Agreement, the License Agreement is not terminable by either party. The Company will pay the Joint Venture a royalty on net sales of certain licensed goods and will commit to an annual guaranteed minimum annual royalty during the term of the License Agreement (i.e., $60 million in the first contract year, increasing by $1 million per year for the next five contract years, and remaining at $65 million following the sixth contract year). The Company will pay royalties at a rate of (i) 3.25% of net sales arising from retail sales of certain licensed goods in the first through fifth contract years (and 3.5% thereafter), and (ii) 8% of net sales arising from wholesale sales of such goods.

Operating Agreement

At the Closing, in connection with the Membership Interest Purchase Agreement, Seller, Contribution Co and an affiliate of WHP will enter into an amended and restated limited liability company agreement governing the operations of the Joint Venture (the “Operating Agreement”). Cash earnings of the Joint Venture will be distributed quarterly to the Company (through Seller and Contribution Co) and WHP on a pro rata basis. Under the Operating Agreement, the Joint Venture will be managed by a board of managers controlled by WHP, subject to the Company’s right to approve certain action by the Joint Venture. The Operating Agreement precludes the Company from entering into any partnership or other similar agreement or any sale, merger or other divestiture with certain Restricted Parties (as defined in the Operating Agreement). Pursuant to the Operating Agreement, each of WHP and the Company will agree to provide the other with a right of first offer with respect to any Retail Opportunity (as defined in the Operating Agreement).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of the Company as of the dates and for the periods presented below. The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended January 29, 2022 ("Annual Report") and our unaudited Consolidated Financial Statements and the related Notes included in Item 1 of this Quarterly Report on Form 10-Q ("Quarterly Report"). This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors. See “Forward-Looking Statements.”

All references herein to “the third quarter of 2022” and “the third quarter of 2021” represent the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively.

Our management's discussion and analysis of financial condition and results of operations is presented in the following sections:

			Page
Overview			26
COVID-19 Pandemic and Other Trends			26
Financial Details			27
Outlook & Third Quarter Update			28
How We Assess the Performance of Our Business			29
Results of Operations			31
Liquidity and Capital Resources			35
Critical Accounting Policies			37

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OVERVIEW

Express is a modern, multichannel apparel and accessories brand grounded in versatility, guided by its purpose - We Create Confidence. We Inspire Self-Expression. - and powered by a styling community. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a part of some of the most important and culture-defining fashion trends. The Express Edit design philosophy ensures that the brand is always ‘of the now’ so people can get dressed for every day and any occasion knowing that Express can help them look the way they want to look and feel the way they want to feel. We operate 566 retail and factory outlet stores in the United States and Puerto Rico, the express.com online store and the Express mobile app.

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COVID-19 PANDEMIC AND OTHER TRENDS

In March 2020, the World Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures. Our business operations and financial performance have been materially impacted by the COVID-19 pandemic. Due to the continued evolution of the pandemic, we continue to see certain disruptions and volatility in our business. While trends in the severity of new cases of COVID-19 in the United States improved during the thirty-nine weeks ended October 29, 2022, we cannot reasonably estimate the extent to which our business will continue to be affected by the COVID-19 pandemic.

Additionally, the COVID-19 pandemic, challenging macroeconomic conditions due to inflation, rising interest rates, recessionary concerns and recent geopolitical conditions, including impacts from the ongoing conflict between Russia and Ukraine and increased tensions between China and Taiwan, have all contributed to disruptions and rising costs to global supply chains. Our ability to continue to replenish our inventory to meet continued levels of consumer demand could be impacted by further delays or disruptions. We expect these impacts to continue for as long as the global supply chain is experiencing these challenges. For additional information regarding risks related

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to the COVID-19 pandemic and these related operational and industry risks, see “Item 1A. Risk Factors: Operational and Industry Risk Factors” in our Annual Report.

FINANCIAL DETAILS FOR THE THIRD QUARTER OF 2022

•Net sales decreased 8% to $434.1 million
•Comparable sales decreased 8%
•Comparable retail sales (includes both retail stores and eCommerce sales) decreased 11%
•Comparable outlet sales were flat
•Gross margin percentage decreased 540 basis points to 27.8%
•Operating income decreased $45.8 million to a loss of $29.5 million
•Net income decreased $47.5 million to a loss of $34.4 million
•Diluted earnings per share decreased $0.69 to $0.50

The following charts show key performance metrics for the third quarter of 2022 compared to the third quarter of 2021.

    

    

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OUTLOOK & THIRD QUARTER UPDATE

The following defines each pillar of the EXPRESSway Forward strategy and provides an update on each priority:

PRODUCT

BRAND

CUSTOMER

EXECUTION

Product

We set out to bring greater balance and versatility to our assortments reflecting a more modern approach to building a wardrobe. Our Express Edit design and merchandising philosophy is working. We offer modern, versatile, high quality fashion at an appealing price point and continue to gain market share in some the most significant volume-driving categories.

We saw continued strength in our men’s business with comparable sales growth across most categories in the third quarter of 2022. However, our women’s business was impacted by the soft demand environment that became more competitive, and much more promotional, as the third quarter of 2022 progressed.

Brand

Express is transforming from being known as a store in the mall to a brand with a purpose, powered by a styling community. We have created a compelling brand purpose: “We create confidence. We inspire self-expression. And we do it by editing the best of now for real life versatility.”

The Express styling community is an authentic way to bring our brand purpose to life. Members of the Express styling community - customers, associates, Style Editors, content creators, influencers, and brand partners - interact with each other in the physical and digital worlds. Building, activating, and amplifying this styling community is one of our key 2022 priorities.

Our stores are the place where our community comes together. We host in-store events and simultaneously stream some of them online. These events broaden the reach of our brand purpose through the participants’ social media and drive video views across all social platforms. During the third quarter of 2022, we featured store associates and Style Editors in our brand campaign for the first time and delivered some of our best performing social media content to date. We are reimagining the customer experience through a pilot program in select stores, and renovating and refreshing a number of stores to elevate the customer experience and present a more consistent brand identity across the fleet.

Customer

We are successfully engaging existing customers and acquiring new ones. Our Express Insider loyalty program brought in five million new customers since its relaunch in the first quarter of 2021. We continue to operate with the highest number of active loyalty members in our history.

Execution

Execution is the through line across all of our Product, Brand, and Customer strategies that will drive our operating model.

We continue to invest in our eCommerce channel. We introduced enhancements to our online checkout process, improved our buy-online-pick-up-in-store experience and in the coming months we will enhance personalization and make the checkout experience more streamlined.

Our new Express Edit stores continue to acquire new customers, reactivate lapsed customers, and sign up loyalty at higher rates than the balance of our fleet.

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HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS

In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, eCommerce demand, transactions, cost of goods sold, buying and occupancy costs, gross profit/gross margin, and selling, general, and administrative expenses. The following table describes and discusses these measures.

Net Sales
Description
Revenue from the sale of merchandise, less returns and discounts, as well as shipping and handling revenue related to eCommerce, revenue from the rental of our LED sign in Times Square, gift card breakage and revenue earned from our private label credit card agreement.
Discussion
Our business is seasonal, and we have historically realized a higher portion of our net sales in the third and fourth quarters, due primarily to the impact of the holiday season. Generally, approximately 45% of our annual net sales occur in the Spring season (first and second quarters) and 55% occur in the Fall season (third and fourth quarters).

Comparable Sales
Description
Comparable sales is a measure of the amount of sales generated in a period relative to the amount of sales generated in the comparable prior year period. Comparable sales for the third quarter of 2022 was calculated using the thirteen weeks ended October 29, 2022 as compared to the thirteen weeks ended October 30, 2021. Comparable retail sales includes: •Sales from retail stores that were open 12 months or more as of the end of the reporting period •eCommerce shipped sales Comparable outlet sales includes: •Sales from outlet stores that were open 12 months or more as of the end of the reporting period, including conversions Comparable sales excludes: •Sales from stores where the square footage has changed by more than 20% due to remodel or relocation activity •Sales from stores in a phased remodel where a portion of the store is under construction and therefore not productive selling space •Sales from stores where the store cannot open due to weather damage or other catastrophes, including pandemics
Discussion
Our business and our comparable sales are subject, at certain times, to calendar shifts, which may occur during key selling periods close to holidays such as Easter, Thanksgiving, and Christmas, and regional fluctuations for events such as sales tax holidays. We believe comparable sales provides a useful measure for investors by removing the impact of new stores and closed stores. Management considers comparable sales a useful measure in evaluating continuing store performance.

eCommerce Demand
Description
eCommerce demand is defined as gross orders for Express and/or third party merchandise that originate through our eCommerce platform, including the website, app, and buy online pick-up in store.
Discussion
We believe eCommerce demand is a useful operational metric for investors and management as it provides visibility for orders placed but not yet shipped.

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Transactions
Description
Transactions are defined as the number of customer point of sale interactions with customers.
Discussion
We believe this metric is useful as it provides a better indicator of the acceptance of our product.

Cost of Goods Sold, Buying and Occupancy Costs
Description
Includes the following: •Direct cost of purchased merchandise •Inventory shrink and other adjustments •Inbound and outbound freight •Merchandising, design, planning and allocation, and manufacturing/production costs •Occupancy costs related to store operations (such as rent and common area maintenance, utilities, and depreciation on assets) •Logistics costs associated with our eCommerce business •Impairments on long-lived assets and right of use lease assets
Discussion
Our cost of goods sold typically increases in higher volume quarters because the direct cost of purchased merchandise is tied to sales. The primary drivers of the costs of individual goods are raw materials, labor in the countries where our merchandise is sourced, and logistics costs associated with transporting our merchandise. Buying and occupancy costs related to stores are largely fixed and do not necessarily increase as volume increases. Changes in the mix of products sold by type of product or by channel may also impact our overall cost of goods sold, buying and occupancy costs. Extended periods of declined business and sales could result in additional impairment of our assets.

Gross Profit/Gross Margin
Description
Gross profit is net sales minus cost of goods sold, buying and occupancy costs. Gross margin measures gross profit as a percentage of net sales.
Discussion
Gross profit/gross margin is impacted by the price at which we are able to sell our merchandise and the cost of our product. We review our inventory levels on an on-going basis in order to identify slow-moving merchandise and generally use markdowns to clear such merchandise. The timing and level of markdowns are driven primarily by seasonality and customer acceptance of our merchandise and have a direct effect on our gross margin. Any marked down merchandise that is not sold is marked-out-of-stock. We use third-party vendors to dispose of this marked-out-of-stock merchandise.

Selling, General, and Administrative Expenses
Description
Includes operating costs not included in cost of goods sold, buying and occupancy costs such as: •Payroll and other expenses related to operations at our corporate offices •Store expenses other than occupancy costs •Marketing expenses, including production, mailing, print, and digital advertising costs, among other things
Discussion
With the exception of store payroll, certain marketing expenses, and incentive compensation, selling, general, and administrative expenses generally do not vary proportionally with net sales. As a result, selling, general, and administrative expenses as a percentage of net sales are usually higher in lower volume quarters and lower in higher volume quarters.

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RESULTS OF OPERATIONS

The Third Quarter of 2022 compared to the Third Quarter of 2021

Net Sales

			Thirteen Weeks Ended
			October 29, 2022						October 30, 2021
Net sales (in thousands)			$	434,145					$	471,981
Comparable retail sales			(11)		%				52		%
Comparable outlet sales			—		%				33		%
Total comparable sales percentage change			(8)		%				46		%
Gross square footage at end of period (in thousands)			4,683						4,744
Number of:
Stores open at beginning of period			564						567
New retail stores			—						—
New outlet stores			—						1
New Express Edit stores			4						2
New UpWest stores			1						1
Closed stores			(3)						(1)
Stores open at end of period			566						570

Net sales in the third quarter of 2022 decreased approximately $37.8 million compared to the third quarter of 2021. The decrease in sales was primarily attributed to the challenging macroeconomic and consumer conditions which became more pronounced as the third quarter progressed, primarily affecting our women’s and eCommerce businesses.

Gross Profit

The following table shows cost of goods sold, buying and occupancy costs, gross profit in dollars, and gross margin percentage for the stated periods:

			Thirteen Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands, except percentages)
Cost of goods sold, buying and occupancy costs			$	313,528					$	315,173
Gross profit			$	120,617					$	156,808
Gross margin percentage			27.8		%				33.2		%

The 540 basis point decrease in gross margin percentage, or gross profit as a percentage of net sales, in the third quarter of 2022 compared to the third quarter of 2021 was comprised of a decrease in merchandise margin of 360 basis points and an increase in buying and occupancy costs as a percentage of net sales of 180 basis points. The decrease in merchandise margin was primarily driven by softness in our women's business and increased promotions to address the competitive environment. The deleverage in buying and occupancy was driven by decreased sales.

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Selling, General, and Administrative Expenses

The following table shows selling, general, and administrative expenses in dollars and as a percentage of net sales for the stated periods:

			Thirteen Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands, except percentages)
Selling, general, and administrative expenses			$	150,090					$	141,055
Selling, general, and administrative expenses, as a percentage of net sales			34.6		%				29.9		%

The $9.0 million increase in selling, general, and administrative expenses in the third quarter of 2022 as compared to the third quarter of 2021 was primarily driven by store wage pressures from minimum wage and merit as well as strategic payroll initiatives implemented during the third quarter.

Interest Expense, Net

The following table shows interest expense in dollars for the stated periods:

			Thirteen Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
Interest expense, net			$	4,668					$	2,879

The $1.8 million increase in interest expense in the third quarter of 2022 as compared to the third quarter of 2021 was the result of increased borrowings under our Amended Revolving Credit Facility, which was impacted by increasing variable rates of interest. Refer to Note 7 in our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion regarding our borrowings during the thirteen weeks ended October 29, 2022.

Income Tax Expense

The following table shows income tax expense in dollars for the stated periods:

			Thirteen Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
Income tax expense			$	780					$	289

The effective tax rate was (2.3)% and 2.2% for the thirteen weeks ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate for the thirteen weeks ended October 29, 2022 reflects the impact of non-deductible executive compensation and the recording of an additional valuation allowance against the Company's current-year losses. The effective tax rate for the thirteen weeks ended October 30, 2021 was driven by an improved full-year operational forecast, offset by a reduction to the valuation allowance needed for current year results.

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The Thirty-Nine Weeks Ended October 29, 2022 compared to the Thirty-Nine Weeks Ended October 30, 2021

Net Sales

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
Net sales (in thousands)			$	1,349,849					$	1,275,367
Comparable retail sales			5		%				39		%
Comparable outlet sales			9		%				21		%
Total comparable sales percentage change			6		%				34		%
Gross square footage at end of period (in thousands)			4,683						4,744
Number of:
Stores open at beginning of period			561						570
New retail stores			—						—
New outlet stores			—						1
New Express Edit stores			5						6
New UpWest stores			8						7
Closed stores			(8)						(14)
Stores open at end of period			566						570

Net sales for the thirty-nine weeks ended October 29, 2022 increased approximately $74.5 million compared to the thirty-nine weeks ended October 30, 2021. The increase in sales was primarily attributed to our product and brand strategies resonating with our customers, especially in the first and second quarters of 2022 which reflected continued recovery of our business from the impacts of the COVID-19 pandemic, as compared to the thirty-nine weeks ended October 30, 2021 which were negatively impacted by COVID-19.

Gross Profit

The following table shows cost of goods sold, buying and occupancy costs, gross profit in dollars, and gross margin percentage for the stated periods:

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands, except percentages)
Cost of goods sold, buying and occupancy costs			$	944,031					$	890,448
Gross profit			$	405,818					$	384,919
Gross margin percentage			30.1		%				30.2		%

The 10 basis point decrease in gross margin percentage, or gross profit as a percentage of net sales, for the thirty-nine weeks ended October 29, 2022 compared to the thirty-nine weeks ended October 30, 2021 was comprised of a decrease in merchandise margin of 160 basis points and a decrease in buying and occupancy costs as a percentage of net sales of 150 basis points. The decrease in merchandise margin was primarily driven by increased product costs of approximately $10.8 million due to an increase in the freight component of our cost of goods sold. In the third quarter of 2022 we saw softness in our women's business and we increased promotions to address the competitive environment. The improvement in buying and occupancy leverage was driven by increased sales.

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Selling, General, and Administrative Expenses

The following table shows selling, general, and administrative expenses in dollars and as a percentage of net sales for the stated periods:

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands, except percentages)
Selling, general, and administrative expenses			$	434,461					$	395,010
Selling, general, and administrative expenses, as a percentage of net sales			32.2		%				31.0		%

The $39.5 million increase in selling, general, and administrative expenses for the thirty-nine weeks ended October 29, 2022 as compared to the thirty-nine weeks ended October 30, 2021 was primarily driven by sales increases and store wage pressures from minimum wage and merit as well as strategic payroll initiatives implemented during the thirty-nine weeks ended October 29, 2022.

Interest Expense, Net

The following table shows interest expense in dollars for the stated periods:

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
Interest expense, net			$	11,962					$	12,246

The $0.3 million decrease in interest expense for the thirty-nine weeks ended October 29, 2022 as compared to the thirty-nine weeks ended October 30, 2021 was the result of lower borrowing levels under our Term Loan Facility and incremental amortization charges incurred due to the pay down of the delayed draw term loan facility during the thirty-nine weeks ended October 30, 2021. This was offset by increased borrowings under our Amended Revolving Credit Facility, which was impacted by increasing variable rates of interest. Refer to Note 7 in our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion regarding our borrowings during the thirty-nine weeks ended October 29, 2022.

Income Tax Expense

The following table shows income tax benefit in dollars for the stated periods:

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
Income tax expense			$	549					$	227

The effective tax rate was (1.4)% and (1.0)% for the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. The effective tax rate for the thirty-nine weeks ended October 29, 2022 reflects the impact of non-deductible executive compensation and the recording of an additional valuation allowance against current year losses. The effective tax rate for the thirty-nine weeks ended October 30, 2021 reflects the impact of non-deductible executive compensation and the release of a valuation allowance against forecasted taxable earnings.

Non-GAAP Financial Measure

Included in the table below is earnings before interest, taxes, depreciation, and amortization ("EBITDA") for the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. We supplement the reporting of our financial information determined under United States generally accepted accounting principles ("GAAP") with certain non-GAAP financial measures such as EBITDA.

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EBITDA

How This Measure Is Useful

When used in conjunction with GAAP financial measures, EBITDA is a supplemental measure of operating performance that we believe is a useful measure to facilitate comparisons to historical performance. EBITDA is used as a performance measure in our long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned and is also a metric used in our short-term cash incentive compensation plan.

Limitations of the Usefulness of This Measure

Because non-GAAP financial measures are not standardized, EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. EBITDA excludes certain normal recurring expenses. Therefore, this measure may not provide a complete understanding of our performance and should be reviewed in conjunction with the GAAP financial measure. A reconciliation of EBITDA to the most directly comparable GAAP measures, is set forth below.

						Thirteen Weeks Ended												Thirty-Nine Weeks Ended
(in thousands)						October 29, 2022						October 30, 2021						October 29, 2022						October 30, 2021
Net (loss)/income						$	(34,448)					$	13,086					$	(39,326)					$	(21,999)
Interest expense, net						4,668						2,879						11,962						12,246
Income tax expense						780						289						549						227
Depreciation and amortization						14,550						15,662						43,763						48,418
EBITDA (Non-GAAP Measure)						$	(14,450)					$	31,916					$	16,948					$	38,892

LIQUIDITY AND CAPITAL RESOURCES

Forward-Looking Liquidity Discussion

Our liquidity position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within three to five days of the related sale, and we have up to 75 days to pay certain merchandise vendors and 45 days to pay the majority of our non-merchandise vendors. We also have commitments under lease agreements and debt agreements that will require future cash outlays.

Based upon the sales and results of operations seen during the thirty-nine weeks ended October 29, 2022, as well as the availability of additional liquidity under the Amended Revolving Credit Facility, and expense control and other measures taken to date, we continue to be in compliance with the financial covenants under our Amended Revolving Credit Facility and Term Loan Facility. We plan to continue enhancing our liquidity by selling through our inventory at appropriate retail prices and managing our costs. We believe this will result in sufficient cash flows to support our ongoing operations and to meet our covenant requirements under the Amended Revolving Credit Facility and Term Loan Facility for one year following the date that these unaudited Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report are issued and beyond however, due to the uncertainty related to the challenging macroeconomic, consumer and competitive environments we could experience material changes to forecasted revenues and cash flows and may experience difficulty remaining in compliance with financial covenants.

On November 28, 2022, we completed two transactions in support of a comprehensive plan to refinance our capital structure and expand liquidity access. The first increased the maximum available under our Amended Revolving Credit Facility by $40.0 million to $290.0 million. The second refinanced and reduced our fixed debt exposure by amending the current $140.0 million Term Loan Facility, including refinancing the $90.0 million FILO Term Loan and terminating the $50.0 million Delayed Draw Term Loan, of which $43.0 million was previously paid down.

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To fund our normal working capital requirements we will continue to utilize our Amended Revolving Credit Facility and $90.0 million outstanding on our Term Loan Facility following the refinancing completed on November 28, 2022. We have (and in the future may continue to have) a negative working capital balance. Our current liabilities include current operating lease liabilities, for which the corresponding operating right of use assets are recorded as non-current on our unaudited Consolidated Balance Sheets. However, the cash collected from our sales is typically collected before payment is due on our current liabilities. The Amended Revolving Credit Facility and the Term Loan Facility contain certain affirmative and negative covenants. Refer to Note 7 of our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our Amended Revolving Credit Facility and Term Loan Facility and the refinancing transactions completed following the end of the third quarter of 2022.

Analysis of Cash Flows

A summary of cash provided by or used in operating, investing, and financing activities is shown in the following table:

			Thirty-Nine Weeks Ended
			October 29, 2022						October 30, 2021
			(in thousands)
(Used in) provided by operating activities			$	(95,869)					$	78,284
Used in investing activities			(24,340)						(18,095)
Provided by (used in) financing activities			103,625						(79,268)
Decrease in cash and cash equivalents			(16,584)						(19,079)
Cash and cash equivalents at end of period			$	24,592					$	36,795

Operating Activities

Our business relies on cash flows from operations as our primary source of liquidity, with the majority of those cash flows being generated in the fourth quarter of the year. Our primary operating cash needs are for merchandise inventories, payroll, store rent and marketing. For the thirty-nine weeks ended October 29, 2022, our cash flows used in operating activities were $95.9 million compared to $78.3 million provided by operating activities for the thirty-nine weeks ended October 30, 2021. This $174.2 million decrease in cash flows from operating activities for the thirty-nine weeks ended October 29, 2022 as compared to the same period in 2021 was primarily driven by changes in working capital and an increase in net loss of $17.3 million compared to 2021. The changes in working capital were primarily driven by a decrease in accounts payable due to the payment of inventory related amounts on the unaudited Consolidated Balance Sheets at January 29, 2022. Operating cash flows for the thirty-nine weeks ended October 30, 2021 were positively impacted by the receipt of approximately $60.0 million of CARES Act receivable.

Investing Activities

We also use cash for investing activities. Our capital expenditures consist primarily of new and remodeled store construction and fixtures and investments in information technology. We had capital expenditures of approximately $24.3 million and $18.1 million for the thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively. The $6.2 million increase in investing activities was primarily driven by investments in information technology to support our strategic business initiatives. We expect capital expenditures for the remainder of 2022 to be approximately $26.0 million, primarily driven by new and remodeled store construction and investments in information technology.

Financing Activities

Credit Facilities

During the thirty-nine weeks ended October 29, 2022 we borrowed a net additional $109.0 million on our Amended Revolving Credit Facility to fund normal working capital needs. In addition, we made $3.4 million in mandatory repayments on our $90.0 million FILO Term Loan.

As of October 29, 2022, the net amount outstanding under our facilities was $235.4 million, of which $4.5 million is classified as short-term debt and $230.9 million is classified as long-term debt on the unaudited Consolidated

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Balance Sheet, net of unamortized costs, and approximately $47.0 million was available for borrowing under our Amended Revolving Credit Facility subject to certain borrowing base limitations and after outstanding letters of credit in the amount of $24.6 million, primarily related to our third party logistics contract. Refer to Note 7 of our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our Amended Revolving Credit Facility and Term Loan Facility and the refinancing transactions completed following the end of the third quarter of 2022.

Share Repurchases

On November 28, 2017, the Board approved a share repurchase program that authorizes us to repurchase up to $150.0 million of our outstanding common stock using available cash. During the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, respectively, we did not repurchase shares under the stock repurchase program.

ATM Equity Offering Sales Agreement

On June 3, 2021, we entered into an ATM Equity Offering Sales Agreement (the “Sales Agreement”) with BofA Securities, Inc. (“BofA”), as the sales agent to sell up to 15.0 million shares of our common stock, par value $0.01 per share, through an “at-the-market” offering program. Such shares were to be issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-253368) filed with the SEC on April 6, 2021. During the thirteen and thirty-nine weeks ended October 29, 2022 and October 30, 2021, we did not sell any shares under the Sales Agreement. In December 2022, we terminated the Sales Agreement. See Note 10 to our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further information related to our termination of the Sales Agreement.

CRITICAL ACCOUNTING POLICIES

Management has determined that our most critical accounting policies are those related to store asset impairment, merchandise inventory valuation and valuation allowance on deferred tax assets. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to the policies discussed in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

Our Amended Revolving Credit Facility and Term Loan Facility bear interest at variable rates. See Note 7 to our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further information on the calculation of the rates. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors.

As of October 29, 2022, we had approximately $144.0 million in borrowings outstanding under our Amended Revolving Credit Facility and approximately $93.4 million in borrowings outstanding under our Term Loan Facility. Based on the levels of borrowings under our credit facilities at October 29, 2022, we estimate that a 100 basis point increase or decrease in underlying interest rates would increase or decrease annual interest expense by approximately $2.4 million. This hypothetical analysis may differ from the actual change in interest expense due to potential changes in interest rates or gross borrowings outstanding under our credit facilities.

With the exception of the changes in the levels of borrowings under our Amended Revolving Credit Facility and Term Loan Facility as well as the refinancing transactions following the end of the third quarter of 2022, discussed in Note 7 of our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report, there have been no material changes in our quantitative and qualitative market risks from those disclosed in our Annual Report.

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ITEM 4. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation prior to filing this report of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of October 29, 2022.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the third quarter of 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Information relating to legal proceedings is set forth in Note 9 to our unaudited Consolidated Financial Statements included in Part I of this Quarterly Report and is incorporated herein by reference.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this Quarterly Report, careful consideration should be given to the risk factors set forth in “Item 1A. Risk Factors” of our Annual Report, any of which could materially affect our business, operations, financial position, stock price, or future results. The risks described herein and in our Annual Report, are important to an understanding of the statements made in this Quarterly Report, in our other filings with the SEC, and in any other discussion of our business. These risk factors, which contain forward-looking information, should be read in conjunction with “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the unaudited Consolidated Financial Statements and related Notes included in this Quarterly Report. Except as provided below, there have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended January 29, 2022.

In the event that our proposed strategic partnership with WHP Global is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.

The conditions to the consummation of the proposed strategic partnership with WHP Global may not be satisfied. If the partnership is not consummated, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed transaction. For these and other reasons, failure to consummate the partnership could adversely affect our business and results of operations. Furthermore, if we do not consummate the partnership, the price of our common stock may decline from the current market price, which we believe reflects a market assumption that the partnership will be consummated. Certain costs associated with the potential partnership have already been incurred or may be payable even if the transaction is not consummated. Further, a

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failed partnership may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the announcement and pendency of the partnership, including any adverse changes in our relationships with our customers, vendors and employees or recruiting and retention efforts, could continue or accelerate in the event of a failed partnership.

We may not be successful in our strategic partnership with WHP Global and the relationship may divert resources away from existing operations or expose us to liabilities, which could adversely affect our business, results of operations and financial condition.

We are investing a substantial amount of time, resources and efforts in connection with our proposed strategic partnership with WHP and WHP Global. All of these actions divert resources away from our other initiatives and operations particularly with respect to product sales in the United States. These efforts may not result in the anticipated additional products, efficiencies or revenues for our Company, which could adversely affect our business, operating results and financial condition as a result.

We may fail to realize the benefits expected from our proposed partnership with WHP Global, which could adversely affect our stock price.

The anticipated benefits we expect from the proposed partnership may not materialize as expected or which may prove to be inaccurate. The value of our common stock following the consummation of the proposed partnership could be adversely affected if we are unable to realize the anticipated benefits from the partnership on a timely basis or at all. The challenges involved in this achieving the benefits of the partnership, which will be complex and time-consuming, include the following:

▪difficulties entering new markets and integrating new strategies in which we have no or limited direct prior experience;

▪successfully managing relationships with our combined customer, supplier and distributor base;

▪the increased scale and complexity of our operations resulting from the partnership; and

▪retaining key employees.

If we do not successfully manage these issues and the other challenges inherent in consummating the partnership, then we may not achieve the anticipated benefits of the partnership. Moreover, we may not be able to achieve our expected synergies without increases in costs or other difficulties. We expect to incur expenses in connection with the consummation of the partnership. Such expenses are difficult to estimate accurately, and may exceed current estimates. Accordingly, the benefits from the partnership may be offset by costs incurred or delays in consummating the partnership. Any of the foregoing factors could cause our revenue, expenses, operating results and financial condition to be materially adversely affected.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information regarding the purchase of shares of our common stock made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, during each month of the quarterly period ended October 29, 2022:

Month						Total Number of Shares Purchased(1)						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs(2)
						(in thousands, except per share amounts)
July 31, 2022 - August 27, 2022						1						$	2.30					—						$	34,215
August 28, 2022 - October 1, 2022						30						$	1.27					—						$	34,215
October 2, 2022 - October 29, 2022						4						$	1.19					—						$	34,215
Total						35												—

1.Represents shares purchased in connection with employee tax withholding obligations under the Second Amended and Restated Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”). Refer to Note 8 of our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further details of the 2018 Plan.

2.On November 28, 2017, the Board approved a share repurchase program that authorized the Company to repurchase up to $150.0 million of the Company’s outstanding common stock using available cash. The Company may repurchase shares on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, through block purchases, or otherwise in compliance with applicable laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and amount of stock repurchases will depend on a variety of factors, including business and market conditions as well as corporate and regulatory considerations. The share repurchase program may be suspended, modified, or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

The following exhibits are filed or furnished as part of this Quarterly Report on Form 10-Q or are incorporated herein by reference.

Exhibit Number						Exhibit Description
31.1*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date:			December 8, 2022			EXPRESS, INC.
						By:			/s/ Jason Judd
									Jason Judd
									Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

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