Express, Inc. (EXPR) And Sycamore Partners: Valuation

Express, Inc. (EXPR) And  Sycamore Partners: Valuation

By Alex Gavrish, Etalon Investment Research; author of Wall Street Back To Basics

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Sycamore Partners accumulated stake

On June 12th, 2014, private equity firm Sycamore Partners disclosed in a SEC filing that it owns 8.3 million shares of Express, Inc. (NYSE:EXPR). Express Inc is a specialty apparel and accessory retailer. The stake represents a holding of 9.9% and is valued at about $138 million (based on the most recent share price). Private equity firm also reported that it sent a letter to company’s board of directors expressing its interest in conducting due diligence for the possible buyout offer. Shares of the company reacted favourably to the news and opened 22% higher. During seven trading days since the disclosure on June 12th, 2014, 26.8 million of company’s shares changed hands. This represents 32% of total shares outstanding and might imply that shares are being pushed into hands of arbitrage and other hedge funds in anticipation of the offer.

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Company profile

Express, Inc. (NYSE:EXPR) is a specialty apparel and accessory retailer offering both women’s and men’s merchandise. Company has over 30 years of experience offering a distinct combination of style and quality at an attractive value, targeting women and men between 20 and 30 years old. It offers customers an assortment of fashionable apparel and accessories to address fashion needs across multiple aspects of their lifestyles, including work, casual, jeanswear, and going-out occasions.As of February 1, 2014, Express Inc operated 632 stores across the United States, in Canada, and in Puerto Rico. Company’s stores are located primarily in high-traffic shopping malls, lifestyle centers, and street locations, and average approximately 8,700 gross square feet. Express Inc also sells products through e-commerce website,, and has franchise agreements with franchisees who operate Express stores in Latin America and the Middle East.

Analysts upgrade the stock

After disclosure of Sycamore’s involvement, on June 17th, 2014, BMO Capital increased its price target on Express, Inc. (NYSE:EXPR) to $20 from $16 and kept an Outperform rating. The firm thinks that company’sfair valuation range is $20-$22s. Yesterday, on June 23rd, 2014, Janney Capital upgraded Express to Buy from Neutral . The firm says Express Inc could receive $20 or more in an LBO. Analysts at Janney Capital believe the historical relationship between Sycamore’s founder and CEO and company’s management makes a deal extremely likely.

Express’s Valuation


As of June 23rd, Express, Inc. (NYSE:EXPR) had a market capitalization was $1.4 billion and an enterprise value of $1.35 billion. Company is currently valued at an EV/EBITDA multiple of x4.76 (FY 2013). On May 29th, 2014, Express Inc authorized new share repurchase program in the amount of $100 million. The program will be active for the next 18 months. Involvement of a private equity firm, a possible buyout and cheap valuation make Express Inc an interesting investment candidate. However, investors should be cautious as retail sector is highly exposed to general economy, and investment can be accompanied by significant stock price volatility of companies.


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