Highlights

• Last week, Express announced a deal providing them with a $260m cash infusion.

• The market does not seem to fully understand or respect this transaction, as Express has sold off sharply after an initial bump.

• I see 10x upside for Express by 2024 if they can execute on their stated goals.

Brief Commentary

On December 8th, Express (NYSE:EXPR) announced a Strategic Partnership with WHP Global, which includes a $260M cash investment. This is a transformative deal for Express, repairing their balance sheet and helping grow their IP with an established partner. Optically, Express would take a $60m hit to operating income (the minimum annual royalty payment), but the Company benefits from negated interest expense ($10m+), and close to $20m of the royalties are returned via their 40% JV stake.

If Express can execute on their FY24 goal of mid-single digit operating income, their stock will likely trade near the double digits, about a 10x return from here. The WHP deal provides Express time and a partner to help expand sales internationally with less risk, hopefully paying for itself via increased sales. If Express can't fix their declining sales in the women's segment and spends their cash on a bad acquisition, shareholders will likely lose their full investment.

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