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Express shares plummet after disappointing sales from weak store traffic

A shopper carries an Express Inc. bag while walking in the Center City neighborhood of Philadelphia Pennsylvania, U.S., on Friday, June 24, 2016.
Charles Mostoller | Bloomberg | Getty Images
A shopper carries an Express Inc. bag while walking in the Center City neighborhood of Philadelphia Pennsylvania, U.S., on Friday, June 24, 2016.

Shares of Express plummeted 25 percent Wednesday after the retailer reported weaker-than-expected quarterly sales and earnings following difficulty with store traffic.

The company reported fiscal second-quarter earnings of 13 cents per share on $505 million in revenue. Analysts expected earnings of about 17 cents a share on $521 million in revenue, according to a consensus estimate from Thomson Reuters.

The company's net sales decreased 6 percent to $504.8 million from $535.6 million in the same quarter last year. Comparable-store sales, which include e-commerce sales, fell by 8 percent, compared with a 7 percent increase in the second quarter last year.

Company President and CEO David Kornberg said in a statement the disappointing figures reflected "challenging store traffic."

"This was compounded by a lack of clarity across the assortment," he said. "We believe we have identified the necessary actions to position Express to regain momentum and we are moving on them. Our fall assortment is more cohesive across our wearing occasions, clearly identifying the important trends, and we are aggressively pursuing several marketing initiatives focused on driving new customer acquisition and retention."

He did say the company is "pleased" with its overall inventory position as the fall season begins.

"Results were below expectations as weak store traffic and lack of clarity across the merchandise assortment held back results and required increased markdowns to clear," said Stifel analyst Richard Jaffe, who gave the company a buy rating with an $18 target price.

He also said the firm supports the company management's optimistic view of an improved third quarter with a more cohesive lineup "across wearing occasions." However, he cautions that the third quarter may have difficulty driving traffic after two quarters of disappointing customers.

Deutsche Bank Markets Research downgraded the company's stock Wednesday to "hold" from buy," with a target price of $12.

Paul Trussell, an analyst in the report, said in part "the company was unable to take advantage of an improved mall apparel backdrop."

As of its Tuesday close, Express's stock has dropped 7 percent this year.

EXPR 2016 Chart