Can Bonobos help get Express out of its rut?
Published April 19, 2023
By Julia Waldow
After months of slumping sales and dipping stock prices, fashion retailer Express Inc. is putting its faith in a new acquisition.
Last week, the company, along with WHP Global, announced plans to buy the men’s fashion brand Bonobos from Walmart. The two companies are paying a combined $75 million for Bonobos, a significant discount from the $310 million Walmart paid in 2017.
The deal caps a frustrating few quarters for Express, which has struggled to keep up with fast-fashion rivals like H&M and Zara. Express’s fourth-quarter net sales dropped 14% year-over-year, while its operating loss for fiscal 2022 totaled $67.5 million. Express has lost more than 70% of its value over the last year, and its share price is so low that it’s at risk of being delisted from the New York Stock Exchange.
Express hopes that Bonobos, which has fared well in sales, could potentially help the company recoup some losses. In a statement, Express CEO Tim Baxter said Bonobos had “double-digit sales growth” and called the company “a compelling addition to our brand portfolio.” He added that he expects “the transaction will be accretive to operating income and free cash flow positive in fiscal 2023.”
However, experts told Modern Retail, Bonobos might not be enough to fix Express’s long list of problems, especially in the challenging area of mall retail.
Walmart absorbed Bonobos nearly six years ago, citing the company’s “amazing product and customer experience.” It completed the deal around the same time that it acquired many other e-commerce-minded companies, including Modcloth. However, many of these acquisitions fell apart over the next several years as Walmart shifted its retail strategy to focus more on its core business.
Two months before parting with Bonobos, Walmart broke ties with sporting goods retailer Moosejaw.
Bonobos was founded in 2007 and sells men’s suits, shirts and shorts, among other apparel. Overall, it is a “quality” brand, Jessica Ramírez, senior research analyst for Jane Hali & Associates, told Modern Retail. At the same time, she said, its standing might not be enough to save Express, considering Express has “been in the gutter so long.”
“Express isn’t a brand that has had its ducks in a row in many, many, many years,” Ramírez told Modern Retail. “If you go into any [Express] store, it’s completely outdated. The website is outdated. The product itself is pretty outdated… I feel like Express just needs an overhaul completely. It’s not a retailer that’s relevant in any sense.”
Neil Saunders, managing director of GlobalData Retail, agreed. “Express is one of those brands that you can just walk on by,” he told Modern Retail. “Whilst the products are reasonable quality, they’re kind of average in terms of style. They’re not cheap. And I think this is one of the problems with Express — they just don’t really have a strong enough proposition to justify their price points.”
Express has been trying to right the ship the last few years, especially in terms of connecting with younger shoppers. Much of its new strategy has focused on building a stronger social presence, testing out new partnerships, upping its omnichannel capabilities and not relying too much on promotions. “We’re constantly measuring and optimizing as we go,” Express CMO Sara Tervo told Modern Retail last August. “And I would say that we try to keep a healthy balance of top-of-funnel brand-building investments.”
Express and WHP Global became closely-linked recently. Last year, the two entered into a “strategic partnership” in which WHP Global invested $25 million in Express for a 7.4% pro-forma stake in the company. Express and WHP Group also formed a “joint venture” valued at approximately $400 million. WHP Global, whose portfolio includes Anne Klein and Joe’s Jeans, has steadily grown its influence in retail over the past few years. In March 2020, it had more than $1 billion in buying power, CNBC reported.
Saunders told Modern Retail that he thinks it’s “a little odd” that WHP Global and Express are pursuing the Bonobos deal together, considering that Express is partially under the WHP Global umbrella. “I wouldn’t really want Express to touch it, to be honest,” he said. On the WHP Global side, he said, Bonobos fits in with some of the group’s other acquisitions, particularly in menswear, and adds “another string to their bow.”
“It’s a different sort of brand in that it’s a bit more custom, a bit more bespoke,” he said. “It is, in some senses, ripe for international expansion… I think there’s work to do on the proposition. I don’t think it’s as sharp as it should be in the U.S. But I think there’s potential to grow the brand, and I think that’s how WHP will look at it.”
Express is expected to report its fiscal first-quarter results this summer. In the meantime, it “still has a lot of work to do on its own proposition,” Saunders said.
The Bonobos deal “is good for Express because it is a bit of diversification,” he added. “But, it doesn’t excuse them from doing all the things they need to do to get their core brand back up to scratch.”