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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 May 1, 2021
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: (614474-4001
(Registrant’s telephone number, including area code)


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

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueEXPRThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 66,299,774 as of May 29, 2021.
EXPRESS, INC. | Q1 2021 Form 10-Q | 1

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EXPRESS, INC.
INDEX TO FORM 10-Q



EXPRESS, INC. | Q1 2021 Form 10-Q | 2

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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, or the expected outcome or impact of pending or threatened litigation 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:

External Risks
changes in consumer spending and general economic conditions;
customer traffic at malls, shopping centers, and at our stores;
the COVID-19 pandemic is adversely affecting and may continue to 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 cost of raw materials, labor, and freight;
supply chain disruption and increased tariffs;
difficulties associated with our 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;
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.
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 long-lived assets and our lease 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.
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 30, 2021 (“Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on March 25, 2021. 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.
EXPRESS, INC. | Q1 2021 Form 10-Q | 3

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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)
 May 1, 2021January 30, 2021
ASSETS
Current Assets:
Cash and cash equivalents$84,072 $55,874 
Receivables, net11,213 14,556 
Income tax receivable98,554 111,342 
Inventories264,488 264,360 
Prepaid rent4,683 7,883 
Other19,340 20,495 
Total current assets482,350 474,510 
Right of Use Asset, Net754,324 797,785 
Property and Equipment965,854 969,402 
Less: accumulated depreciation(799,389)(789,204)
Property and equipment, net166,465 180,198 
Other Assets3,600 5,964 
TOTAL ASSETS$1,406,739 $1,458,457 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term lease liability$206,890 $203,441 
Accounts payable159,013 150,230 
Deferred revenue29,861 32,430 
Short-term debt37,772  
Accrued expenses118,906 128,952 
Total current liabilities552,442 515,053 
Long-Term Lease Liability681,010 722,949 
Long-Term Debt190,025 192,032 
Other Long-Term Liabilities18,941 18,734 
Total Liabilities1,442,418 1,448,768 
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 May 1, 2021 and January 30, 2021, respectively, and 66,258 shares and 64,971 shares outstanding at May 1, 2021 and January 30, 2021, respectively
936 936 
Additional paid-in capital218,187 222,141 
Retained earnings53,349 114,732 
Treasury stock – at average cost; 27,374 shares and 28,661 shares at May 1, 2021 and January 30, 2021, respectively
(308,151)(328,120)
Total stockholders’ (deficit)/equity(35,679)9,689 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,406,739 $1,458,457 
See Notes to Unaudited Consolidated Financial Statements.
EXPRESS, INC. | Q1 2021 Form 10-Q | 4

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EXPRESS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in Thousands, Except Per Share Amounts) (Unaudited)

Thirteen Weeks Ended
 May 1, 2021May 2, 2020
Net Sales$345,759 $210,275 
Cost of Goods Sold, Buying and Occupancy Costs266,955 256,482 
GROSS PROFIT/(LOSS)78,804 (46,207)
Operating Expenses:
Selling, general, and administrative expenses119,393 99,165 
Other operating income, net(33)(93)
TOTAL OPERATING EXPENSES119,360 99,072 
OPERATING LOSS(40,556)(145,279)
Interest Expense, Net5,252 56 
Other Expense, Net 2,733 
LOSS BEFORE INCOME TAXES(45,808)(148,068)
Income Tax (Benefit)/Expense(84)5,982 
NET LOSS$(45,724)$(154,050)
COMPREHENSIVE LOSS$(45,724)$(154,050)
EARNINGS PER SHARE:
Basic$(0.70)$(2.41)
Diluted$(0.70)$(2.41)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic65,200 64,030 
Diluted65,200 64,030 
See Notes to Unaudited Consolidated Financial Statements.
EXPRESS, INC. | Q1 2021 Form 10-Q | 5

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EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Amounts in Thousands) (Unaudited) 

Common StockTreasury Stock
 Shares OutstandingPar ValueAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossSharesAt Average CostTotal
BALANCE, January 30, 202164,971 $936 $222,141 $114,732 $ 28,661 $(328,120)$9,689 
Net loss— — — (45,724)— — — (45,724)
Exercise of stock options and restricted stock1,934 — (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)



Common StockTreasury Stock
 Shares OutstandingPar ValueAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossSharesAt Average CostTotal
BALANCE, February 1, 202063,922 $936 $215,207 $533,690 $ 29,710 $(343,531)$406,302 
Net loss— — — (154,050)— — — (154,050)
Exercise of stock options and restricted stock802 — (1,609)(7,659)— (802)9,268  
Share-based compensation— — 2,502 — — — — 2,502 
Repurchase of common stock(268)— — — — 268 (540)(540)
BALANCE, May 2, 202064,456 $936 $216,100 $371,981 $ 29,176 $(334,803)$254,214 
See Notes to Unaudited Consolidated Financial Statements.

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EXPRESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands) (Unaudited)
Thirteen Weeks Ended
 May 1, 2021May 2, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(45,724)$(154,050)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization18,497 19,332 
Impairment of property, equipment and lease assets 14,678 
Equity method investment impairment 2,733 
Share-based compensation2,523 2,502 
Deferred taxes 64,424 
Landlord allowance amortization(77)(104)
Changes in operating assets and liabilities:
Receivables, net3,343 (2,073)
Income tax receivable12,788 (10,228)
Inventories(128)(48,485)
Accounts payable, deferred revenue, and accrued expenses(3,426)2,117 
Other assets and liabilities10,624 (22,084)
NET CASH USED IN OPERATING ACTIVITIES
(1,580)(131,238)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(3,562)(4,176)
NET CASH USED IN INVESTING ACTIVITIES
(3,562)(4,176)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under the revolving credit facility38,000 165,000 
Repayment of borrowings under the revolving credit facility(39,050) 
Proceeds from borrowings under the term loan facility50,000  
Repayment of borrowings under the term loan facility(12,404) 
Repayments of financing arrangements(576) 
Costs incurred in connection with debt arrangements(463) 
Repurchase of common stock for tax withholding obligations(2,167)(540)
NET CASH PROVIDED BY FINANCING ACTIVITIES
33,340 164,460 
NET INCREASE IN CASH AND CASH EQUIVALENTS28,198 29,046 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD55,874 207,139 
CASH AND CASH EQUIVALENTS, END OF PERIOD$84,072 $236,185 
See Notes to Unaudited Consolidated Financial Statements.
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EXPRESS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Page

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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, versatile, dual gender apparel and accessories brand that helps people get dressed for every day and any occasion. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has been a brand of the now, offering some of the most important and enduring fashion trends. Express aims to Create Confidence & Inspire Self-Expression through a design & merchandising view that brings forward The Best of Now for Real Life Versatility. The Company operates 563 retail and factory outlet stores in the United States and Puerto Rico, as well as an online destination. As of May 1, 2021, Express operated 357 primarily mall-based retail stores in the United States and Puerto Rico as well as 206 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 YearYear EndedNumber of Weeks
2021January 29, 202252
2020January 30, 202152

All references herein to “the first quarter of 2021” and “the first quarter of 2020” represent the thirteen weeks ended May 1, 2021 and May 2, 2020, 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 2021. Therefore, these statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended January 30, 2021, included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 25, 2021.
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 and 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 brick-and-mortar retail and outlet stores and eCommerce operations.
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
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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 has seen significant recovery in sales and profitability in the first quarter with continued improvement into the second quarter and continues to be in compliance with the financial covenants under its Revolving Credit Facility and Term Loan Facility. However, due to the uncertainty related to the speed of recovery from the COVID-19 pandemic and its potential impacts, the Company could experience material changes to forecasted revenues and cash flows and could experience difficulty remaining in compliance with financial covenants. 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.

Based upon the sales and profitability recovery seen in the first quarter and continued improvement into the second quarter, as well as the availability of additional liquidity under the Revolving Credit Facility, and expense control and other measures taken to date, the Company's liquidity position has improved significantly. The Company plans to continue its cash conservation and cost reduction measures taken to date, including rent concessions agreed to, and is forecasting continued improvement in both sales and profitability in the remainder of 2021. The Company believes these plans and forecasts are probable of being successfully implemented, which will result in adequate cash flows to support its ongoing operations and to meet its covenant requirements under the Revolving Credit Facility and Term Loan Facility for one year following the date these financial statements are issued.

NOTE 2 | REVENUE RECOGNITION
The following is information regarding the Company’s major product categories and sales channels:
Thirteen Weeks Ended
 May 1, 2021May 2, 2020
(in thousands)
Apparel$304,272 $179,583 
Accessories and other32,223 21,380 
Other revenue9,264 9,312 
Total net sales$345,759 $210,275 
Thirteen Weeks Ended
 May 1, 2021May 2, 2020
(in thousands)
Retail$246,231 $159,537 
Outlet90,264 41,426 
Other revenue9,264 9,312 
Total net sales$345,759 $210,275 
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, revenue from gift card breakage and revenue from franchise agreements.

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.
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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 that are redeemed or expire. To calculate this deferral, the Company makes assumptions related to card holder redemption rates based on historical experience. The loyalty liability is included in deferred revenue on the unaudited Consolidated Balance Sheets.

Thirteen Weeks Ended
 May 1, 2021May 2, 2020
(in thousands)
Beginning balance loyalty deferred revenue$8,951 $14,063 
Net revenue recognized(678)(4,478)
Ending balance loyalty deferred revenue$8,273 $9,585 
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 $10.3 million and $6.4 million as of May 1, 2021 and January 30, 2021, 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 $21.6 million and $23.5 million, as of May 1, 2021 and January 30, 2021, respectively, and is included in deferred revenue on the unaudited Consolidated Balance Sheets. 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.
Thirteen Weeks Ended
 May 1, 2021May 2, 2020
(in thousands)
Beginning gift card liability$23,478 $24,142 
Issuances4,078 4,040 
Redemptions(5,225)(5,418)
Gift card breakage(744)(1,036)
Ending gift card liability$21,587 $21,728 
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
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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. 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 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 2018. As of May 1, 2021, the deferred revenue balance of $10.6 million will be recognized over the remaining term of the amended Card Agreement within the other revenue component of net sales.
Thirteen Weeks Ended
 May 1, 2021May 2, 2020
(in thousands)
Beginning balance refundable payment liability$11,272 $14,150 
Recognized in revenue(719)(719)
Ending balance refundable payment liability $10,553 $13,431 

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
May 1, 2021May 2, 2020
(in thousands)
Weighted-average shares - basic65,200 64,030 
Dilutive effect of stock options and restricted stock units  
Weighted-average shares - diluted65,200 64,030 
Equity awards representing 9.9 million and 9.6 million shares of common stock were excluded from the computation of diluted earnings per share for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively, as the inclusion of these awards would have been anti-dilutive.
Additionally, for the thirteen weeks ended May 1, 2021, approximately 1.5 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 May 1, 2021.

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.
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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.
Financial Assets
The following table presents the Company’s financial assets, recorded in cash and cash equivalents on the unaudited Consolidated Balance Sheets, measured at fair value on a recurring basis as of May 1, 2021 and January 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall.
May 1, 2021
Level 1Level 2Level 3
(in thousands)
Money market funds$54,242 $ $ 
January 30, 2021
Level 1Level 2Level 3
(in thousands)
Money market funds$35,964 $ $ 
The money market funds are valued using quoted market prices in active markets.
The carrying amounts reflected on the unaudited Consolidated Balance Sheets for the remaining cash and cash equivalents, receivables, prepaid expenses, and payables as of May 1, 2021 and January 30, 2021 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 and cost of goods sold (exclusive of buying and occupancy costs), 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 assumptions used in the undiscounted future store cash flow models include sales growth rate and gross margin, exclusive of buying and occupancy costs.

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.

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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.

During the thirteen weeks ended May 1, 2021 and May 2, 2020, the Company recognized impairment charges as follows:
Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands)
Right of use asset impairment$ $9,688 
Property and equipment asset impairment 4,990 
Total asset impairment$ $14,678 
Impairment charges are recorded in cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income.

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 May 1, 2021.

On March 27, 2020, the Coronavirus Aid Relief and Economic Security (“CARES”) Act was enacted into law. The CARES Act provides several provisions that impact the Company including the establishment of a five-year carryback of net operating losses originating in the tax years 2018, 2019, and 2020, temporarily suspending the 80% limitation on the use of net operating losses, relaxing limitation rules on business interest deductions, and retroactively clarifying that businesses may immediately write-off certain qualified leasehold improvement property dating back to January 1, 2018.

The Company’s effective tax rate was 0.2% and (4.0)% for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively. The effective tax rate for the thirteen weeks ended May 1, 2021 reflects the impact of recording an additional valuation allowance of $10.0 million against current year losses. The effective tax rate for the thirteen weeks ended May 2, 2020 reflects the impact of establishing a valuation allowance against the Company's net deferred tax assets, which includes $54.3 million of discrete tax expense from a valuation allowance on previously recognized deferred tax assets and $6.8 million valuation allowance on 2020 U.S. state taxes and other tax credits. This tax expense was partially offset by a $19.5 million tax benefit related to the CARES Act, which includes the benefit for the portion of the estimated 2019 and 2020 U.S. Federal net operating losses that are able to be carried back to offset taxable income in the five-year carryback period.

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
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(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.

As a result of the impact of the COVID-19 pandemic, the Company did not initially make its store rent payments for certain stores in the first and second quarter of 2020. The Company established an accrual for rent payments that were not made and has continued to recognize accrued rent expense. As a result of negotiations with certain landlords, the Company has since made rent payments for certain stores and some landlords have agreed to abate certain rent payments. The appropriate adjustments were made to accrued rent. Accrued rent is within accrued expenses on the unaudited Consolidated Balance Sheets. Accrued minimum rent as of May 1, 2021 and January 30, 2021, was $31.8 million and $56.3 million, respectively.

Supplemental cash flow information related to leases is as follows:
Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$75,456 $41,467 
Right-of-use assets obtained in exchange for operating lease liabilities$27,773 $15,243 

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NOTE 7 | DEBT
The following table summarizes the Company's outstanding debt as of the dates indicated:
May 1, 2021January 30, 2021
(in thousands)
Term Loan Facility$127,596 $90,000 
Revolving Facility105,000 106,050 
Total outstanding borrowings232,596 196,050 
Less: unamortized debt issuance costs(4,799)(4,018)
Total debt, net227,797 192,032 
Less: current portion of long-term debt37,772  
Long-term debt, net$190,025 $192,032 
Outstanding letters of credit$36,099 $36,099 
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 $12.4 million with proceeds from 2020 CARES Act tax refunds, as required under the Term Loan Facility. As of May 1, 2021, the Company had $127.6 million in borrowings outstanding under the Term Loan Facility. The fair value of the Term Loan Facility at May 1, 2021 was $119.1 million. Subsequent to May, 1, 2021 the Company paid an additional $30.9 million payment on the DDTL with proceeds from CARES Act refunds received subsequent to quarter end.

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 fiscal quarter beginning on or about January 30, 2022. 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 will bear interest at a variable rate indexed to LIBOR plus a pricing margin ranging from 8.00% to 8.25% per annum, as determined in accordance with the provisions of the Term Loan Facility based on EBITDA, 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 May 1, 2021 the interest rate on the outstanding FILO Term Loan was 9.0%.

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.
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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 $4.8 million as of May 1, 2021. 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 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
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in certain instances to a prepayment fee. As of May 1, 2021, the interest rate on the outstanding borrowings of $105.0 million at LIBOR was approximately 2.8%.

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 May 1, 2021, the Company had $105.0 million in borrowings outstanding under the Revolving Credit Facility and approximately $70.8 million remained available for borrowing under the Revolving Credit Facility after giving effect to outstanding letters of credit in the amount of $36.1 million and subject to certain borrowing base limitations as further discussed above. The fair value of the Revolving Credit Facility at May 1, 2021 was $105.1 million. Subsequent to May, 1, 2021 the Company made a $30.0 million payment on the Revolving Credit Facility.

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 May 1, 2021 and January 30, 2021, 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 May 1, 2021 and January 30, 2021, outstanding stand-by LCs totaled $36.1 million, respectively.

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NOTE 8 | SHARE-BASED COMPENSATION
The Company records the fair value of share-based payments to employees in the unaudited Consolidated Statements of Income and Comprehensive Income within selling, general, and administrative expenses 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 Compensation Plans
In 2010, the Board approved, and the Company implemented, the Express, Inc. 2010 Incentive Compensation Plan (as amended, the "2010 Plan"). The 2010 Plan authorized the Compensation Committee (the "Committee") of the Board and its designees to offer eligible employees and directors cash and stock-based incentives as deemed appropriate in order to attract, retain, and reward such individuals.

On April 30, 2018, upon the recommendation of the Committee, the Board unanimously approved and adopted, subject to stockholder approval, the Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”) to replace the 2010 Plan. On June 13, 2018, stockholders of the Company approved the 2018 Plan and all grants made subsequent to that approval will be 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 addition to increasing the number of shares, the Company also made several enhancements to the 2010 Plan to reflect best practices in corporate governance. The 2018 Plan incorporates these concepts and also includes several other enhancements which were practices the Company already followed but were not explicitly stated in the 2010 Plan. None of these changes will have a significant impact on the accounting for awards made under the 2018 Plan.

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.

The following summarizes long-term incentive compensation expense:
Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands)
Restricted stock units$2,015 $2,184 
Stock options300 318 
Performance-based restricted stock units208  
Total share-based compensation$2,523 $2,502 
Cash-settled awards1,542 (371)
Total long-term incentive compensation$4,065 $2,131 
The stock compensation related income tax benefit, excluding consideration of valuation allowances, recognized by the Company during the thirteen weeks ended May 1, 2021 and May 2, 2020 was $2.3 million and $0.5 million, respectively. The valuation allowances associated with these tax benefits were $2.3 million and $0.0 million for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

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Equity Awards
Restricted Stock Units
During the thirteen weeks ended May 1, 2021, the Company granted restricted stock units (“RSUs”) under the 2018 Plan. The fair value of RSUs is 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 2021 vest ratably over 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 thirteen weeks ended May 1, 2021 was as follows:

Number of
Shares
Grant Date
Weighted Average
Fair Value Per Share
(in thousands, except per share amounts)
Unvested - January 30, 2021
7,090 $2.63 
Granted9 $2.80 
Vested(1,933)$2.97 
Forfeited(160)$3.05 
Unvested - May 1, 2021
5,006 $2.48 
The total fair value of RSUs that vested during the thirteen weeks ended May 1, 2021 and May 2, 2020 was $5.7 million and $5.6 million, respectively. As of May 1, 2021, there was approximately $9.2 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.4 years.

Stock Options
The Company’s activity with respect to stock options during the thirteen weeks ended May 1, 2021 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 30, 2021
3,324 $6.65 
Granted $ 
Exercised $ 
Forfeited or expired(134)$18.60 
Outstanding - May 1, 2021
3,190 $6.15 7.0$1,044 
Expected to vest at May 1, 2021
2,025 $2.61 8.2$909 
Exercisable at May 1, 2021
1,145 $12.46 4.9$126 
As of May 1, 2021, there was approximately $0.9 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of approximately 1.3 years.
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Performance-Based Restricted Stock Units
During the first quarter of 2021, the Company granted 1.5 million 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 beginning on the first day of the Company's 2021 fiscal year and ending on the last day of the Company's 2023 fiscal year. These awards are valued based on the fair value of the award at the grant date and do not vary based on changes in the Company's stock price or performance. The performance condition of the award is adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA"). The number of shares that will are expected to vest will change based on estimates of the Company’s Adjusted EBITDA performance in relation to the pre-established targets. As of May 1, 2021, $6.1 million of total unrecognized compensation cost is expected to be recognized on performance-based restricted stock units over a weighted-average period of 3.0 years.

Cash-Settled Awards
Time-Based Cash-Settled Awards
During the thirteen weeks ended May 1, 2021 and May 2, 2020, 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. As of May 1, 2021, $0.5 million is included in accrued expenses and $0.8 million is included in other long-term liabilities on the unaudited Consolidated Balance Sheets. The expense related to these awards will be accrued using a straight-line method over this vesting period. As of May 1, 2021, $12.5 million of total unrecognized compensation cost is expected to be recognized on cash-settled awards over a weighted-average period of 1.9 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 determined that it could not set meaningful multi-year performance targets given the uncertain economic conditions.

Accordingly, the Committee delayed setting performance targets for the 2020 long-term performance-based awards until February 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. 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 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 May 1, 2021, $6.6 million of total unrecognized compensation cost is expected to be recognized on performance-based cash-settled awards.

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.

In August 2018, former associate Ms. Leticia Rosete filed suit in Los Angeles County Superior Court for the State of California naming certain subsidiaries of the Company as defendants in a representative action alleging violations of
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California state wage and hour statutes and other labor standard violations (including claims for discrimination, harassment, retaliation, etc.). 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 wages and hour statutes and other labor standard violations. The lawsuit seeks unspecified monetary damages and attorneys' fees.

The Company is vigorously defending itself against these claims and, as of May 1, 2021, has established an estimated liability based on its best estimate of the outcome of the 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 "2017 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 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. During the thirteen weeks ended May 1, 2021 and May 2, 2020, the Company did not repurchase shares of its common stock. As of May 1, 2021, the Company had approximately $34.2 million remaining under this authorization.

Stockholder Rights Agreement
On April 20, 2020, the Board adopted a Stockholder Rights Agreement (the “Rights Agreement”). Under the Rights Agreement, one preferred share purchase right was distributed for each share of common stock, par value $0.01, outstanding at the close of business on April 30, 2020 and one right will be issued for each new share of common stock issued thereafter. The rights will initially trade with common stock and will generally become exercisable only if any person (or any persons acting as a group) acquires 10% (or 20% in the case of certain passive investors) or more of the Company’s outstanding common stock (the “triggering percentage”). In the event the rights become exercisable, each holder of a right, other than triggering person, will be entitled to purchase additional shares of common stock at a 50% discount or the Company may exchange each right held by such holders for one share of common stock. Existing 10% or greater stockholders are grandfathered to the extent of their April 21, 2020 ownership levels. The Rights Agreement expired on April 19, 2021.

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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 30, 2021 ("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 first quarter of 2021” and “the first quarter of 2020” represent the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.

Our management's discussion and analysis of financial condition and results of operations is presented in the following sections:
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OVERVIEW
Express is a modern, versatile, dual gender apparel and accessories brand that helps people get dressed for every day and any occasion. Launched in 1980 with the idea that style, quality and value should all be found in one place, Express has always been a brand of the now, offering some of the most important and enduring fashion trends. Express aims to Create Confidence and Inspire Self-Expression through a design and merchandising view that brings forward The Best of Now for Real Life Versatility. The Company operates 563 retail and factory outlet stores in the United States and Puerto Rico, as well as an online destination.

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COVID-19 PANDEMIC
Our business operations and financial performance continue to be materially impacted by the COVID-19 pandemic. The COVID-19 pandemic has significantly impacted global economies, resulting in travel restrictions, business slowdowns or shutdowns and changes in consumer behavior. In March 2020, following the World Health Organization’s declaration of COVID-19 as a global pandemic, we temporarily closed all of our retail and factory outlet stores and offices, and a result all store associates and a number of home office employees were furloughed. As mandated shutdowns and stay-at-home orders went into effect across the country, we experienced an immediate reduction in sales levels compared to the prior year. We continued to be materially impacted by COVID-19 throughout 2020, even after all of our stores re-opened, as customer traffic continued to be depressed, especially in our retail stores, and two of our key categories, wear to work and occasion wear, saw significant declines in demand.

During the first quarter of 2021, we saw encouraging trends as a result of the vaccination rollout and the lifting of COVID-related restrictions, especially in areas where COVID-19 guidelines were less restrictive. In markets where mask mandates were lifted our comparable sales were better than in the more restrictive markets and we expect this performance to materialize more broadly as states continue to lift mandates and restrictions.
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The extent of the pandemic’s impact on our business and financial results will depend, however, on future developments, including the remaining duration and severity of the pandemic (including any variants of the COVID-19 virus), the distribution, rate of public acceptance and efficacy of vaccines and other treatments, related impacts on consumer confidence and spending, and the effect of any additional governmental regulations imposed, all of which are highly uncertain. Given the dynamic nature of the COVID-19 pandemic, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our future financial condition, results of operations or cash flows. For additional information regarding risks related to the COVID-19 pandemic, see “Item 1A. Risk Factors: External Risk Factors” in our Annual Report.

FINANCIAL DETAILS FOR THE FIRST QUARTER 2021
Net sales increased 64% to $345.8 million
Comparable sales increased 5%
Comparable retail sales (includes both retail stores and eCommerce sales) increased 11%
Comparable outlet sales decreased 19%
Gross margin percentage increased 4,480 basis points to 22.8%
Operating loss decreased $104.7 million to a loss of $40.6 million
Net loss decreased $108.3 million to a loss of $45.7 million
Diluted earnings per share increased $1.71 to a loss of $0.70

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The following charts show key performance metrics for the first quarter of 2021 compared to the first quarter of 2020.
    
    

OUTLOOK & FIRST QUARTER UPDATE
Our top and bottom line performance in the first quarter of 2021 exceeded our expectations and we significantly improved our operating cash flow by $129.7 million compared to the first quarter of 2020. These results were driven by strong customer response to our product and brand strategies and we continued to make significant progress on our transformation to become a modern, relevant, and compelling multichannel fashion brand in the first quarter. In addition, we have meaningfully advanced the EXPRESSway Forward strategy which positions us well for customer demand as restrictions imposed in response to the COVID-19 pandemic are lifted and for the post-pandemic world. The following defines each area and provides an update on each priority:
PRODUCTBRANDCUSTOMEREXECUTION
Product
We’ve established new core programs such as denim and Express Essentials. We have tested and built inventory behind what worked and the positive customer response to our new product validates that our Express Edit Design philosophy is resonating with customers. As we increase the percent of newness with a strong emphasis on versatility and comfort because we know these attributes will still be important even when demand for dressier product returns we expect this response to continue.
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Last year we made the decision to aggressively pursue market share in denim and saw acceleration in the first quarter of 2021. This was driven by the introduction of new leg shapes, new fits, and our Denim x You customer co-creation capsule. This newness is not only driving sales; it is also attracting new customers.

Our Express Essentials program is the second component of what we refer to as our "new core," and we have also exceeded our expectations in this area. The performance was driven in women’s styles by the launch of body contour, compression and high compression programs. In men’s styles, the continued success of our polo business, expansion of our X logo icon in pique polos and tees, plus enhanced fabrics and continued attention to the fashion details our customers want, contributed to the success.

As the more flexible and versatile elements of our business are performing well the wear to work and occasion-based categories are starting to show early signs of recovery, certainly boosted by the return to offices and the rise of in-person gatherings and social occasions. As more states lift their restrictions, we would expect this trend to continue.

Looking ahead to the second quarter of 2021, our focus for summer will be on versatile dresses and shirts, bright colors in tees, and a reinvention of our shorts offering, with new fabrics and designs, including denim shorts in white and light colors and further enhancements in our denim and Express Essentials categories.

Brand
Restoring the relevance of the Express brand is a top priority and brand tracking measures, social media engagement, and customer feedback indicate that we've made good progress in a relatively short period of time.

Our brand purpose to create confidence and inspire self-expression is now coming through in all of our marketing in the way we engage customers and in our marketing tactics across channels. For example, our Dream Big Project, which we kicked off at the end of 2020, supports individuals and organizations that have missions that align with our brand purpose. In addition to providing financial support, we also leverage our social platforms to drive awareness and visibility for the organizations and individuals we support through this program. In the first quarter of 2021, our corporate, associate, and customer contributions supported the NAACP Empowerment Program.

Customer
Our Express Insider Loyalty program relaunch in the first quarter of 2021 is driving positive early results with better engagement and increased customer acquisition and reactivations and a decrease in the number of lapsing customers.

During the first quarter of 2021, we also initiated a customer reactivation strategy with direct mail messaging, a strategic customer targeting program and paid media. The early results are encouraging with our total reactivated customers increasing by more than we anticipated.

Over the last year, we have completely reimagined our marketing approach and reallocated our investment across the marketing mix. We have increased engagement with our customers in new and creative ways and with more relevant, authentic content. Through a dialogue to better understand the wardrobe needs and style preferences of our top loyalty program members, we developed a customer co-created denim capsule called Denim X You that performed well during the first quarter of 2021.

Execution
Execution is both a through line across Product, Brand, and Customer and the evolution of our operating model as a result of more streamlined, and disciplined systems and processes.

Conversion is a key component of execution and we have successfully driven increases across all of our channels. In stores, we believe conversion is driven by a new customer experience model, new associate education programs, and a continued focus on loyalty signups.

Another key component of execution is inventory management, and we have improved our inventory level and composition versus the fourth quarter of 2020, which positions us well to flow more new product as we head into the second quarter of 2021 and the back half of the year. In addition, our positioning in historically strong categories like
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men's suits and women's dresses set us up for continued improvement especially with the expectation of increases in gatherings and occasions as governmental restrictions in response to the pandemic are lifted.

Finally, as previously discussed, our focus has now shifted from fleet rationalization to fleet optimization. Fleet rationalization speaks to the number of stores, fleet optimization speaks to such characteristics as store location, size, concept, format, and perhaps most importantly the role physical stores will play in customers’ post-pandemic lives. Our mall-based stores can and will be more productive, and we will also expand beyond the mall. As examples of our store optimization activities, we opened a reduced square footage concept at the King of Prussia mall in King of Prussia, Pennsylvania, and we will open another reduced square footage store at the NorthPark mall in Dallas, Texas in the second quarter of 2021. We continue to view our Express Edit concept stores as valuable test-and-learn scenarios, and we plan to add eight additional Express Edit concept stores this year.

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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/(loss)/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, revenue earned from our private label credit card agreement, and revenue earned from our franchise agreements.
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). In 2020, this split was approximately 38% in the Spring and 62% in the Fall as a result of the COVID-19 pandemic and the related store closures in the Spring season.
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 first quarter of 2021 was calculated using the thirteen weeks ended May 1, 2021 as compared to the thirteen weeks ended May 2, 2020.

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 units sold as compared to the dollar amount of sales.
Discussion
We believe this metric is useful as it removes the impact of promotions and 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/(Loss)/Gross Margin
Description
Gross profit/(loss) is net sales minus cost of goods sold, buying and occupancy costs. Gross margin measures gross profit/(loss) as a percentage of net sales.
Discussion
Gross profit/(loss)/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.
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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 First Quarter of 2021 compared to the First Quarter of 2020
Net Sales
 Thirteen Weeks Ended
 May 1, 2021May 2, 2020
Net sales (in thousands)$345,759 $210,275 
Comparable retail sales 11 %(26)%
Comparable outlet sales(19)%(13)%
Total comparable sales percentage change5 %(24)%
Gross square footage at end of period (in thousands)4,760 5,045 
Number of:
Stores open at beginning of period570 595 
New retail stores— — 
New outlet stores— — 
New Express Edit concept stores— 
New UpWest stores— 
Retail stores converted to outlets— — 
Closed stores(9)(1)
Stores open at end of period563 594 
Net sales in the first quarter of 2021 increased approximately $135.5 million compared to the first quarter of 2020. The sales increase is primarily attributed to the temporary closure of all Express stores from mid-March through the remainder of the first quarter of 2020 due to the COVID-19 pandemic. Our retail comparable sales increases are lower than our retail sales increases during the first quarter of 2021 as the comparable sales do not include the impact of stores closed as the result of the pandemic.
Gross Profit/(Loss)
The following table shows cost of goods sold, buying and occupancy costs, gross profit/(loss) in dollars, and gross margin percentage for the stated periods:
 Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands, except percentages)
Cost of goods sold, buying and occupancy costs$266,955 $256,482 
Gross profit/(loss)$78,804 $(46,207)
Gross margin percentage22.8 %(22.0)%
The 4,480 basis point increase in gross margin percentage, or gross profit as a percentage of net sales, in the first quarter of 2021 compared to the first quarter of 2020 was comprised of an increase in merchandise margin of 1,100 basis points and a decrease in buying and occupancy costs as a percentage of net sales of 3,380 basis points. The increase in merchandise margin was primarily the result of increased sales. The improvement in buying and occupancy costs was driven by reductions in our expense structure, primarily related to rent savings achieved through landlord negotiation, fleet optimization, and the workforce reduction we announced in November 2020. In addition, we had a $14.7 million impairment in the first quarter of 2020.
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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
May 1, 2021May 2, 2020
(in thousands, except percentages)
Selling, general, and administrative expenses$119,393 $99,165 
Selling, general, and administrative expenses, as a percentage of net sales34.5 %47.2 %
The $20.2 million increase in selling, general, and administrative expenses in the first quarter of 2021 as compared to the first quarter of 2020 was primarily the result of our stores being fully open in the first quarter of 2021 and the related increases in store payroll related expenses, while our stores were temporarily closed beginning in mid-March through the remainder of the first quarter of 2020 due to the COVID-19 pandemic.
Interest Expense, Net
The following table shows interest expense in dollars for the stated periods:
 Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands)
Interest expense/(income), net$5,252 $56 
The $5.2 million increase in interest expense in the first quarter of 2021 as compared to the first quarter of 2020 was the result of borrowing under our Revolving Credit Facility and Term Loan Facility, which bear interest at variable rates. Refer to Note 7 in our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for further discussion regarding our borrowings during the thirteen weeks ended May 1, 2021.
Income Tax (Benefit)/Expense
The following table shows income tax (benefit)/expense in dollars for the stated periods:
 Thirteen Weeks Ended
 May 1, 2021May 2, 2020
 (in thousands)
Income tax (benefit)/expense$(84)$5,982 
The effective tax rate was 0.2% and (4.0)% for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively. The effective tax rate for the thirteen weeks ended May 1, 2021 reflects the impact of recording an additional valuation allowance of $10.0 million against current year losses. The effective tax rate for the thirteen weeks ended May 2, 2020 reflects the impact of establishing a valuation allowance against the net deferred tax assets, which includes $54.3 million of discrete tax expense from a valuation allowance on previously recognized deferred tax assets and $6.8 million valuation allowance on 2020 U.S. state taxes and other tax credits. This tax expense was partially offset by a $19.5 million tax benefit related to the CARES Act, which includes the benefit for the portion of the estimated 2019 and 2020 U.S. Federal net operating losses that are able to be carried back to offset taxable income in the five-year carryback period.
Operating Loss, Net Loss, Diluted Earnings Per Share and EBITDA
Included in the table below is operating loss, net loss, diluted earnings per share and earnings before interest, taxes, depreciation, and amortization ("EBITDA") for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively. We supplement the reporting of our financial information determined under United States generally accepted accounting principles ("GAAP") with certain non-GAAP financial measures: adjusted operating loss, adjusted net loss, adjusted diluted earnings per share and EBITDA. The following table presents these financial
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measures, each a non-GAAP financial measure, for the stated periods which eliminate certain non-core operating costs:
Thirteen Weeks Ended
May 1, 2021May 2, 2020
(in thousands, except per share amounts)
Operating loss$(40,556)$(145,279)
Adjusted operating loss (Non-GAAP)$(40,556)
*
$(130,601)
Net loss$(45,724)$(154,050)
Adjusted net loss (Non-GAAP)$(35,747)$(99,424)
Diluted earnings per share$(0.70)$(2.41)
Adjusted diluted earnings per share (Non-GAAP)$(0.55)$(1.55)
EBITDA (Non-GAAP)$(23,802)$(128,740)
* No adjustments were made to operating loss for the thirteen weeks ended May 1, 2021.
How These Measures Are Useful
We believe that these non-GAAP measures provide additional useful information to assist stockholders in understanding our financial results and assessing our prospects for future performance. Management believes adjusted operating loss, adjusted net loss, adjusted diluted earnings per share and EBITDA are important indicators of our business performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operating results, and may provide a better baseline for analyzing trends in the business. In addition, adjusted diluted earnings per share and EBITDA are used as a performance measures in the Company's long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned and EBITDA is also a metric used in our short-term cash incentive compensation plan.

Limitations of the Usefulness of These Measures
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported net loss, operating loss, or diluted earnings per share. These non-GAAP financial measures reflect an additional way of viewing our operations that, when viewed with the GAAP results and the below reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of our business. Management strongly encourages investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The following table reconciles the non-GAAP financial measures (adjusted operating loss, adjusted net loss, and adjusted diluted earnings per share) with the most directly comparable GAAP financial measures (operating loss, net loss, and diluted earnings per share, respectively) for the thirteen weeks ended May 1, 2021 and May 2, 2020, respectively.
Thirteen Weeks Ended May 1, 2021
(in thousands, except per share amounts)Operating LossIncome Tax ImpactNet LossDiluted Earnings per ShareWeighted Average Diluted Shares Outstanding
Reported GAAP Measure$(40,556)$(45,724)$(0.70)65,200 
Valuation allowance on deferred taxes (a)
— 9,977 9,977 0.15 
Adjusted Non-GAAP Measure$(40,556)$(35,747)$(0.55)
a.Valuation allowance provided against 2021 losses.

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Thirteen Weeks Ended May 2, 2020
(in thousands, except per share amounts)Operating LossIncome Tax ImpactNet LossDiluted Earnings per ShareWeighted Average Diluted Shares Outstanding
Reported GAAP Measure$(145,279)$(154,050)$(2.41)64,030 
Impairment of property, equipment and lease assets14,678 (3,856)
(a)
10,822 0.17 
Equity method investment impairment (b)
— (642)2,091 0.03 
Valuation allowance on deferred taxes (c)
61,075 61,075 0.95 
Tax impact of the CARES Act (d)
(19,473)(19,473)(0.30)
Tax impact of executive departures (e)
— 111 111 — 
Adjusted Non-GAAP Measure$(130,601)$(99,424)$(1.55)