Express, Inc.
Shareholder Annual Meeting in a DEF 14A on 04/30/2021   Download
SEC Document
SEC Filing
DEF 14A 1 expr-def14a_20210609.htm DEF 14A expr-def14a_20210609.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

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Definitive Proxy Statement

 

 

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Soliciting Material Pursuant to §240.14a-12

Express, Inc.

(Name of Registrant as Specified In Its Charter)

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Notice of

2021

Annual Meeting

of Shareholders

 

 

 

 


 

 

 

Dear Fellow Shareholders,

 

2020 was an unusual and difficult year due to the enormous impact of COVID-19 on the fashion retail industry.

When the onset of the pandemic forced the closure of our stores and offices, the EXPRESSway Forward strategy had just launched, and the work to restore the relevance of the brand and the health of the business had just begun.

 

Our CEO, Tim Baxter, had assembled a leadership team comprised of skilled and seasoned executives, each one with strong subject matter expertise and a proven track record for delivering results. Throughout 2020, these leaders worked together to implement significant changes within each one of the four foundational pillars of the EXPRESSway Forward strategy and kept a sharp focus on the Company’s most important initiatives, while also taking decisive and appropriate actions to mitigate risk and protect liquidity.

 

While the Company’s performance last year is certainly not indicative of its underlying strength or future potential, the Board is confident that the transformational work already underway positions Express to achieve long term, profitable growth and deliver shareholder value in 2021 and beyond.

 

Earlier this year, we attracted a number of new investors to Express. We appreciate your belief in our transformation, support for our business and interest in our Company, and we remain committed to creating and delivering long term value for all of our shareholders.

 

We hope you will join us at our annual meeting to be held virtually on Wednesday, June 9th, 2021, at 8:30 am EDT, and we ask for your voting support at the meeting for the items detailed in this proxy statement.

 

Sincerely,

 

Mylle H. Mangum, Board Chair

April 30, 2021


 

 


 

 

Notice of

2021 Annual Meeting of Shareholders

 

Time and Date

8:30 a.m., Eastern Daylight Time, on Wednesday, June 9, 2021. We encourage you to access the meeting prior to the start time.

 

 

Place

The Annual Meeting will be held virtually via live webcast at www.virtualshareholdermeeting.com/EXPR2021

 

 

Items of Business

1.       Election of Class II directors;

 

2.       Advisory vote to approve executive compensation (say-on-pay);

 

3.       Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021; and

 

4.      Such other business as may properly come before the meeting.

 

 

 

Record Date

Holders of record of the Company’s common stock at the close of business on April 19, 2021 are entitled to notice of and to vote at the 2021 Annual Meeting of Shareholders or any adjournment or postponement thereof.

 

This proxy statement is issued in connection with the solicitation of proxies by the Board of Directors of Express, Inc. for use at the 2021 Annual Meeting of Shareholders, which is to be held virtually via live webcast, and at any adjournment or postponement thereof. On or about April 30, 2021, we will begin distributing print or electronic materials regarding the virtual annual meeting to each shareholder entitled to vote at the virtual meeting. Shares represented by a properly executed proxy will be voted in accordance with instructions provided by the shareholder.

 

 

 

 

How to Vote

 

 

 

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to participate in the 2021 Annual Meeting of Shareholders, we urge you to vote your shares now in order to ensure the presence of a quorum.

 

 

 

Shareholders of record may vote:

 

 

 

 

By Internet: go to
www.proxyvote.com;

 

By telephone: call toll free
(800) 690-6903; or

 

By mail: if you received

paper copies in the mail of

the proxy materials and

proxy card, mark, sign,

date, and promptly mail the enclosed proxy card in the postage-paid envelope.

 

 

 

Beneficial Shareholders. If you hold your shares through a broker, bank, or other nominee, follow the voting instructions you receive from your broker, bank, or other nominee, as applicable, to vote your shares.

 

 

By Order of the Board of Directors,

 

 

Raanan Lefkovitz

Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on June 9, 2021: this Notice of Annual Meeting and Proxy Statement and our 2020 Annual Report are available in the investor relations section of our website at www.express.com/investor. Additionally, and in accordance with the Securities and Exchange Commission (“SEC”) rules, you may access our proxy materials at www.proxyvote.com, a site that does not have “cookies” that identify visitors to the site.


 


 

Table of Contents

 

 

 

PROXY STATEMENT SUMMARY INFORMATION

1

 

 

ELECTION OF CLASS II DIRECTORS (PROPOSAL NO. 1)

7

 

 

CORPORATE GOVERNANCE

13

 

 

Board Responsibilities

13

 

 

Board Composition

13

 

 

Board Competencies and Experience

14

 

 

Board Demographics and Refreshment

15

 

 

Identifying and Evaluating Director Candidates

16

 

 

Board Leadership & Structure

16

 

 

Leadership Structure

16

 

 

Board Committees

17

 

 

Board Practices

20

 

 

Strategy Oversight

20

 

 

Risk Oversight

20

 

 

Management Oversight and Succession Planning

20

 

 

Compliance Oversight

21

 

 

Corporate and Social Responsibility

21

 

 

Sustainability

22

 

 

Shareholder Engagement

23

 

 

Shareholder Rights Plan

23

 

 

Communications with the Board

23

 

 

Board Meetings

24

 

 

Corporate Governance Principles

24

 

 

Director Election Standards

24

 

 

Board Evaluations

24

 

 

Outside Board Memberships

24

 

 

Code of Conduct

24

 

 

Related Person Transactions

25

 

 

Director Compensation

25

 

 

EXECUTIVE OFFICERS

27

 

Compensation Discussion and Analysis

28

 

 

Executive Summary

28

 

 

What We Pay and Why: Elements  of Compensation

34

 

 

Executive Compensation Practices

45

 

 

Compensation and Governance Committee Report

48

 

 

Compensation Tables

49

 

 

Employment Related Agreements

54

 

 

Potential Payments Upon  Termination and
Change-in-Control

57

 

 

CEO Compensation Relative to Median Company
Employee

60

 

 

STOCK OWNERSHIP INFORMATION

61

 

 

AUDIT COMMITTEE

62

 

 

Audit Committee Report

62

 

 

Independent Registered Public Accounting Firm Fees and
Services

63

 

 

ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION (SAY-ON-PAY) (PROPOSAL NO. 2)

64

 

 

RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021 (PROPOSAL NO. 3)

65

 

 

OTHER MATTERS

66

 

 

ADDITIONAL INFORMATION

66

 

 

QUESTIONS AND ANSWERS ABOUT
THE ANNUAL MEETING AND VOTING

68

 

 

APPENDIX A — Information About Non-GAAP
Financial Measures

71

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Proxy Statement Summary Information

The Board of Directors (the “Board”) of Express, Inc. (the “Company”) is soliciting your proxy to vote at the Company’s 2021 Annual Meeting of Shareholders (the “Annual Meeting”), or at any adjournment or postponement of the Annual Meeting. To assist you in your review of this proxy statement, we have provided a summary of certain information relating to the items to be voted on at the Annual Meeting in this section. For additional information about these topics, please review this proxy statement in full and the Company’s Annual Report on Form 10-K for 2020 which was filed with the SEC on March 25, 2021 (the “Annual Report”).

Who We Are

Express is a modern, versatile, dual gender apparel and accessories brand that helps people get dressed for every day and any occasion. We believe that style, quality and value should all be found in one place, and our Express Edit philosophy ensures that everything we design is smart and beautiful. Our brand purpose is to create confidence and inspire self-expression. We operate over 500 retail and factory outlet stores in the United States and Puerto Rico, as well as an online store.

What We Achieved

Despite the many challenges and impacts of COVID-19, we took a number of decisive actions to protect our balance sheet. As a result, we are well positioned in 2021 to advance our transformation across each one of our four strategic pillars (Product, Brand, Customer, Execution).

Key Financial Results

 

Net Sales

Operating Loss

Earnings Per Share

EBITDA

Net sales decreased 40% to $1,208 million from $2,019 million in 2019, materially impacted by the COVID-19 pandemic.

 

 Operating Loss was $455.2 million, and on an adjusted basis operating loss was $420.8 million, compared to Operating Loss of $217.9 million, and Operating Loss of $6.8 million on an adjusted basis, in 2019.

EPS reflected a loss of $6.27 per diluted share compared to a loss of $2.49 per diluted share in 2019. Adjusted EPS reflected a loss of $4.86 per diluted share, compared to a loss of $0.08 per diluted share, in 2019.

EBITDA reflected a loss of $385 million compared to a loss of $133 million in 2019. Adjusted EBITDA reflected a loss of $348 million compared to income of $78 million in 2019.

 

Refer to Appendix A for more information on adjustments made to operating loss, EPS, and EBITDA.  

 

 

Liquidity Highlights

 

Cost Savings

 

Executed costs savings of approximately $250 million through various COVID-19 mitigation actions and other strategic actions.

 

 

$250

MILLION

Rent Savings

 

Negotiated $85 million in landlord concessions through rent abatements, deferrals, reductions and allowances.

 

$85

MILLION

 

Revolver Draw

 

Accessed $165 million* on existing revolver to improve liquidity.

 

 

 

 

$165

MILLION

*Repaid approximately $60 million after receipt of additional debt financing.

Debt Financing

 

Secured a loan agreement that strengthens the Company’s liquidity position by an additional $140 million.*

$140

MILLION

*Includes a $50 million bridge loan to be repaid upon receipt of the CARES Act refund.

CARES Act

Filed to receive CARES Act benefit that provides $120 million* of additional liquidity.

 

 

$120

MILLION

*Filing occurred in 2021. $50 million to be repaid to bridge loan lender upon receipt of CARES Act refund.

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

1

 


Proxy Statement Summary Information

Proposals to be Voted on and Voting Recommendations

 

Proposal

Board Voting

Recommendation

 

Page Reference

(for more detail)

Election of Class II Directors (Proposal No. 1)

 

FOR

 

7

Advisory vote to approve executive compensation (say-on-pay) (Proposal No. 2)

 

FOR

 

64

Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021 (Proposal No. 3)

 

FOR

 

65

2020 Named Executive Officers

The Compensation Discussion and Analysis included in this proxy statement focuses on the compensation of our named executive officers (our “NEOs”) for 2020, who are listed below:

 

Name

       

Position

Timothy Baxter

 

Chief Executive Officer

Matthew Moellering

 

President and Chief Operating Officer

Malissa Akay

 

Executive Vice President and Chief Merchandising Officer

Sara Tervo

 

Executive Vice President and Chief Marketing Officer

Periclis (“Perry”) Pericleous

 

Senior Vice President, Chief Financial Officer and Treasurer

Director Nominees

The following table provides summary information about our Class II director nominees. The Class II directors will be elected to each serve a three-year term that will expire at the Company’s 2024 annual meeting of shareholders.

 

Nominee

   

Age

   

Director

Since

   

Select

Professional

Experience

   

Independent

   

Board

Committees

   

Select Skills/Qualifications

Michael F.

Devine

 

62

 

May

2010

 

Retired Chief Financial Officer

Previous Experience:

-  EVP & CFO – Coach, Inc.

-  CFO & VP – Mothers Work, Inc. (now Destination Maternity Corp.)

-  CFO – Strategic Distribution, Inc.

 

Yes

 

Audit

Committee

 

Accounting, finance, and capital structure; risk management; retail merchandising and operations; corporate governance and public company board practices; investor relations; executive leadership of complex organizations

Mylle

Mangum

 

72

 

August

2010

 

Chief Executive Officer, IBT Holdings, LLC

Previous Experience:

-  CEO – True Marketing Services, LLC

-  CEO – MMS Incentives, Inc.

-  President – Carlson Wagonlit Travel, Inc.

 

Yes

 

Audit

Committee

 

Compensation and Governance Committee

 

Business development and strategic planning; corporate governance and public company board practices; executive leadership of complex organizations; leadership development and succession planning; accounting, finance, and capital structure; executive compensation

 

 

2

 

www.express.com

 


Proxy Statement Summary Information

 

2020 Compensation Highlights

Our executive compensation program for 2020 was designed to strongly align executive compensation with the Company’s financial performance. In 2020:

 

  CEO Target Pay Opportunity Established Between 25th Percentile and Median Level of our Peer Group: Mr. Baxter’s target pay opportunity of $6.5M, established in 2019 between the 25th percentile and median level of our peer group, remained the same for 2020.

  CEO Compensation Reinforces Pay-for-Performance: 85% of Mr. Baxter’s target compensation package was composed of short-term cash incentives and long-term equity and cash incentives. The performance-based short-term and long-term incentives for both Mr. Baxter and other executives continued to include challenging performance targets so that realizable compensation reflects business performance.

  Short-Term Incentive Program Continued to Include Challenging Financial and Strategic Performance Components: Under the Company’s short-term cash incentive program, 75% of the target bonus opportunity was based on achievement of challenging financial performance goals and 25% was based on achievement of challenging operational performance goals tied to key strategic initiatives in furtherance of the Company’s long-term growth strategy. See “Executive Compensation—What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Short-Term Incentives” beginning on page 35 for more information regarding performance goals for the 2020 short-term performance-based cash incentive program.

  Delayed Setting of Challenging Long-Term Incentive Performance Goals in Light of COVID-19: Historically, the Company’s performance-based long-term incentive awards were dependent on the achievement of challenging three-year Adjusted EPS performance targets, subject to modification upwards or downwards by 20% based on the Company’s TSR performance relative to the Dow Jones U.S. Retail Apparel Index (“Relative TSR”). However, in 2020, 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 Compensation and Governance Committee (the “Committee”) determined that it could not set meaningful multi-year performance goals for the long-term performance-based awards granted in March 2020 given the uncertain economic conditions. Accordingly, the Committee delayed setting performance goals for 2020 long-term performance awards until February 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. Because of the delayed setting of the goals, 2020 long-term performance awards, which were granted in March 2020 and remain subject to a three-year vesting cliff, are subject to a two-year performance period 2021-22.  

  Long-Term Performance Goals Established Based on Challenging Adjusted EBITDA Achievement: In February 2021, when setting the delayed performance goals for the 2020 long-term performance based awards, the Committee, together with the executive leadership team, took into account that cash flow would be the key driver of the Company’s future success and of long-term shareholder value creation. Accordingly, the Committee determined to establish long-term performance goals based on Adjusted EBITDA because it focuses on the operational aspect of the business from a cash generation standpoint and is thus a better measure for cash than EPS. The Committee established rigorous 2-year 2021-2022 Adjusted EBITDA goals, so that business performance must significantly improve in the next two years in order for the 2020 long-term performance-based awards to pay out. See “Executive Compensation —What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives—2020 Modifications to Long-Term Incentive Award Program” on page 38 for more information about the 2020 long-term performance awards.

  Portion of Long-Term Time-Based Incentives Cash Denominated: While performance-based awards continue to represent 50% of our annual long-term incentive grants to our NEOs, in order to conserve shares under our equity incentive plan and manage the Company’s burn rate and dilution on account of what the Committee considered an unusually low share price at the time of grant, in 2020, (i) all performance-based long-term incentive awards were delivered in the form of performance-based cash awards and (ii) approximately 40% of long-term time-based awards were delivered in the form of restricted cash awards with time-based vesting, while the remaining portion consisted of time-based restricted stock units. Time-based restricted cash awards were introduced for 2020 in order to conserve shares while still promoting the stability and retention of a high-performing executive leadership team over the long term. See “Executive Compensation—What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives— 2020 Long-Term Incentive Award Mix” on page 39 for more information.

  Realizable Compensation for our NEOs was Significantly Below Target, Reflecting Business Results: Actual realizable total direct compensation for our CEO and other NEOs fell significantly below target in 2020. With respect to total direct compensation opportunities for 2020, (i) no short-term cash incentives paid out for either of the Spring and Fall seasons and (ii) business performance must significantly improve over the next two years for any payout of the 2020 performance-based long-term incentives to occur. With respect to long-term incentives granted in prior years, (i) the 2018 performance-based long-term awards (which were subject to a three-year performance period through 2020) were entirely forfeited and (ii) the 2019 performance-based awards (which are subject to a three-year performance period through 2021) are not expected to pay out. See “Executive Compensation—What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives— Performance-Based Awards” on page 39 for more information on the payout status of the Company’s long-term performance awards.

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

3

 


Proxy Statement Summary Information

 

2020 CEO Target Total Direct Compensation (“TDC”) Versus Summary Compensation Table TDC(1)

The table below shows the annual target total direct compensation package for our CEO as compared to Mr. Baxter’s 2020 annual total direct compensation as disclosed in the Summary Compensation Table on page 49.

 

Elements of Compensation

2020 CEO Annual Target TDC

2020 CEO Summary Compensation Table TDC

 

Base Salary

$1,000,000

$1,000,000

      There was no change in Mr. Baxter’s base salary level in 2020 versus 2019.

      Reflects that no short-term cash incentive awards paid out for either of the 2020 Spring and Fall seasons.

      Reflects that (i) 50% of Mr. Baxter’s 2020 long term incentive opportunity was delivered in the form of performance-based cash awards, and (ii) approximately 20% of Mr. Baxter’s long-term awards were delivered in the form of time-based restricted cash awards, both of which are not included in the Summary Compensation Table until earned. The remaining 30% of long-term awards were delivered in the form of time-based RSUs.  

 

Incentive Compensation Opportunity at Target

$1,300,000

$0

 

 

Annual Long-Term Incentive Opportunity

$4,200,000

 

 

$1,339,246

Total TDC

$6,500,000

$2,339,246

 

(1) Total Direct Compensation is made up of base salary, short-term incentives, and long-term incentives, and excludes all other compensation set forth in the Summary Compensation Table on page 49.

 

Alignment Between Executive Compensation Program and Company Performance

The alignment between our executive compensation program and the Company’s financial performance is set forth in the table below, which shows how our compensation program paid out or is tracking to pay out for our NEOs and other executives at the end of 2020. In addition to the payout information shown below, long-term performance-based awards granted to our executives in each of 2016 and 2017 have also not paid out.

 

Short-Term Annual Cash Incentive Compensation Program

 

Long-Term Performance-Based Awards Subject to Three-Year Performance Periods(1)

Spring 2020

Fall 2020

 

2018-2020

2019-2021

2020-2022

No Payout

No Payout

 

No Payout

Not Expected to Payout

Will only payout if Adjusted EBITDA performance significantly improves over next two years

(1) As discussed further in “Executive Compensation—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives—2020 Modifications to Long-Term Incentive Program” on page 38, 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 delayed setting performance targets for the 2020 long-term performance awards until February 2021. Therefore, while such 2020 awards remain subject to a three-year vesting period, they are subject to a two-year performance period instead of a three-year performance period.

 

 

For more information on our short-term cash incentive program, refer to “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” beginning on page 35. For information on our long-term incentive program, see “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives” beginning on page 38.

 

 

 

4

 

www.express.com

 


Proxy Statement Summary Information

 

 

EXECUTIVE COMPENSATION OBJECTIVES AND PRACTICES

 

 

 

Program Objective

What We DO:

Pay for Performance

  Performance-Based CEO Compensation Package with over 70% Variable Compensation

 

  Short-Term and Long-Term Incentives with Challenging Performance Targets that Incentivize Creation of Shareholder Value

 

  50% of Long-Term Incentives are Performance-Based with Multi-Year Performance Periods

Pay Competitively

  Robust Compensation Setting Process that Utilizes Market Data to Ensure Competitiveness

Pay Responsibly

  Long-Term Vesting Requirements: Multi-Year Performance Periods for Performance Based Long-Term Incentive Awards and Multi-Year Vesting Requirements for Time-Based Restricted Stock Units

 

  Annual Shareholder Engagement Process and the Incorporation of Shareholder Feedback into Executive Compensation Decision Making

 

  Stock Ownership Guidelines

 

  Mitigate Risk Through Incentive Compensation Design

 

  Utilize Independent Compensation Consultant

 

  Robust Clawback Policy

 

What We DON’T DO:

Pay Responsibly

  No Special Tax Gross-Ups

 

  No Pension Plans or Other Post-Employment Defined Benefit Plans

 

  No Liberal Share Recycling, Repricing of Underwater Stock Options, or Reloads of Stock Options

 

  No Hedging or Pledging Transactions

 

  No Single Trigger Change-in-Control Payments

 

  No Special Perquisites

 

Governance Highlights

 

Board Composition:

 

 

 

 

 

 

 

 

 

 

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

5

 


Proxy Statement Summary Information

Other Governance Highlights:

 

2020 Updates

 

Shareholder Rights Plan

  On April 20, 2020, we adopted a limited duration shareholder rights plan in response to the unprecedented impact of the COVID-19 pandemic on the Company, including the considerable decline in the Company’s stock price. The shareholder rights plan expired on April 19, 2021, one year after it was adopted.

 

 

 

Board Independence

  All of our directors, except for our CEO, are independent, which includes an independent Chairman of the Board and Committees comprised entirely of independent directors.

  Our independent directors have an opportunity to meet in executive session at each meeting and do so routinely.

Director Elections

  We adhere to a majority vote standard, with a director resignation policy, for uncontested director elections.

Board and Committee

Meetings

  Each of our directors attended at least 75% of all Board meetings and applicable Committee meetings.

Board and Committee

Evaluations

  The Board and each Committee conduct a comprehensive self-evaluation each year to identify potential areas of improvement.

Corporate Strategy

  At least once per year, the Board and management engage in an in-depth discussion and align on the Company’s long-term corporate strategy. The strategy is revisited regularly during Board and Committee meetings.

Shareholder Engagement

  As part of our annual shareholder engagement cycle, we reach out to our largest shareholders who collectively hold over a majority of the shares of our outstanding common stock, which usually includes approximately our top 20 largest shareholders.

Clawback Policy

  The Company’s Clawback Policy, in addition to providing for clawbacks related to financial restatements, also gives the Compensation and Governance Committee discretion to clawback incentive compensation in the event of management misconduct that could significantly damage the reputation of Express, but that does not lead to a financial restatement.

 

 

 

Forward-Looking Statements and Other Information

This proxy statement, including the “Letter to our Shareholders,” contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and are based on current expectations and assumptions, which may not prove to be accurate. Forward-looking statements are not guarantees and are subject to risks, uncertainties, changes in circumstances that are difficult to predict, and significant contingencies, many of which are beyond the Company’s control. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including those set forth in Item 1A of the Company’ s Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise, except as required by law.

Our fiscal year ends on the Saturday closest to January 31. Fiscal years are referred to by the calendar year in which the fiscal year commences. All references herein to “2020”, “2019”, and “2018” refer to the 52-week period ended January 30, 2021, February 1, 2020, and February 2, 2019, respectively.

In this proxy statement, we refer to adjusted operating loss, adjusted diluted earnings per share (“Adjusted EPS”), and earnings before interest, taxes, depreciation, and amortization, and excluding the impact of non-core operating items (“Adjusted EBITDA”) which are financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Please refer to Appendix A to this proxy statement for more information on adjusted operating loss, Adjusted EPS, and Adjusted EBITDA, and a reconciliation of such measures to reported operating loss, diluted earnings per share (“EPS”), and net income, respectively, which are their most directly comparable GAAP measures.

 

 

 

6

 

www.express.com

 


 

Election of ClasII Directors

(Proposal No. 1)

The Board and its Compensation and Governance Committee are committed to ensuring that the Board possesses the right diversity of backgrounds, skills, experience, and perspectives to constitute an effective Board. The Board currently consists of eight members and is divided into three classes of directors, with three Class I directors, two Class II directors, and three Class III directors. The current term of our Class II directors expires at the Annual Meeting, while the terms for Class III and Class I directors will expire at our 2022 and 2023 annual meetings of shareholders, respectively.

Mr. Devine and Ms. Mangum currently serve as Class II directors and are each independent. Upon the recommendation of the Compensation and Governance Committee, the Board has nominated Mr. Devine and Ms. Mangum for re-election as Class II directors, to each serve three-year terms expiring at the 2024 annual meeting of shareholders. Mr. Devine and Ms. Mangum have each served as directors since 2010 and were each elected to serve a three-year term most recently at our 2018 annual meeting of shareholders.

Mr. Devine and Ms. Mangum have consented to serve if elected. If re-elected, each of Mr. Devine and Ms. Mangum will hold office until their respective successor has been duly elected and qualified or until their earlier resignation or removal. If Mr. Devine or Ms. Mangum becomes unavailable to serve as a director, the Board may either designate a substitute nominee or reduce the number of directors. If the Board designates a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by the Board.

Information with respect to our Class II director nominees and our continuing Class I and Class III directors, including their recent employment or principal occupation, a summary of select qualifications, skills, and experience that led to the conclusion that they are qualified to serve as directors, the names of other public companies for which they currently serve as a director or have served as a director within the past five years, their period of service on the Board, and their ages as of April 19, 2021 (the “Record Date”) are provided in this section. The Board believes that our continuing directors, together with our director nominees, possess a complementary and diverse set of qualifications, skills, and experience to allow the Board to function at a high level and fulfill its responsibilities to our shareholders. Please refer to “Corporate Governance—Board Composition” on page 13 for other information about our Board, including a description of the qualifications, skills, and experience that the Board believes are important in order to effectively oversee the Company as it carries out its growth strategy and commitment to long-term value creation.

 

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Election of Class lI Directors (Proposal No. 1)

 

Nominees for Class II Directors for Election at the 2021 Annual Meeting

 

MICHAEL F. DEVINE

 

 

Director Since: May 2010

Age: 62

Audit Committee Member (Chair of the Audit Committee May 2010 - March 2019)

 

 

Select Qualifications, Skills, and Experience:

 

    Accounting, finance, and capital structure

 

    Risk management

 

    Corporate governance and public company board practices

 

    Investor relations

 

    Executive leadership of complex organizations

 

    Retail merchandising

 

 

Business Experience

 

Mr. Devine was appointed Senior Vice President and Chief Financial Officer of Coach in December 2001 and Executive Vice President in August 2007, a role he held until he retired in August 2011. Prior to joining Coach, Mr. Devine served as Chief Financial Officer and Vice President—Finance of Mothers Work, Inc. (now known as Destination Maternity Corporation) from February 2000 until November 2001. From 1997 to 2000, Mr. Devine was Chief Financial Officer of Strategic Distribution, Inc. Mr. Devine was Chief Financial Officer at Industrial System Associates, Inc. from 1995 to 1997, and for the six years prior to that, he was the Director of Finance and Distribution for McMaster-Carr Supply Co. Mr. Devine previously served as a director of Nutrisystems, Inc. He currently serves as Chairman of the Board of Deckers, Inc. and as a director of Five Below, Inc.

 

 

 

MYLLE MANGUM

 

 

Director Since: August 2010

Age: 72

Chairman of the Board; Compensation and Governance Committee Member; Audit Committee Member

 

 

Select Qualifications, Skills, and Experience:

 

    Business development and strategic planning

 

    Corporate governance and public company board practices

 

    Executive leadership of complex organizations

 

    Leadership development and succession planning

 

    International and franchise operations

 

    Accounting, finance, and capital structure

 

    Executive compensation

 

 

 

Business Experience

 

Ms. Mangum is the Chief Executive Officer of IBT Holdings, LLC, a position she has held since October 2003. Prior to that, Ms. Mangum served as Chief Executive Officer of True Marketing Services, LLC since July 2002. She served as Chief Executive Officer of MMS Incentives, Inc. from 1999 to 2002. From 1997 until 1999, she served as President-Global Payment Systems and Senior Vice President-Expense Management and Strategic Planning for Carlson Wagonlit Travel, Inc. From 1992 until 1997 she served as Executive Vice President-Strategic Management for Holiday Inn Worldwide. Ms. Mangum was previously employed with BellSouth Corporation as Director-Corporate Planning and Development from 1986 to 1992 and President of BellSouth International from 1985 to 1986. Prior to that, she was with the General Electric Company. Ms. Mangum previously served as a director of Emageon, Inc., Scientific-Atlanta, Inc., Respironics, Inc., and PRGX Global, Inc. Ms. Mangum currently serves as a director of Barnes Group Inc., and Haverty Furniture Companies, Inc.

 

 

 

 

 

 

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Election of Class lI Directors (Proposal No. 1)

 

Class III Directors with Terms Continuing Until the 2022 Annual Meeting

 

TERRY DAVENPORT

 

 

 

Director Since: November 2016

Age: 63

Compensation and Governance Committee Member

 

 

Select Qualifications, Skills, and Experience:

 

    Consumer brand marketing and advertising

 

    E-commerce and omni-channel retailing

 

    Retail merchandising and operations

 

    Business development and strategic planning

 

    International operations

 

    Corporate responsibility

 

    Experience with target customers

 

 

 

Business Experience

 

Mr. Davenport served as Global Brand Advisor for Starbucks Coffee Company from February 2014 until he retired in October 2017. Mr. Davenport spent the last ten years of his career at Starbucks Coffee Company. Prior to serving as Global Brand Advisor, his roles at Starbucks included: Senior Vice President of Global Creative Studios, Senior Vice President of Marketing and Category for Europe, Middle East, and Africa (EMEA), and Senior Vice President of Marketing for the U.S. He originally joined Starbucks as Vice President of Brand Strategy and Consumer Insights in October 2006. Prior to joining Starbucks, Mr. Davenport held senior brand leadership roles with YUM! Brands, PepsiCo., and Omnicom Agencies. Mr. Davenport is currently a strategic advisor and consultant for various enterprises on consumer, strategy, and brand related matters.

 

KAREN LEEVER

 

 

 

Director Since: August 2016

Age: 57

Compensation and Governance Committee Member

 

 

Select Qualifications, Skills, and Experience:

 

    E-commerce and omni-channel retailing

 

    Technology development and management experience

 

    Data analytics

 

    Business development and strategic planning

 

    Retail merchandising and operations

 

    Experience with target customers

 

    Leadership development and succession planning

 

 

 

Business Experience

 

Ms. Leever is President, U.S. Digital Products and Marketing, for Discovery Communications, a role she has had since July 2018. Ms. Leever joined Discovery Communications in October 2015 where she first served as Executive Vice President and General Manager, Digital Media. Prior to joining Discovery Communications, she spent ten years with DIRECTV, and held several roles including: Senior Vice President of Digital and Direct Sales from 2013 until 2015, Senior Vice President of Digital Marketing and Media in 2012, and Senior Vice President of directv.com and Customer Communications in 2011. Additionally, Ms. Leever served as Vice President, Marketing at Kmart Corporation during 2005 and as Divisional Vice President, E-commerce from 2004 until 2005. Earlier in her career, she spent more than a decade in electronic television retailing at HSN and QVC, overseeing website design, messaging, pricing, and programming strategies.

 

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Election of Class lI Directors (Proposal No. 1)

 

WINNIE PARK

 

 

 

Director Since: June 2018

Age: 50

Audit Committee Member

 

 

Select Qualifications, Skills, and Experience:

 

    Retail merchandising and operations

 

    Apparel merchandising and design

 

    Business development and strategic planning

 

    E-commerce and omni-channel retailing

 

    Consumer brand marketing and advertising

 

    Experience with Target Customers

 

    Supply Chain

 

    Corporate Responsibility

 

 

 

Business Experience

 

Ms. Park is Chief Executive Officer of Paper Source, Inc., a role she has held since September 2015. Paper Source, Inc. filed a voluntary petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in March 2021. Prior to joining Paper Source, Ms. Park held the titles of Executive Vice President, Global Marketing and E-commerce and Global VP, GMM, Merchandising during her 9-year tenure at Hong Kong-based luxury shopping leader, DFS, a division of LVMH, beginning in 2006. Prior to her roles at DFS, Ms. Park served as Senior Director, Merchandising for Levi Strauss & Co. from 2003 to 2006. Earlier in her career, Ms. Park worked at McKinsey and Company, with a focus on the overlap of technology and retail. Ms. Park currently serves on the Board of Directors of Dollar Tree, Inc. and also serves on the Women in Retail Advisory Board.

 

 

 

 

 

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www.express.com

 


Election of Class lI Directors (Proposal No. 1)

 

Class I Directors With Terms Continuing Until the 2023 Annual Meeting

 

MICHAEL ARCHBOLD

 

 

 

Director Since: January 2012

Age: 60

Chair of the Audit Committee

 

 

Select Qualifications, Skills, and Experience:

 

    Accounting, finance, and capital structure

 

    Risk management

 

    Retail merchandising and operations

 

    Business development and strategic planning

 

    Investor relations

 

    Executive leadership of complex organizations

 

 

 

Business Experience

 

Mr. Archbold served as Chief Executive Officer of GNC Holdings, Inc. from August 2014 until July 2016 and also served as a director on the board of GNC Holdings, Inc. Prior to that, he was the Chief Executive Officer of The Talbots Inc. from August 2012 until June 2013 and also served as a director on the board of The Talbots Inc. Prior to that, Mr. Archbold served as President and Chief Operating Officer of Vitamin Shoppe, Inc. from April 2011 until June 2012, and prior to that as its Executive Vice President, Chief Operating Officer, and Chief Financial Officer from April 2007. Mr. Archbold served as Executive Vice President / Chief Financial and Administrative Officer of Saks Fifth Avenue from 2005 until 2007. From 2002 until 2005 he served as Chief Financial Officer for AutoZone, Inc., originally as Senior Vice President, and later as Executive Vice President. Mr. Archbold is an inactive Certified Public Accountant and has 20 years of financial experience in the retail industry. Mr. Archbold currently serves on the Board of the Council for Inclusive Capitalism with The Vatican; on the Advisory Board for the Dolan School of Business at Fairfield University; and as the Program Director for the CFO Council: Fortune 250 at The Conference Board.

 

 

TIMOTHY BAXTER

 

 

Director Since: June 2019

Age: 51

Chief Executive Officer, Express, Inc.

 

 

Select Qualifications, Skills, and Experience:

 

    Retail merchandising and operations

 

    Apparel merchandising and design

 

    Business development and strategic planning

 

    E-commerce and omni-channel retailing

 

    Consumer brand marketing and advertising

 

    Experience with target customers

 

    Supply chain

 

 

Business Experience

 

Mr. Baxter has served as our Chief Executive Officer since June 2019. Prior to joining the Company, Mr. Baxter was Chief Executive Officer of Delta Galil Premium Brands, a group of specialty retail apparel brands including 7 For All Mankind and Splendid, since May 2018. Prior to that, he held numerous leadership positions at Macy’s, Inc. from 2006 to 2017 including Chief Merchandising Officer from 2015 to 2017 and Executive Vice President, General Merchandise Manager from 2013 to 2015. Mr. Baxter started his career with Famous-Barr and May Department Stores, where he held positions of increasing responsibility from 1992 until 2006.

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

11

 


Election of Class lI Directors (Proposal No. 1)

 

PETER SWINBURN

 

 

Director Since: February 2012

Age: 68

Chair of the Compensation and Governance Committee

 

 

Select Qualifications, Skills, and Experience:

 

    Business development and strategic planning

 

    Consumer brand marketing and advertising

 

    International operations

 

    Finance and capital structure

 

    Corporate governance and public company board practices

 

    Executive leadership of complex organizations

 

    Mergers and acquisitions

 

    Executive compensation

 

 

 

Business Experience

 

Mr. Swinburn served as Chief Executive Officer and President of Molson Coors Brewing Company from July 2008 until he retired in December 2014. He also served as a director on the board of Molson Coors Brewing Company and MillerCoors Brewing Company from July 2008 until his retirement. Prior to that, he was Chief Executive Officer of Coors (U.S.) and from 2005 until October 2007, Mr. Swinburn served as President and Chief Executive Officer of Molson Coors Brewing Company (UK) Limited. Prior to that, he served as President and Chief Executive Officer of Coors Brewing Worldwide and Chief Operating Officer of Molson Coors Brewing Company (UK) Limited following the Molson Coors Brewing Company’s acquisition of Molson Coors Brewing Company (UK) Limited in 2002 where he served until 2003. Mr. Swinburn currently serves on the Board of Directors of Driven Brands, Inc. and previously served as a director of Fuller, Smith & Turner PLC and of Cabela’s Inc.

 

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE CLASS II NOMINEES TO BE ELECTED

AS DIRECTORS.

 

 

 

 

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Corporate Governance

Board Responsibilities

The Board is responsible for overseeing the affairs of the Company in order to generate sustainable long-term value for our shareholders and does so through oversight of the Company’s (1) strategy and performance, (2) management, including succession planning, (3) risk management program, (4) compliance and corporate responsibility programs, and (5) other corporate governance practices, including shareholder engagement.

 

Board Oversight

 

Strategy and

Performance

 

Management,

including Succession

Planning

 

Risk Management

 

Compliance and

Corporate

Responsibility

 

Other Corporate

Governance

Practices, including

Shareholder

Engagement

 

The Board believes that effective oversight is best achieved through (1) having the right combination of people on the Board, (2) an effective Board leadership and committee structure, and (3) effective Board practices. The Board continually reassesses the composition of the Board, the Board’s leadership and structure, and its governance practices and believes that the continuing directors, along with the director nominees, together have a complementary and diverse set of skills, backgrounds, experiences, and perspectives to constitute an effective Board; and furthermore, that the Board’s leadership and committee structure as well as its governance practices are effective. See “Board Composition” below and “Election of Class II Directors (Proposal No. 1)” on page 8 for more information about the composition of the Board; see “Board Leadership and Structure” on page 17 for more information about the Board’s leadership structure and its committees; and see “Board Practices” on page 21 for more information about the Board’s governance practices.

 

Board Composition

The Board and its Compensation and Governance Committee (in this “Corporate Governance” section, the “Committee”) are committed to ensuring that the Board possesses the right diversity of backgrounds, skills, experience, and perspectives to constitute an effective Board. The Committee is responsible for developing the criteria for, and reviewing periodically with the Board, the skills and characteristics of nominees, as well as the composition of the Board as a whole. These criteria include independence, diversity, age, skills, tenure, and experience in the context of the needs of the Board. The Committee also considers a number of other factors, including the ability to represent all shareholders without a conflict of interest; the ability to work in and promote a productive environment; sufficient time and willingness to fulfill the substantial duties and responsibilities of a director; a high level of character and integrity; broad professional and leadership experience and skills necessary to effectively respond to complex issues encountered by a publicly-traded company; and the ability to apply sound and independent business judgment.

 

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Corporate Governance

 

BOARD COMPETENCIES AND EXPERIENCE

 

The Board believes that it has the right mix of qualifications, skills, experience, and perspectives that allow it to fulfill its responsibilities, including overseeing management’s execution of the Company’s corporate strategy, which is designed to create long-term shareholder value. The information below shows how the Board’s collective qualifications, skills, and experience relate to the Company’s corporate strategy. For biographical information regarding each of our directors and their individual qualifications, skills, and experience see, “Election of Class II Directors (Proposal No. 1)” beginning on page 7.

 

Long-Term Strategy for Value

Creation

 

Strategic Competencies and

Experience

 

Corporate Governance

Competencies and Experience

 

  Retail merchandising & operations

  Apparel merchandising & design

  E-commerce and omni-channel retailing

  Business development & strategic planning

  Supply chain

  International and franchise operations

  Technology development and management experience

  Data analytics

  Leadership development

 

  Accounting, finance, and capital structure

  Investor relations

  Executive compensation

  Mergers and acquisitions

  Executive leadership of complex organizations

  Corporate responsibility

  Corporate governance and public company board practices

  Risk management

  Succession planning

ENGAGE Our Customers and Acquire New Ones

 

 

 

X-ECUTE With Precision to Accelerate Sales and Profitability

 

 

 

 

 

PRODUCT First

 

 

 

 

 

REINVIGORATE our Brand

 

 

 

 

 

 

 

 

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Corporate Governance

 

BOARD DEMOGRAPHICS AND REFRESHMENT

 

As previously noted, in addition to ensuring that the Board collectively has a diverse set of competencies, experience, and perspectives, the Committee and Board also consider independence as well as diversity, age, and tenure. The charts below show certain demographic information about our Board as of April 19, 2021.

 

 

The Board does not believe it should establish term limits or age limits for service of directors because such limits may disadvantage the Company and the Board by causing loss of the contribution of directors who have been able to develop, over a period of time, increasing insight into the Company and its operations and, therefore, provide an increasing contribution to the Board as a whole. In order to assure the appropriate balance between members with new and different perspectives and those with a deep understanding of the Company built up over many years, the Committee reviews a director’s continuation on the Board each time such director’s term of office expires. The Board believes that together these practices are effective at ensuring an appropriate balance between experience and a fresh perspective on the Board.

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Corporate Governance

 

IDENTIFYING AND EVALUATING DIRECTOR CANDIDATES

 

The Committee is responsible for identifying, recruiting, and recommending candidates for the Board and is responsible for reviewing and evaluating any candidates recommended by shareholders.

The following shows our nomination process for candidates to our Board:

 

Conduct a Needs Assessment

 

The Committee determines the director skills, experience, and attributes needed for the Board to exercise effective oversight of the Company. The Committee assesses the skills, experience, and attributes of existing directors against desired director skills, experience, and attributes to identify any skills, experience, and attributes that would strengthen the collective skills and experience of the Board.

Develop a New Director Profile

 

The Committee develops a profile that sets forth the skills, experience, and attributes desired for the new director, which satisfies the needs identified in the needs assessment.

Identify New Director Candidates

 

The Committee may identify new director candidates through professional search firms, professional networks of sitting directors, and nominations suggested by shareholders.

Selection of New Director

 

The Committee makes a recommendation to the Board based on an initial round of interviews, reference checks, and a final round of interviews with all directors.

Due Diligence and Onboarding

 

Once due diligence is performed and the nominee is appointed to the Board, the Company provides a robust onboarding program which includes a full day of in-person meetings with senior leadership at the Company’s headquarters and participation in a multi-day new director education program for first-time directors.

The Committee considers all director candidates, including candidates proposed by shareholders in accordance with our Bylaws, based on the same criteria. As noted above, the Committee may engage third party search firms to identify potential director nominees.

Board Leadership and Structure

LEADERSHIP STRUCTURE

 

Ms. Mangum has served as the Company’s independent Chairman since assuming the role at our 2016 Annual Meeting of Shareholders. The independent Chairman’s roles and responsibilities include: (1) establishing the Board agendas and schedules to confirm that appropriate topics are reviewed and sufficient time is allocated to each; (2) providing input to the CEO with respect to the information provided to the Board; (3) serving as a liaison between the independent directors and the CEO; (4) presiding at the executive sessions of independent directors; (5) facilitating communications and coordination of activities among the committees as appropriate; and (6) approving and coordinating the retention of advisors and consultants to the Board.

Our Corporate Governance Guidelines provide that the roles of Chairman and CEO may be separated or combined. The Board exercises its discretion in combining or separating these positions as it deems appropriate. The Board believes that the combination or separation of these positions should be considered as part of the succession planning process. In the event that the Chairman is not independent, the Board believes that it is beneficial for the independent directors to appoint an independent Lead Director. Currently, the Board believes that having an independent Chairman best serves the Board in its oversight role.

 

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Corporate Governance

 

BOARD COMMITTEES

 

The Board has two standing committees: an Audit Committee and a Compensation and Governance Committee. The composition and leadership of these committees are shown in the table below. In the future, the Board may establish other committees, as it deems appropriate, to assist it with its responsibilities. The committees report to the Board as they deem appropriate and as the Board may request. Each standing committee operates under a charter that has been approved by the Board and each is comprised solely of independent directors.

 

Board Member

 

Audit Committee

 

 

Compensation and

Governance Committee

 

Michael Archbold

 

 

 

 

 

 

Terry Davenport

 

 

 

 

 

X

 

Michael F. Devine

 

 

X

 

 

 

 

Karen Leever

 

 

 

 

 

X

 

Mylle Mangum

 

 

X

 

 

 

X

 

Winnie Park(1)

 

 

X

 

 

 

 

Peter Swinburn

 

 

 

 

 

 

 

Chair of the committee  

(1)

Effective September 2020, Ms. Park was appointed to serve on the Audit Committee and stepped down from her role on the Compensation and Governance Committee.

AUDIT COMMITTEE

Audit Committee Responsibilities

 

The Audit Committee is responsible for, among other matters:

  appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;

  reviewing the independent registered public accounting firm’s independence from management;

  reviewing with our independent registered public accounting firm the scope and results of their audit;

  approving all audit and permissible non-audit services to be performed by the Company’s independent registered public accounting firm;

  overseeing the financial reporting process and discussing with management and the Company’s independent registered public accounting firm the interim and annual financial statements, including related disclosures, that the Company files with the SEC, as well as earnings releases, earnings guidance, and non-GAAP measures;

  reviewing and monitoring the Company’s accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;

  establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls, or auditing matters;

  reviewing and approving known related person transactions;

  reviewing internal audit activities and reports; and

  assisting the Board in its oversight of the Company’s risk management program, including regularly reviewing the Company’s risk portfolio, management’s process for identifying risks, and the steps management has taken to monitor and control such risks.

 

The Audit Committee also prepares the Audit Committee Report that SEC rules require to be included in our annual proxy statement. This report is on page 62 of this proxy statement.

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Corporate Governance

 

Audit Committee Meetings

The Audit Committee met eight times in 2020. The Audit Committee generally has eight regularly scheduled meetings per year and has an opportunity at each meeting to speak with the lead audit partner from the Company’s independent registered public accounting firm as well as the Company’s director of internal audit without any other members of management present. In addition, the Audit Committee Chair has regularly scheduled teleconferences with each of the Company’s Chief Financial Officer and the lead audit partner from the Company’s independent registered public accounting firm.

Audit Committee Practices

At the end of each quarter, the Audit Committee reviews and discusses with management and the Company’s independent registered public accounting firm the Company’s financial results, press releases concerning the Company’s financial performance and earnings estimates, any significant control deficiencies identified and steps management has taken or plans to take to remediate the deficiencies, significant estimates and proposed adjustments to the financial statements, reports to the Company’s ethics hotline, internal audit activities and reports, risk management activities, and the results of the independent registered public accounting firm’s review or audit of the Company’s financial statements, among other things.

Each year the Audit Committee evaluates the performance of the Company’s independent registered public accounting firm and considers whether it is in the best interests of the Company and its shareholders to engage the firm for another year. As part of its evaluation, the Audit Committee considers the qualifications of the persons who will be staffed on the Company’s engagement, including the lead audit partner, quality of work, firm reputation, independence, fees, retail experience, and understanding of the Company’s financial reporting processes, policies, and procedures. The Audit Committee solicits feedback from management as part of its evaluation process.

Audit Committee Independence and Expertise

The Board has affirmatively determined that (1) each of our Audit Committee members meets the definition of “independent director” for purposes of serving on the Audit Committee under both Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE listing rules, and (2) each qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

Audit Committee Charter

The Audit Committee Charter may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide a copy of the charter in print without charge upon written request delivered via email to IR@express.com or by mail to Express, Inc. 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.

 

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Corporate Governance

 

COMPENSATION AND GOVERNANCE COMMITTEE

Compensation and Governance Committee Responsibilities

 

The Compensation and Governance Committee is responsible for, among other matters:

  overseeing the overall performance evaluation process for the CEO;

  reviewing and approving key employee compensation goals, policies, plans, and programs;

  reviewing and approving corporate goals and objectives relevant to CEO compensation and evaluating the CEO’s performance in light of these goals and objectives;

  reviewing and approving, in consultation with or with the approval of the independent directors of the Board, compensation arrangements for the CEO;

  reviewing the performance of and approving compensation arrangements for executive officers other than the CEO;

  reviewing and approving employment agreements and other similar arrangements between the Company and its executive officers;

  reviewing and recommending to the Board, in consultation with the Committee’s independent compensation consultant, compensation arrangements for the independent directors;

  overseeing management’s administration of Company benefit plans and policies, including incentive compensation plans;

  reviewing the Company’s compensation program to ensure it is appropriate and does not incentivize unnecessary and excessive risk taking;

  identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board;

  reviewing shareholder proposals and making recommendations to the Board regarding proposals;

  overseeing the annual self-evaluation process for the Board and its committees;

  overseeing the organization of the Board to discharge the Board’s duties and responsibilities properly and efficiently; and

  developing and recommending to the Board a set of corporate governance guidelines and principles applicable to the Company.

 

 

The Compensation and Governance Committee also prepares the Compensation and Governance Committee Report that SEC rules require to be included in our annual proxy statement. This report is on page 48 of this proxy statement.

Compensation and Governance Committee Independence

The Board has affirmatively determined that each of our Compensation and Governance Committee members meets the definition of “independent director” for purposes of serving on the Compensation and Governance Committee under both Rule 10C-1 of the Exchange Act and the NYSE listing rules.

Compensation and Governance Committee Meetings

The Compensation and Governance Committee met seven times in 2020. The Compensation and Governance Committee generally has six regularly scheduled meetings per year and has an opportunity at each meeting to speak with the Compensation and Governance Committee’s independent compensation consultant.

Compensation and Governance Committee Practices

See “Executive Compensation—Compensation Discussion & Analysis—Executive Compensation Practices” on page 45 for additional information about the Compensation and Governance Committee’s practices.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation and Governance Committee has been an officer or employee of the Company. No interlocking relationships exist between the members of the Board or Compensation and Governance Committee and the board of directors or compensation committee of any other company.

 

EXPRESS Notice of 2021 Annual Meeting of Shareholders

 

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Corporate Governance

 

Compensation and Governance Committee Charter

The Compensation and Governance Committee Charter may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide a copy of the charter in print without charge upon written request delivered via email to IR@express.com or by mail to Express, Inc. 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.

Board Practices

STRATEGY OVERSIGHT

 

The Board has deep experience in the area of strategy and business development, with much of that experience gained in the retail sector. At least once per year, the Board and management engage in an in-depth discussion and align on the Company’s corporate strategy which is designed to create long-term shareholder value and serves as the foundation upon which goals are established and decisions are made. Short and medium term objectives are developed to support achievement of the long-term strategy and the Board monitors management’s progress against such objectives.

RISK OVERSIGHT

 

 

 

Full Board

 

The Board, with the assistance of the Audit Committee and the Compensation and Governance Committee, oversees our enterprise risk management (“ERM”) program. Our ERM program is designed to enable effective identification and management of critical enterprise risks and to facilitate the incorporation of risk considerations into decision making.

 

The Board is kept informed of the committees’ risk oversight and related activities primarily through reports of the committee chairs to the full Board. The Board also receives a comprehensive report from management on the ERM program at least annually. In addition, the Audit Committee escalates issues relating to risk oversight to the full Board as appropriate to ensure that the Board is appropriately informed of developments that could affect our risk profile or other aspects of our business. The Board also considers specific risk topics in connection with strategic planning and other matters.

 

 

 

 

 

 

 

 

The Audit Committee

 

The Audit Committee oversees management’s implementation of the ERM program, including regularly reviewing our enterprise risk portfolio, management’s process for identifying risks, and steps management has taken to monitor and control enterprise risks.

 

 

The Compensation and Governance Committee

 

The Compensation and Governance Committee is responsible for risk oversight as it relates to our compensation policies and practices and governance structure and processes.

 

 

Management

 

Management has day-to-day responsibility for the Company’s ERM program. As part of its responsibilities, management continuously identifies and monitors the Company’s enterprise risks, develops and reviews risk response plans, and takes steps to control risk where appropriate.

 

Management’s responsibilities are carried out by a cross-functional Risk Committee which includes our President and Chief Operating Officer, General Counsel, Chief Financial Officer, Chief Information Officer, Chief Human Resources Officer, and Director of Internal Audit.

 

MANAGEMENT OVERSIGHT AND SUCCESSION PLANNING

 

As part of its management oversight responsibilities, the Board assesses whether the Company has the management talent needed to successfully pursue the Company’s strategy, monitors management’s execution of the Company’s strategy, and provides advice to management as a strategic partner. The Board believes that open communications between the Board and management play a key role in effective oversight. Accordingly, in addition to formal meetings, individual directors and members of management engage in frequent dialogue concerning the Company in between meetings.

 

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The Board is responsible for succession planning for the CEO position and for monitoring and advising on management’s succession planning for other executive officers and key contributors. The Board reviews and discusses succession plans for the CEO position and the Company’s other executive officers and key contributors at least once annually, usually as part of the annual talent review of the executive leadership and key contributors in the Company. As part of the annual talent review process, the CEO shares their evaluation of the executive leadership in the business and makes recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals. Directors become familiar with potential successors for key management positions through various means, including annual talent reviews, presentations to the Board, and communications outside of meetings.

COMPLIANCE OVERSIGHT

 

The Board is committed to ensuring that the Board and the management team together cultivate a high-performing, collaborative corporate culture that emphasizes the importance of acting according to high ethical standards and in compliance with legal requirements. The Board receives a compliance update each quarter from the Company’s General Counsel who has day-to-day oversight responsibilities for the Company’s compliance program. On an annual basis, the Board reviews with management the Company’s top compliance risks based on an updated risk assessment, steps management is taking to reduce compliance risk, and key compliance initiatives for the upcoming year.  

CORPORATE AND SOCIAL RESPONSIBILITY

 

Corporate and social responsibility, which includes respect for our communities, the environment and human rights influences our ability to create long-term shareholder value. These matters were incorporated in Board discussions throughout the year.

 

To extend the reach and impact of our commitment, we require our product suppliers in our direct supply chain to follow strict ethical labor standards as outlined in our Supplier Code of Conduct.

 

Our corporate and social responsibility highlights during 2020 include:

Community Involvement

We believe that giving back to the communities where our associates live and work is the right thing to do, and also supports our efforts to attract and retain the most talented and experienced associates.

 

To further fulfill our brand purpose we launched the Express Dream Big Project ("Dream Big") in 2020. This is an ongoing fundraising initiative created to champion organizations that empower people to believe in themselves and follow their dreams. This program is a way to unify and align our corporate philanthropy and associate giving in a way that is tightly connected to our brand purpose.

 

During the Fall, we partnered with the GoFundMe Small Business Relief Fund to encourage our customers and associates to help us raise money for entrepreneurs who’ve been hit hardest by COVID-19. We matched customer donations up to $50,000 on Small Business Saturday and Giving Tuesday. These efforts raised over $275,000 and helped more than 500 small businesses.

 

The first Dream Big partnership of 2021 was with the NAACP Empowerment Programs whose mission is to ensure the political, educational, social, and economic equality of rights of all persons and to eliminate racial hatred and discrimination.

 

We also identified Express Small Business Heroes - individuals we selected to receive a $10,000 grant to help their businesses: Solise White and Evita Colon of A Concrete Rose Book Bar, and Omar Tate and Cybille St. Aude-Tate of Honeysuckle Community Center.

A Concrete Rose Book Bar is a bookstore, community space and wine bar concept in Lancaster, PA that will champion Black artists and provide a place for gathering and a platform for creativity and self-expression. Honeysuckle Community Center in West Philadelphia is a community center and supper club dedicated to sharing Black culture through fine dining experiences. In addition to financial support, these Express Small Business Heroes were also featured in a dedicated advertising campaign to bring visibility to their businesses.


 

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Diversity, Equity, and Inclusion

In the Spring of 2020, the Company revisited the subject of Diversity & Inclusion (“D&I”) at Express to ensure that our work here was aligned with our corporate strategy, brand purpose and values. We expanded the definition and scope of this work to Diversity, Equity & Inclusion ("DE&I") and made the following changes to reflect this expansion:

 

The Diversity & Inclusion Steering Committee was renamed the DE&I Stewards to reflect their sense of ownership and accountability for driving this work forward, and the Diversity & Inclusion Council was renamed DE&I Ambassadors to reflect their role in building greater awareness and understanding of this work.

 

We developed a DE&I charter that includes a vision and mission to define our aspirations, and a set of objectives to guide our priorities and initiatives.

 

Express DE&I Vision: To create a culture where associates, customers and partners can feel confident and supported being their genuine selves

 

Express DE&I Mission: To seek out, respect and embrace different experiences, approaches and points of view

 

The DE&I Stewards and Executive Leadership Team are driving the realization of this work across all of our functional areas and ensuring that we embed best practice DE&I thinking into everything that we do.

 

At the time of this writing, the Company has recognized Black History Month (February) and Women's History Month (March) through a series of content and conversations for associates.

Initiatives and Training

The Company has increased content and programming around DE&I awareness and understanding among our corporate associates.

 

In January of 2021, the Company encouraged associates to treat our observance of Martin Luther King, Jr.’s birthday as a 'day on' rather than a 'day off' by dedicating time to learning and reflecting on Dr. King's teachings and legacy. The Company’s DE&I Stewards compiled informational and educational resources as well as links to virtual MLK Day events.

 

In February 2021, the DE&I Stewards hosted a panel to introduce themselves to associates and foster a dialogue about diversity, equity & inclusion. The Stewards shared their desire to be an informed, accessible resource to all associates.

 

In March 2021, the Company recognized Women’s History Month with the launch of the Women Who Lead series for female leaders at Express to share their professional journeys and perspectives with associates.

 

In 2021, the Company will introduce a new suite of DE&I courses as part of our training curriculum and onboarding experience. The courses focus on topics such as unconscious bias, racism in the workplace, microaggressions, and how to speak up.

SUSTAINABILITY

 

We believe that building best practice thinking on sustainability into our product and operations is important for many reasons, and has the potential to contribute to our goal of generating long-term value for our shareholders. The Company’s path to better sustainability practices began several years ago, and while we have certainly made progress, we still have more work to do.  We are committed to incorporating more sustainable practices across our organization and reporting on our progress along the way. 

Sustainability steps taken to date include:

Replacement of all store lighting with more energy efficient LED bulbs

Adding energy management system controls on all store HVAC systems

Reusing & recycling packaging materials in our Distribution Center

Working with our vendors to reduce water usage in our manufacturing through ozone washing technology and sustainable dry processing techniques

Beginning to use sustainable materials such as recycled fibers in some of our apparel, and committing to expanded use across more of our product line

Reducing the amount of paper and plastic packaging in our men’s dress shirts

Selecting vendor partners who are implementing their own sustainable practices

 

We know that implementing more sustainability-focused practices across our organization will take time, but we are committed to doing what we can to promote the health and well-being of our planet.

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SHAREHOLDER ENGAGEMENT

 

Our shareholders’ views on corporate governance and executive compensation are important to us, and we value and utilize the feedback and insights that we receive. Each year, as part of our annual shareholder engagement cycle described below, we reach out to our largest shareholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes approximately our 20 largest shareholders. Our Chief Executive Officer, Chief Financial Officer, and Vice President of Investor Relations also routinely engage with shareholders throughout the year outside of our annual shareholder engagement program. Shareholders may request meetings with management or directors by sending a written request to the Office of the Corporate Secretary at 1 Express Drive, Columbus, OH 43230 or via email to IR@express.com.

SHAREHOLDER ENGAGEMENT CYCLE

 

 

We received feedback from several investors that helped to inform our proposal in the prior year’s proxy statement for the approval of an amendment to the 2018 Plan to increase the number of shares available for grant. In addition, our current Chief Executive Officer’s compensation package closely followed the compensation package for our former Chief Executive Officer, which was originally designed based in part on feedback received from shareholders on our executive compensation in prior years.

For more information regarding our 2020 shareholder engagement efforts, see “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Practices—Shareholder Engagement and Annual Advisory Vote on Executive Compensation” on page 46.

SHAREHOLDER RIGHTS PLAN

 

On April 20, 2020, we adopted a limited duration shareholder rights plan (“Rights Plan”) in response to the unprecedented impact of the COVID-19 pandemic on the Company, including the considerable decline in the Company’s stock price, the substantial increase in trading volume and market volatility, and the significant impact of the pandemic across the retail industry. The Board believes adopting the Rights Plan was in the best interests of all of the Company’s shareholders. The Rights Plan was not adopted in response to any specific takeover bid or other proposal to acquire control of the Company. The Rights Plan expired on April 19, 2021, one year after it was adopted.

COMMUNICATIONS WITH THE BOARD

 

Shareholders and other interested parties may contact an individual director, including the independent Chairman, the Board as a group, or a specified Board committee or group, including the independent directors as a group, at the following address: Office of the Corporate Secretary, Express, Inc., 1 Express Drive, Columbus, OH 43230 Attn: Board of Directors. Any correspondence should clearly indicate whether the correspondence is intended for an individual director, the Board as a group, or a specified committee or group of directors.

All such reports or correspondence will be forwarded to the appropriate director or group of directors as indicated on the correspondence unless the correspondence is of a trivial nature, irrelevant to the Board’s responsibilities, or already addressed by the

 

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Corporate Governance

 

Board. A report will be made to the Audit Committee of all communications to the Board, and all such correspondence is made available to all directors.

BOARD MEETINGS

 

The Board held a total of 15 meetings during 2020. Each director attended at least 75% of Board meetings held during the year, as well as at least 75% of meetings of the committees on which he or she served during 2020. Directors are expected to attend our annual meetings of shareholders. All directors attended our 2020 annual meeting of shareholders, which was held virtually via a live webcast.

The independent directors are given an opportunity to meet in executive session at each Board meeting and do so routinely.

CORPORATE GOVERNANCE PRINCIPLES

 

The Board has adopted policies and procedures to ensure effective governance of Express. Our Corporate Governance Guidelines may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide the Corporate Governance Guidelines in print without charge upon request by telephone at (888) 423-2421, via email to IR@express.com, or via mail delivered to Express, Inc., 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.

The Compensation and Governance Committee reviews our Corporate Governance Guidelines from time to time as necessary, but no less than annually, and may propose modifications to the principles and other key governance practices from time to time for adoption by the Board. The Board most recently updated our Corporate Governance Guidelines in June 2020.

DIRECTOR ELECTION STANDARDS

 

Our Bylaws and Corporate Governance Guidelines provide for a majority voting standard in uncontested director elections. Therefore, in uncontested director elections, a director nominee must receive more votes cast for than against their election in order to be elected to the Board. The Board expects a director to tender their resignation if he or she fails to receive the required number of votes for election or re-election.

The Company has a classified Board, with each class of directors serving 3-year terms. Our certificate of incorporation provides that, subject to any rights applicable to any then-outstanding preferred stock, the Board shall consist of such number of directors as is determined from time to time by resolution adopted by a majority of the total number of authorized directors, whether or not there are any vacancies in previously authorized directorships. Subject to any rights applicable to any then-outstanding preferred stock, any vacancies resulting from an increase in the size of the Board or otherwise must be filled by the directors then in office unless otherwise required by law or by a resolution passed by the Board. The term of office for each director will be until their successor is elected at an annual meeting of shareholders or their death, resignation, or removal, whichever is earliest to occur. Any additional directorships resulting from an increase in the size of the Board will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.

BOARD EVALUATIONS

 

The Board conducts a comprehensive annual self-evaluation to determine whether it and its committees are functioning effectively and to identify potential areas of improvement. The evaluation process includes written questionnaires and one-on-one interviews with each director. The Chairman shares a summary of the results with the full Board and action plans are created to address identified improvement opportunities.

OUTSIDE BOARD MEMBERSHIPS

 

Our Corporate Governance Guidelines provide that directors should not serve on more than four other public company boards. Directors are expected to advise the Chairman in advance of accepting an invitation to serve on another public company board or for-profit private company board and before accepting an assignment to any other public company’s audit or compensation committee. No director may serve as a director, officer, or employee of a competitor of ours.

 

CODE OF CONDUCT

 

Our Code of Conduct serves as the foundation for our compliance program and sets forth the ethical standards, legal requirements, and other policies we expect our directors, officers, and associates to comply with at all times. Shareholders may access a copy of our Code of Conduct on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide the Code of Conduct in print without charge upon request by telephone at (888) 423-2421, via email to IR@express.com or via mail delivered to the Office of the Corporate Secretary at 1 Express Drive, Columbus, OH 43230.

 

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We will promptly disclose any waivers of our Code of Conduct involving our directors or executive officers. We intend to satisfy any disclosure requirements regarding any amendment or waiver of our Code of Conduct by posting the information on the “Corporate Governance” page of our website which can be found at www.express.com/investor.

RELATED PERSON TRANSACTIONS

 

Under our current Related Person Transaction policy, a “Related Person Transaction” is any transaction, arrangement, or relationship between us or any of our subsidiaries and a Related Person where the amount involved exceeds $120,000 and the Related Person has or will have a direct or indirect material interest. A “Related Person” is any of our executive officers, directors, director nominees, any shareholder beneficially owning in excess of 5% of our stock or securities exchangeable for our stock, any immediate family member of any of the foregoing persons, and any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a partner or principal, or in a similar position, or in which such person has a 5% or greater beneficial ownership interest in such entity.

All Related Person Transactions must be approved or ratified by a majority of the disinterested directors on the Board or a designated committee thereof consisting solely of disinterested directors in accordance with our Related Person Transaction Policy. In approving any Related Person Transaction, the Board or the committee must determine that the transaction is on terms no less favorable in the aggregate than those generally available to an unaffiliated third-party under similar circumstances.

Since February 2, 2020, there has not been, and there is not currently proposed, any transaction or series of transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any Related Person had or will have a direct or indirect interest.

Director Compensation

OVERVIEW

 

Non-employee directors receive compensation for Board service, which is designed to fairly compensate them for their time and effort, be competitive with the market, and align their interests with the long-term interests of our shareholders. Employee directors receive no compensation for Board service. The Compensation and Governance Committee, together with its independent compensation consultant, periodically review the form and amount of director compensation and recommend changes to the Board, as appropriate. As part of its review, the Compensation and Governance Committee considers how the Company’s director compensation program compares to the programs at the peer companies we refer to in the executive compensation setting process. See “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Practices—The Role of Peer Companies and Benchmarking” beginning on page 45 for more information about our peer companies. The Compensation and Governance Committee believes that director compensation should be competitive with the market and geared towards attracting and retaining highly-qualified independent professionals to oversee the Company and represent the interests of the Company’s shareholders.

NON-EMPLOYEE DIRECTOR COMPENSATION

 

The annual cash retainers for our non-employee directors in 2020 are shown in the following table.

 

Annual Retainer Type

 

2020

Annual  Retainer Amount

 

Non-Employee Director

 

$75,000

 

Committee Service

 

$10,000

 

Chairman

 

$100,000

 

Audit Committee Chair

 

$20,000

 

Compensation and Governance Committee Chair

 

$20,000

 

 

Non-employee directors also receive equity grants on an annual basis. In 2020, non-employee directors were granted restricted stock units that had a fair value of approximately $117,453 on the date of grant and that vest on June 15, 2021, subject to continued service. The Company’s non-employee Chairman was entitled to an additional grant of restricted stock units that had a fair value of approximately $37,585 on the date of grant and that vest on June 15, 2021 subject to continued service. All directors receive reimbursement for reasonable out-of-pocket expenses incurred in connection with their Board service.

REASONABLE INDIVIDUAL COMPENSATION LIMITATIONS FOR NON-EMPLOYEE DIRECTORS

Under the Second Amended and Restated Express, Inc. 2018 Incentive Compensation Plan (the “Plan”), the aggregate value of all compensation paid or granted to any individual for service as a non-employee director during any calendar year, including awards granted under the 2018 Plan and cash fees paid by us, will not exceed $600,000, calculating the value of any awards granted during such calendar year based on the grant date fair value of such awards for financial reporting purposes, other than with respect to any special compensation paid to any non-employee director for their service as Chairman of the Board.

 

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DIRECTOR STOCK OWNERSHIP GUIDELINES

 

The Board has director stock ownership guidelines which call for non-employee directors to own an amount of our common stock equal to five times their annual cash retainer. Directors have five years to meet the guidelines. Under these guidelines, directors are generally not permitted to sell any shares of our common stock until they achieve the ownership guideline and thereafter are only permitted to sell shares to the extent that such sale would not cause the director to fall below the ownership guideline. To avoid fluctuating ownership requirements, once a director has achieved the applicable stock ownership guideline, he or she is considered to have satisfied the guideline, provided that the shares used to meet the underlying requirement are retained. As of the end of fiscal 2020, all non-employee directors have met or are on track to meet the stock ownership guidelines.

2020 DIRECTOR COMPENSATION TABLE

 

The following table sets forth information regarding compensation earned for each of our non-employee directors in fiscal 2020.

 

Director(1)

 

Fees Earned

or Paid in Cash

($)

 

Stock Awards

($)(3)(4)

 

Total

($)

 

Michael Archbold

 

105,000

 

117,453

 

222,453

 

Terry Davenport

 

85,000

 

117,453

 

202,453

 

Michael F. Devine

 

85,000

 

117,453

 

202,453

 

Karen Leever

 

85,000

 

117,453

 

202,453

 

Mylle Mangum

 

195,000

 

155,038

 

350,038

 

Winnie Park(2)

 

85,000

 

117,453

 

202,453

 

Peter Swinburn

 

105,000

 

117,453

 

222,453

 

 

(1)

Mr. Baxter did not receive compensation for service on the Board.

(2)

Effective September 2020, Ms. Park was appointed to serve on the Audit Committee and stepped down from service on the Compensation and Governance Committee.

(3)

Reflects the aggregate grant date fair value of restricted stock units. These values have been determined based on the assumptions and methodologies set forth in Note 9 of the Company’s financial statements included in our Annual Report. These amounts do not represent the actual amounts paid to or received by the named director during 2020. No stock options were granted to any of the Company’s non-employee directors in 2020.

(4)

The aggregate restricted stock units outstanding as of April 19, 2021 are as follows: Mr. Archbold (47,170 restricted stock units); Mr. Davenport (47,170 restricted stock units); Mr. Devine (47,170 restricted stock units); Ms. Leever (47,170 restricted stock units); Ms. Mangum (62,264 restricted stock units); Ms. Park (47,170 restricted stock units); and Mr. Swinburn (47,170 restricted stock units).

 

 

 

 

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Executive Officers

The following table sets forth the names, ages, and titles of our executive officers as of the Record Date:

 

Name

Age

Position

Timothy Baxter

51

Chief Executive Officer

Matthew Moellering

54

President and Chief Operating Officer

Malissa Akay

44

Executive Vice President and Chief Merchandising Officer

Sara Tervo

45

Executive Vice President and Chief Marketing Officer

Periclis (“Perry”) Pericleous

48

Senior Vice President, Chief Financial Officer and Treasurer

 

Our executive officers are appointed by the Board and serve until their successors have been duly elected and qualified or their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Set forth below is a description of the background of the persons named above, other than Mr. Baxter, whose background information is provided in “Election of Class II Directors (Proposal No. 1)” on page 7.

Matthew Moellering has served as our President and Chief Operating Officer since September 2019. He also served as Interim President and Interim Chief Executive Officer from January 2019 to June 2019. Prior to his current role, he was Executive Vice President and Chief Operating Officer from 2011 to 2019; Executive Vice President, Chief Administrative Officer, Chief Financial Officer, Treasurer and Secretary from 2009 until 2011, Senior Vice President, Chief Financial Officer, Treasurer and Secretary from 2007 until 2009, and Vice President of Finance from 2006 until 2007. Before joining Express, he served in various roles with Limited Brands (now known as L Brands) from 2003 until 2006, including Vice President of Financial Planning. Mr. Moellering also served in various roles with Procter and Gamble where he was employed from 1995 until 2003 and prior to that he served as an officer in the United States Army. Mr. Moellering serves on the board of directors of L.L.Bean, Inc. which is a privately held company.

Malissa Akay has served as our Executive Vice President and Chief Merchandising Officer since September 2019. Ms. Akay joined Express from Lane Bryant where she most recently served as Executive Vice President and General Merchandise Manager from 2018 to 2019 and as Senior Vice President and General Merchandise Manager from 2016 to 2017. Prior to that, Mr. Akay served in various roles with Ralph Lauren from 2012 until 2016 including Chief Merchandising Officer, Polo Accessories, and Senior Vice President, Merchandising, Planning and Allocation and Visual Merchandising. Previously, Ms. Akay spent 13 years with DFS Group where she held merchandising leadership positions across multiple categories.

Sara Tervo has served as our Executive Vice President and Chief Marketing Officer since September 2019. Ms. Tervo joined Express from Justice where she was Executive Vice President and Chief Marketing Officer from 2016 to 2019. Prior to that Ms. Tervo held multiple leadership positions with L Brands from 1998 to 2016 across marketing, creative services and public relations, including Executive Vice President, Marketing for Victoria’s Secret and Senior Vice President, Marketing for PINK.

Periclis (“Perry”) Pericleous has served as our Senior Vice President, Chief Financial Officer and Treasurer since July 2015. Prior to this appointment, he held a number of other leadership positions within our finance organization, including Vice President of Finance from December 2010 until July 2015, Director of Financial Planning & Analysis from April 2010 until December 2010, and Director of Store Finance from November 2007 until April 2010. Mr. Pericleous joined Express in August 1999 and served in a variety of roles of increasing responsibility across the finance organization, including in store finance and financial reporting. He began his career in 1996, serving in various accounting roles at Drug Emporium and then Value City Department Stores. Mr. Pericleous is a Certified Public Accountant.

 

 

 

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Executive Compensation

Compensation Discussion and Analysis

EXECUTIVE SUMMARY

 

Express is a modern, versatile, dual gender apparel and accessories brand that helps people get dressed for every day and any occasion. We believe that style, quality and value should all be found in one place, and our Express Edit philosophy ensures that everything we design is smart and beautiful. Our brand purpose is to create confidence and inspire self-expression. We operate over 500 retail and factory outlet stores in the United States and Puerto Rico, as well as an online store.

Despite the many challenges and impacts of COVID-19, we took a number of decisive actions to protect our balance sheet. As a result, we are well positioned in 2021 to advance our transformation across each one of our four strategic pillars (Product, Brand, Customer, Execution).

We have a reasonable compensation program designed to reward long-term performance. We target pay opportunity for our CEO below our peer group median, and design our executive compensation program to be significantly performance-based and long-term oriented. No short-term or long-term incentives were earned by our executives in 2020, reflecting business results. For more information about compensation program decisions made in 2020 by our Compensation and Governance Committee (the “Committee”), please refer to “2020 Compensation Highlights” on page 30.

2020 Named Executive Officers

This Compensation Discussion and Analysis focuses on the compensation of our named executive officers (our “NEOs”) for 2020, who are listed below:

 

Name

Position

Timothy Baxter

Chief Executive Officer

Matthew Moellering

President and Chief Operating Officer

Malissa Akay

Executive Vice President and Chief Merchandising Officer

Sara Tervo

Executive Vice President and Chief Marketing Officer

Periclis (“Perry”) Pericleous

Senior Vice President, Chief Financial Officer and Treasurer

 


 

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2020 BUSINESS PERFORMANCE

Key Financial Results

 

Net Sales

Operating Loss

Earnings Per Share

EBITDA

Net sales decreased 40% to $1,208 million from $2,019 million in 2019, materially impacted by the COVID-19 pandemic.

 

Operating Loss was $455.2 million, and on an adjusted basis operating loss was $420.8 million, compared to Operating Loss of $217.9 million, and Operating Loss of $6.8 million on an adjusted basis, in 2019.

EPS reflected a loss of $6.27 per diluted share compared to a loss of $2.49 per diluted share in 2019. Adjusted EPS reflected a loss of $4.86 per diluted share, compared to a loss of $0.08 per diluted share, in 2019.

EBITDA reflected a loss of $385 million compared to a loss of $133 million in 2019. Adjusted EBITDA reflected a loss of $348 million compared to income of $78 million in 2019.

 

Refer to Appendix A for more information on adjustments made to operating loss, EPS, and EBITDA.

 

 

 

Liquidity Highlights

 

Cost Savings

 

Executed costs savings of approximately $250 million through various COVID-19 mitigation actions and other strategic actions.

 

 

$250

MILLION

Rent Savings

 

Negotiated $85 million in landlord concessions through rent abatements, deferrals, reductions and allowances.

 

$85

MILLION

 

Revolver Draw

 

Accessed $165 million* on existing revolver to improve liquidity.

 

 

 

 

$165

MILLION

*Repaid approximately $60 million after receipt of additional debt financing.

Debt Financing

 

Secured a loan agreement that strengthens the Company’s liquidity position by an additional $140 million.*

$140

MILLION

*Includes a $50 million bridge loan to be repaid upon receipt of the CARES Act refund.

CARES Act

Filed to receive CARES Act benefit that provides $120 million* of additional liquidity.

 

$120

MILLION

*Filing occurred in 2021. $50 million to be repaid to bridge loan lender upon receipt of CARES Act refund.

 

 

 

 

 

 

 

 

 

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2020 COMPENSATION HIGHLIGHTS

Our executive compensation program for 2020 was designed to strongly align executive compensation with the Company’s financial performance. In 2020:

 

 

 

  CEO Target Pay Opportunity Established Between 25th Percentile and Median Level of our Peer Group: Mr. Baxter’s target pay opportunity of $6.5M, established in 2019 between the 25th percentile and median level of our peer group, remained the same for 2020.

  CEO Compensation Reinforces Pay-for-Performance: 85% of Mr. Baxter’s target compensation package was composed of short-term cash incentives and long-term equity and cash incentives. The performance-based short-term and long-term incentives for both Mr. Baxter and other executives continued to include challenging performance targets so that realizable compensation reflects business performance.

  Short-Term Incentive Program Continued to Include Challenging Financial and Strategic Performance Components: Under the Company’s short-term cash incentive program, 75% of the target bonus opportunity was based on achievement of challenging financial performance goals and 25% was based on achievement of challenging operational performance goals tied to key strategic initiatives in furtherance of the Company’s long-term growth strategy. See “What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Short-Term Incentives” beginning on page 35 for more information regarding performance goals for the 2020 short-term performance-based cash incentive program.

  Delayed Setting of Challenging Long-Term Incentive Performance Goals in Light of COVID-19: Historically, the Company’s performance-based long-term incentive awards were dependent on the achievement of challenging three-year Adjusted EPS performance targets, subject to modification upwards or downwards by 20% based on the Company’s TSR performance relative to the Dow Jones U.S. Retail Apparel Index (“Relative TSR”). However, in 2020, 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 goals for the long-term performance-based awards granted in March 2020 given the uncertain economic conditions. Accordingly, the Committee delayed setting performance goals for 2020 long-term performance awards until February 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. Because of the delayed setting of the goals, 2020 long-term performance awards, which were granted in March 2020 and remain subject to a three-year vesting cliff, are subject to a two-year performance period 2021-22.  

  Long-Term Performance Goals Established Based on Challenging Adjusted EBITDA Achievement: In February 2021, when setting the delayed performance goals for the 2020 long-term performance based awards, the Committee, together with the executive leadership team, took into account that cash flow would be the key driver of the Company’s future success and of long-term shareholder value creation. Accordingly, the Committee determined to establish long-term performance goals based on Adjusted EBITDA because it focuses on the operational aspect of the business from a cash generation standpoint and is thus a better measure for cash than EPS. The Committee established rigorous 2-year 2021-2022 Adjusted EBITDA goals, so that business performance must significantly improve in the next two years in order for the 2020 long-term performance-based awards to pay out. See “What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives— 2020 Modifications to Long-Term Incentive Award Program” on page 38 for more information about the 2020 long-term performance awards.

  Portion of Time-Based Long-Term Incentives Cash Denominated: While performance-based awards continue to represent 50% of our annual long-term incentive grants to our NEOs, in order to conserve shares under our equity incentive plan and manage the Company’s burn rate and dilution on account of what the Committee considered an unusually low share price at the time of grant, in 2020, (i) all performance-based long-term incentive awards were delivered in the form of performance-based cash awards and (ii) approximately 40% of long-term time-based awards were delivered in the form of restricted cash awards with time-based vesting, while the remaining portion consisted of time-based restricted stock units. Time-based restricted cash awards were introduced for 2020 in order to conserve shares while still promoting the stability and retention of a high-performing executive leadership team over the long term. See “What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives— 2020 Long-Term Incentive Award Mix” on page 39 for more information.

  Realizable Compensation for our NEOs was Significantly Below Target, Reflecting Business Results: Actual realizable total direct compensation for our CEO and other NEOs fell significantly below target in 2020. With respect to total direct compensation opportunities for 2020, (i) no short-term cash incentives paid out for either of the Spring and Fall seasons and (ii) business performance must significantly improve over the next two years for any payout of the 2020 performance-based long-term incentives to occur. With respect to long-term incentives granted in prior years, (i) the 2018 performance-based long-term awards (which were subject to a three-year performance period through 2020) were entirely forfeited and (ii) the 2019 performance-based awards (which are subject to a three-year performance period through 2021) are not expected to pay out. See “What We Pay And Why: Elements of Compensation —Performance-Based Incentives—Long-Term Incentives— Performance-Based Awards” on page 39 for more information on the payout status of the Company’s long-term performance awards.

 

 

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2020 CEO Target Total Direct Compensation (“TDC”) Versus Summary Compensation Table TDC(1)

The table below shows the annual target total direct compensation package for our CEO as compared to Mr. Baxter’s 2020 annual total direct compensation as disclosed in the Summary Compensation Table on page 49.

 

Elements of Compensation

2020 CEO Annual Target TDC

2020 CEO Summary Compensation Table TDC

 

Base Salary

$1,000,000

$1,000,000

      There was no change in Mr. Baxter’s base salary level in 2020 versus 2019.

      Reflects that no short-term cash incentive awards paid out for either of the 2020 Spring and Fall seasons.

      Reflects that (i) 50% of Mr. Baxter’s 2020 long term incentive opportunity was delivered in the form of performance-based cash awards, and (ii) approximately 20% of Mr. Baxter’s long-term awards were delivered in the form of time-based restricted cash awards, both of which are not included in the Summary Compensation Table until earned. The remaining 30% of long-term incentive awards were delivered in the form of time-based RSUs.  

 

Incentive Compensation Opportunity at Target

$1,300,000

$0

 

 

Annual Long-Term Incentive Opportunity

$4,200,000

 

 

$1,339,246

Total TDC

$6,500,000

$2,339,246

 

(1) Total Direct Compensation is made up of base salary, short-term incentives, and long-term incentives, and excludes all other compensation set forth in the Summary Compensation Table on page 49.

 

Alignment Between Executive Compensation Program and Company Performance

The alignment between our executive compensation program and the Company’s financial performance is set forth in the table below, which shows how our compensation program paid out or is tracking to pay out for our NEOs and other executives at the end of 2020. In addition to the payout information shown below, long-term performance-based awards granted to our executives in each of 2016 and 2017 have also not paid out.

 

Short-Term Annual Cash Incentive

Compensation Program

Long-Term Performance-Based Awards Subject to Three-Year Performance

Periods(1)

Spring 2020

Fall 2020

2018-2020

2019-2021

2020-2022

No Payout

No Payout

No Payout

Not Expected to Pay Out

Will only pay out if Adjusted EBITDA performance significantly improves over the next two years.

(1) As discussed further in “—Performance-Based Incentives—Long-Term Incentives—2020 Modifications to Long-Term Incentive Program” on page 38, 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 delayed setting performance targets for the 2020 long-term performance awards until February 2021. Therefore, such 2020 awards are subject to a two-year performance period instead of a three-year performance period.

 

For more information on our short-term cash incentive program, refer to “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” beginning on page 35. For information on our long-term incentive program, see “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives” beginning on page 38.


 

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EXECUTIVE COMPENSATION OBJECTIVES AND PRACTICES

Below we highlight the core objectives that serve as the foundation for our compensation program, the practices we have implemented to achieve those objectives, and practices we have not implemented because we do not believe they would serve the Company’s long-term interests.

 

    Program
    Objective

 

What We DO:

    Pay for

    Performance

 

Variable Compensation. A significant portion of our executives’ compensation opportunity is variable and tied to the achievement of challenging financial performance targets and changes in the Company’s stock price. In 2020, 72% of CEO target total direct compensation was variable.

 

 

Short-Term and Long-Term Incentive Compensation with Challenging Performance Targets. 75% of our short-term cash incentive awards are subject to the achievement of challenging financial performance goals, and the remaining 25% depends on the achievement of operational performance goals tied to our strategic initiatives. One-half of our long-term incentive awards are also subject to the achievement of challenging financial performance goals that incentivize the creation of shareholder value. See “—Performance-Based Incentives—Short-Term Incentives” on page 35 for information regarding 2020 short-term performance targets and see “—Performance-Based Incentives—Long-Term Incentives” on page 38 for information about long-term performance targets.

 

 

Performance-Based Long-Term Incentive Awards. In 2020, we granted a mix of long-term incentives, comprised of 50% performance-based cash awards, and 50% time-based restricted stock and cash units. 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 to delay setting performance targets for the 2020 performance-based cash awards until February 2021. See “—Performance-Based Incentives—Long-Term Incentives” beginning on page 38 for more information on long-term incentive performance targets.

 

    Pay

    Competitively

 

Robust Compensation Setting Process. We utilize market data without strict benchmarking in order to make sure executives are paid commensurate with their experience and performance. Executive compensation packages are heavily weighted on performance but also include base salary and other benefits that make them competitive with our peers.

 

    Pay

    Responsibly

 

Long-Term Vesting Requirements. Time-based restricted stock units and time-based restricted cash awards granted to our NEOs in 2020 vest ratably over 3 years, while performance-based restricted cash awards granted to our NEOs in 2020 cliff vest after 3 years, subject to achievement of challenging performance targets, in order to align the interests of our executives with our shareholders. No stock options were granted to our NEOs in 2020.

 

 

 

Annual Shareholder Engagement Process. As part of our annual shareholder engagement cycle, we reach out to our largest shareholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes our 20 largest shareholders. We also offer our shareholders the opportunity to vote annually on the Company’s executive compensation program. We value the feedback we receive from shareholders and consider it when making decisions on behalf of the Company, including with respect to executive compensation. Refer to page 64 for more information about this year’s non-binding say-on-pay proposal.

 

 

 

Stock Ownership Guidelines. Each of our executives is subject to substantial stock ownership requirements. Under the guidelines, executives are generally not permitted to sell any shares until they achieve the ownership guideline and thereafter are only permitted to sell shares to the extent that such sale would not cause the executive to fall below the ownership guideline.

 

 

 

Mitigate Undue Risk. The mix between short-term incentives and long-term incentives is intended to discourage executives and associates from maximizing short-term performance at the expense of long-term performance. In 2020, our short-term cash-incentive program had financial performance goals based on year end cash and Fall season internal sales and operational goals based on Fall season e-commerce demand, while our long-term performance-based awards had performance targets based on Adjusted EBITDA, thereby discouraging participants from focusing on the achievement of one performance measure at the expense of another.

 

 

 

Capped Payouts. Payouts are capped at 200% of target under our cash and equity incentive award programs.

 

 

Independent Compensation Consulting Firm. The Compensation and Governance Committee (in this “Executive Compensation” section, the “Committee”) is advised by an independent compensation consultant that provides no other services to the Company.

 

 

 

Clawback Policy. Our executives are subject to a robust clawback policy that in addition to providing for clawbacks related to financial restatements, also allows for the clawback of cash and equity incentive compensation in the event of management misconduct that could significantly damage the reputation of the Company, unrelated to a financial restatement.

 

 

 

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What We DON’T DO:

    Pay

 

No Special Tax Gross-Ups. We do not provide special tax gross-ups to executives.

    Responsibly

 

No Pension Plans or Other Post-Employment Defined Benefit Plans. We do not provide any qualified or non-qualified post-employment defined benefit plans.

 

No Special Executive Perquisites. We do not provide our executives with any special perquisites.

 

No Liberal Share Recycling, Repricing of Underwater Stock Options, or Reloads of Stock Options. The Company’s Second Amended and Restated 2018 Incentive Compensation Plan (the “2018 Plan”) prohibits the repricing of stock options without the consent of shareholders, does not allow for reloads of stock options to the extent stock options are used to pay the exercise price or taxes with respect to stock option exercises, and includes an explicit prohibition on liberal share recycling.

 

No Hedging or Pledging Transactions. We prohibit associates, including NEOs, and directors from hedging or pledging any securities of the Company held by them.

 

No Single Trigger Change-in-Control Payments. Our NEOs are not currently entitled to any single-trigger special vesting, severance, or other benefits in a change-in-control.

 

 

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WHAT WE PAY AND WHY: ELEMENTS OF COMPENSATION

 

Our executive compensation program is designed to strongly align executive compensation with the Company’s financial performance. The elements of our compensation program for 2020 were generally as follows:

 

 Compensation
 Element

 

Form

 

Performance/
Vesting Period

 

Performance
Metric

 

Alignment to Compensation
Objectives

 

 

 

 

 

 

 

 

 

Base Salary

 

Cash

 

        

 

        

 

Salary is set at competitive market levels in order to compete for, obtain, and retain the talent necessary to successfully operate the Company and execute our strategic plans.

 

 

 

 

 

 

 

 

 

Short-Term Incentives

 

Cash

 

Six-month operating seasons

(because of the business disruption and store closures resulting from the COVID-19 pandemic, 2020 Spring season targets set prior to the pandemic were cancelled and no amounts were earned)

 

Financial Goal (Fall 2020 only):

Year-end Cash with Net Sales gatekeeper

(75% weighting)

 

75% of the incentive payment opportunity depends on the achievement of pre-established objective financial goals, which is intended to motivate executives to work effectively to achieve financial performance objectives aligned with our seasonal business cycle and reward them when objectives are met.

 

 

 

Operational Goal (Fall 2020 only):

E-commerce Demand

(25% weighting)

 

25% of the incentive payment opportunity is based on achievement of operational goals tied to key performance metrics in furtherance of the Company’s long-term growth strategy.

 

 

 

 

 

 

 

 

 

Long-Term Incentives

 

50% performance-based cash:

 

3-year performance and vesting period (while the vesting period remains at 3 years, the performance period usually set at 3 years was, modified to a  2-year period 2021-2022 due to COVID-19)(1)

 

Adjusted

EBITDA (modified from Adjusted EPS) 2)

 

3-year vesting periods and modified 2-year performance periods based on challenging financial performance targets aligns the interests of our executives with the interests of shareholders in creating long-term value.(1)

 

 

 

 

 

50% time-based restricted stock and cash units

 

 

3-year vesting requirements (reduced from 4 years)

 

        

 

Multi-year vesting requirements align our executives’ interests with our shareholders and incentivize retention of our executive talent.

 

 

 

 

 

 

 

 

 

Other

 

–    Defined contribution retirement plans

 

–    Health and welfare benefits

 

–    Termination benefits

 

        

 

        

 

We seek to offer retirement plan benefits, health and welfare benefits, and termination benefits at levels that are competitive with the market.

 

(1) Although we have historically set the performance period as three years, 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 to delay setting the performance target for the long-term performance awards granted in 2020 until February 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. Because of the delayed setting of the target, such awards will be subject to a two-year performance period of 2021-2022 based on adjusted EBITDA.

 

(2) See “—Performance-Based Incentives—Long-Term Incentives—Modifications Made to Long-Term Performance Awards in 2020” for a discussion on the use of Adjusted EBITDA as a performance target in our long-term incentive program.

(

 

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The Committee strives to achieve an appropriate mix between the various elements of our compensation program to meet our compensation objectives; however, it does not apply any rigid allocation formula in setting our executive compensation, and the Committee may make adjustments to this approach for various positions on a case-by-case basis as appropriate. A significant portion of executive compensation is intended to be variable and tied to the Company’s financial performance and stock price. The following charts show that in 2020, 72% of CEO compensation and 60% of other NEO compensation at target was variable.

 

 

(1)

Target total direct compensation is comprised of base salary, short-term incentives, and long-term incentives. Variable compensation is comprised of short-term incentives, long-term performance-based cash awards and long-term time-based restricted stock units. Variable compensation does not include base salary and long-term time-based restricted cash awards.

BASE SALARY

We provide a base salary to our executive officers to compensate them for their services during the year and to provide them with a stable source of income. NEO base salaries are determined by an annual assessment of a number of factors, including the individual’s current base salary, job responsibilities, peer group and other data, relevant market survey data, and individual and Company performance.

The annual base salaries in effect for each of our NEOs as of January 30, 2021 are shown in the following table:

 

Name

 

2019

Fiscal Year End

 

Changes to Base Salary During Fiscal 2020

 

2020

Fiscal Year End

 

Timothy Baxter

 

$1,000,000

 

No change in 2020.

 

$1,000,000

 

Matthew Moellering

 

$825,000

 

No change in 2020.

 

$825,000

 

Malissa Akay

 

$725,000

 

No change in 2020.

 

$725,000

 

Sara Tervo

 

$600,000

 

No change in 2020.

 

$600,000

 

Periclis (“Perry”) Pericleous

 

$500,000

 

No change in 2020.

 

$500,000

 

 

Annual base salaries for our NEOs are expected to remain the same in 2021.

PERFORMANCE-BASED INCENTIVES

Short-Term Incentives

Our short-term performance-based cash incentive compensation program provides our NEOs with incentive payment opportunities for each six-month operating season that corresponds to the traditional retail selling seasons of Spring (February through July) and Fall (August through January). The target short-term performance-based cash incentive compensation opportunity for each eligible executive is set at a percentage of base salary. 40% of each executive’s annual target bonus is allocated to the six-month Spring season and 60% is allocated to the six-month Fall season which is intended to align with the seasonality in our business where higher portions of our net sales and net income are typically realized in the six-month Fall season due primarily to the impact of the holiday season.

The Committee generally sets performance goals near the beginning of each six-month season based on an analysis of (i) historical performance, (ii) internal financial plans, (iii) strategic objectives, and (iv) general economic conditions. The seasonal design allows us to establish appropriately challenging performance targets that align business performance expectations with (1) the seasonal nature of the way we manage our business and (2) prevailing market and economic conditions which can change quickly in the retail apparel sector.

Performance goals are set at the same targets for all leadership in the business. We believe it is important to have all members of leadership working towards the same goals and that those goals are clear, understandable, and within their control.

 

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Executive Compensation

 

2020 Short-Term Cash Incentive Payout Opportunity

For 2020, the amount of the performance-based cash incentive opportunity for participating executives ranged from zero to 200% of their incentive target, based upon the extent to which the performance goals were achieved. The threshold, target, and maximum short-term performance-based cash incentive payout opportunities for our NEOs for 2020 are set forth in the “Grants of Plan-Based Awards” table on page 50.

The target cash incentive compensation opportunity as a percentage of base salary in effect for 2020 for each of our NEOs is shown below:

 

Annual Short-Term Cash Incentive Payout Opportunity at Target (as a % of Base Salary)

 

 

 

Name

2019

 

Changes to Short-Term Cash Incentives During Fiscal 2020

 

2020

 

Timothy Baxter

130%

 

No change in 2020.

 

130%

 

Matthew Moellering

90%

 

No change in 2020.

 

90%

 

Malissa Akay

75%

 

No change in 2020.

 

75%

 

Sara Tervo

75%

 

No change in 2020.

 

75%

 

Periclis (“Perry”) Pericleous

65%

 

No change in 2020.

 

65%

 

 

Final payout amounts for each six-month season have historically been approved by the Committee at its first regularly scheduled in-person Committee meeting following the end of each six-month operating season and are paid out to executives after such approval.

2020 Short-Term Cash Incentive Compensation Goals and Payouts

Our seasonal short-term performance-based cash incentive compensation program includes a financial performance goal and an operational performance goal based on the achievement of key strategic initiatives that tie to our long-term strategy. 75% of the target payout opportunity was based on a financial performance goal while 25% was based on an operational performance goal.

 

Spring Season (40% weighting)

The Committee set financial and operational performance targets for the 2020 Spring season prior to the onset of the COVID-19 pandemic. Following the closure of the Company’s retail and outlet stores in response to the pandemic and to evolving local and state restrictions and guidelines, the Committee cancelled the Spring season performance targets. Due to the uncertainty stemming from the impact of the COVID-19 pandemic on our business, consumer demand, and the retail industry, the Committee did not establish new performance targets for the 2020 Spring season. Accordingly, our NEOs forfeited their respective incentive compensation opportunity for the 2020 Spring season.

 

Fall Season (60% weighting)

Fall Financial Performance Goal (75% Weighting). The financial performance goal under the short-term performance-based cash incentive program has traditionally been based on operating income, subject to adjustments for certain extraordinary items. However, the Committee considered various factors when setting the financial performance targets for Fall 2020, including the Company’s strategic priorities for the Fall season and the importance of managing liquidity amid an uncertain macro-economic environment and challenging business conditions due to the impact of the ongoing COVID-19 pandemic.

Based on these considerations, the Committee decided to base the Fall 2020 financial performance goal on a year-end cash metric in order to incentivize the executive leadership team to manage the Company’s liquidity during the Fall season. In order to ensure that executives still remained incentivized to drive strong business results during the Fall season, the Committee established a challenging Fall season internal sales gatekeeper that would preclude the Fall incentive goal from paying out if the gatekeeper target was not exceeded.

The year-end cash goal had threshold, target, and maximum payout levels which allowed participating executives to double the incentive payout associated with achievement of the financial goal if the maximum year-end cash goal was achieved, subject to exceeding the Fall 2020 Internal Sales Goal. The year-end cash metric provided for adjustments to exclude the impact of changes in borrowings and other significant unplanned cash related events.

The year-end cash and Fall 2020 Internal Sales financial performance goals were set with anticipation of a recovery in the overall macroeconomic environment during the Fall season. However, due to the resurgence of COVID-19 in the second half of 2020, the Company continued to experience an adverse sales impact and challenges in traffic.

 

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The following table illustrates the financial performance goals and actual payout levels for the six-month Fall season for our NEOs. The Company did not meet either of the Fall 2020 Internal Sales or Year End Cash goals. Therefore, the financial goal did not pay out under the Company’s seasonal short-term performance-based cash incentive program for the 2020 Fall season.

 

Performance Metric

 

Weighting

 

 

Threshold

Goal

 

Target Goal

 

Maximum

Goal

 

 

Actual Payout

Year End Cash

 

75%

 

 

$80M

 

$100M

 

$150M

 

No Payout

Fall 2020 Internal Sales Gatekeeper

 

 

 

$800M

 

 

 

 

 

 

Fall Operational Performance Goal (25% Weighting). The Committee determined to base the operational performance goal under the short-term performance-based cash incentive program for Fall 2020 on e-commerce demand given the Company’s intensified focus on its e-commerce business amid the continued pressure on traffic in the Company’s retail and outlet stores. The Fall operational performance goal had a threshold, target, and maximum payout which allowed participating executives to double the incentive payout associated with achievement of the operational performance goal if the maximum e-commerce demand goal was achieved.

 

The operational performance goals were set with anticipation of a recovery in the overall macroeconomic environment during the Fall season. However, due to the resurgence of COVID-19 in the second half of 2020, the Company continued to experience an adverse sales impact and challenges in traffic.    

 

The following table illustrates the operational performance goal and payout levels for the six-month Fall season for our NEOs. The Company did not achieve the threshold goal shown below. Therefore, the operational performance goal did not pay out under the Company’s seasonal short-term performance-based cash incentive program for the 2020 Fall season.

 

Performance Metric

 

Weighting

 

 

Threshold

Goal

 

Target Goal

 

Maximum

Goal

 

Actual Payout

Fall 2020

e-Commerce Demand

 

25%

 

 

+10%

 

+18%

 

+22%

 

No Payout

 

2021 Short-Term Cash Incentive Compensation

Target cash incentive compensation opportunity as a percentage of base salary is expected to remain the same for our NEOs in 2021. See “—2021 Compensation Program Decisions” on page 42 for more information regarding the performance targets and design of the 2021 Short-Term Performance-Based Incentive Compensation Program.”

 

 

 

 

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Long-Term Incentives

For 2020, the Committee and Board determined that our NEOs would receive a mix of long-term incentives comprised of the following:

 

 

Our long-term incentive awards are generally intended to accomplish the following main objectives: (1) create a direct correlation between the Company’s financial performance and stock price and compensation paid to our NEOs; (2) retention of our NEOs; (3) assist in building equity ownership of our NEOs to increase alignment with long-term shareholder interests; (4) attract and motivate key associates; (5) reward participants for performance in relation to the creation of shareholder value; and (6) deliver competitive levels of compensation consistent with our compensation objectives. The total grant date fair value of awards for our NEOs are determined on a position-by-position basis using market data for corresponding positions in our peer group and other relevant market survey data, the individual’s job responsibilities, and individual performance.

Executives are generally granted long-term incentive awards as part of our annual merit review process. During this process, the Committee determines the appropriate overall value and mix of long-term incentive grants for our NEOs. For more information on our executive compensation practices, including the annual merit review process and the objectives and factors considered by the Committee as part of the executive compensation decision making process, see “—Executive Compensation Practices—“Determining Compensation for the CEO” and “Determining Compensation for the Other NEOs” beginning on page 45.

2020 Modifications to Long-Term Incentive Award Program

Modification of Long-Term Incentive Mix. The Committee made its annual grant of long-term incentive awards to our NEOs on March 24, 2020 amid a significant decline in the Company’s stock price resulting from the unprecedented business disruption of the COVID-19 pandemic. In order to conserve shares under our equity incentive plan while still promoting the stability and retention of a high-performing executive leadership team over the long-term, the Committee determined, as described in more detail below, that a portion of the long-term incentives normally granted as restricted stock units would be granted instead as restricted cash awards.  

Modification of Long-Term Time-Based Vesting Terms. In order to better align the Company’s vesting treatment of long-term awards with practices among the Company’s peer group, the Committee reduced the vesting schedule for time-based long-term incentive awards from four to three years.

Delayed Setting of Long-Term Performance Targets. 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 for the long-term performance-based awards granted in March 2020 given the uncertain economic conditions. Accordingly, the Committee delayed setting performance targets for the 2020 long-term performance-based awards until February of 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. Because of the delayed setting of the long-term performance target, 2020 long-term performance awards, which were granted in March 2020 and remain subject to a three-year vesting cliff, are subject to a two-year performance period 2021-22.  

Long-Term Performance Targets Established Based on Challenging Adjusted EBITDA Goals. In February 2021, when setting the delayed performance targets for the 2020 long-term performance-based awards, the Committee, together with the executive leadership team, took into account that cash flow would be the key driver of the Company’s future success and of long-term shareholder value creation. Accordingly, the Committee determined to establish long-term performance targets based on EBITDA, subject to adjustments for extraordinary items (“Adjusted EBITDA”), because it focuses on the operational aspect of the business from a cash generation standpoint and is thus a better measure for cash than EPS. The Committee established  rigorous 2-year 2021-2022 EBITDA goals, so that business performance must significantly improve in the next two years in order for the 2020 long-term performance-based awards to pay out. See “— 2020 Performance-Based Awards” below for more information on the 2021-2022 Adjusted EBITDA target.

Relative TSR and Share Price Hurdle. Recognizing that a key driver of the Company’s go forward success was tied to its ability to return to positive EBITDA, the Committee determined that subjecting 2020 long-term performance-based awards to a Relative TSR modifier and Share Price Hurdle no longer provided a clear incentive for executives. When making this determination the Committee took into account that (i) given the uncertainty surrounding the continuing impacts of the COVID-19 pandemic on the Company’s stock price and the retail industry, a Relative TSR modifier and a Share Price Hurdle were no longer measures over which executives could expect to have a significant impact. The Company may re-implement these elements when the Committee deems that the retail industry and Company stock price conditions have stabilized such that these elements appropriately incentive executives.

 

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2020 Long-Term Incentive Award Mix

In 2019 the Company generally structured its long-term incentive program by granting 50% of the awards in restricted stock units (with the exception of non-qualified stock options granted to our new CEO in 2019) vesting over four years and 50% of the awards in performance-based cash. For 2020, in order to conserve shares under the Company’s equity incentive plan and manage the Company’s burn rate and dilution on account of what the Committee considered an unusually low share price at the time of grant, the Committee determined to adjust the mix of awards included in the 2020 long-term incentive grant. As a result, 2020 long-term incentive awards were comprised of approximately 50% performance-based cash, 30% time-based restricted stock units, and 20% time-based cash.

The table below shows how the Committee allocated the long-term time-based award mix between time-based restricted stock units and time-based restricted cash awards in order to maintain the value of the long-term time-based incentive award opportunity for each NEO in 2020. One-third of the restricted stock units and the restricted cash awards are scheduled to vest on each of April 15, 2021, 2022, and 2023, subject to continued employment with the Company.

Name

Total Long-Term Incentive Grant Value

Performance-Based Long-Term Incentive Grant Value

Number of Time-Based RSUs Granted

Value of RSU grant at $1.60 per share (1)

Value of Time-Based Cash Award

Timothy Baxter

$4,200,000

$2,100,000

792,453

$1,267,925

$832,075

Matthew Moellering

$2,000,000

$1,000,000

377,358

$603,773

$396,227

Malissa Akay

$900,000

$450,000

169,811

$271,698

$178,302

Sara Tervo

$700,000

$350,000

132,075

$211,320

$138,680

Periclis (“Perry”) Pericleous

$550,000

$275,000

103,774

$166,038

$108,962

(1)

Value reflects actual closing stock price as of March 16, 2020, the date the award mix was determined.  The value disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards Table reflects the change in share price between the date of the share price used by the Committee to determine and calculate the size of the awards and the date of grant (March 24, 2020).

Performance-Based Awards

As described above, 2020 long-term performance-based awards granted to our NEOs in March 2020 are subject to a three-year vesting period and two-year Adjusted EBITDA performance goals. 2018 and 2019 long-term performance-based awards granted to our NEOs are subject to a three-year vesting period and three-year Adjusted EPS performance goals.

The Adjusted EPS and Adjusted EBITDA performance goals, as applicable, have a threshold goal (50% payout), target goal (100% payout), and a maximum goal (200% payout). The amount of long-term performance-based awards that vest is determined using straight line interpolation if Adjusted EPS or Adjusted EBITDA, over the performance period, as applicable, is an amount between performance goals. No portion of performance-based awards are payable in the event the Company fails to achieve the threshold performance goal.

2018 and 2019 long-term performance-based awards granted to our NEOs are subject to a Relative TSR modifier such that payouts may be increased or decreased by 20% based upon Relative TSR with respect to companies in the Dow Jones U.S. Retail Apparel Index.

2019 long-term performance-based awards are further subject to a share price hurdle whereby the performance-based awards will not pay out if the Company’s closing stock price at the end of the performance period (measured based on a 90-day moving average) has declined from the closing stock price on the date of grant.

“Adjusted EBITDA” means the Company’s earnings before interest, taxes, depreciation, and amortization calculated in accordance with GAAP and excluding the impact of non-core operating items. “Adjusted EPS” means the Company’s diluted earnings per share calculated in accordance with GAAP, adjusted to exclude the impact of any non-core operating costs consistent with past practice for debt extinguishment and one-time transaction costs. The Company provides supplemental non-GAAP financial information to exclude non-core operating items that may not be indicative of, or are unrelated to, our underlying operating results and that we believe provides a better baseline for analyzing trends. Refer to Appendix A for more information on non-GAAP measures and a reconciliation to the most directly comparable GAAP measures.

 

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Executive Compensation

 

The table below summarizes the performance-measure, award mix, and payout status of the performance-based long-term incentive awards granted to our NEOs in each of 2020, 2019, and 2018. Performance-based long-term incentive awards granted in 2016 and in 2017 were also forfeited.

 

 

Performance-based awards granted to our NEOs

Grant

Date      

    Performance Period

Performance 

Measure

Award Mix

Payout

Vesting Terms

March 2020

    Fiscal 2021-Fiscal 2022(1)

2-year Adjusted EBITDA

100% performance-based cash

Business performance must significantly improve during the two year performance period in order for these awards to payout. See “—2020 Performance-Based Awards” below for detail on the challenging 2-year Adjusted EBITDA performance target.

Three-year cliff vest with a two-year performance period. Any performance-based awards that are earned are scheduled to vest in April 2023.

March 2019

    Fiscal 2019-Fiscal 2021

3-year Adjusted EPS with a Relative TSR modifier(2) and Share Price Hurdle(3)

100% performance-based cash

No payout expected.

Any performance-based awards that are earned are scheduled to vest in April 2022.

March 2018

    Fiscal 2018-Fiscal 2020

3-year Adjusted EPS with a Relative TSR Modifier(2)

50% performance-based restricted stock units and 50% performance-based cash

No payout.

All performance-based awards were forfeited.

 

 

(1)

As discussed above, due to the significant disruption caused by the COVID-19 pandemic on our business operations, as well as its adverse impact on consumer confidence and demand, the Committee delayed setting the a performance target for the long-term performance awards granted in March 2020 until February 2021. While the 2020 long-term performance awards remain subject to a three-year vesting cliff, such awards are subject to a two-year performance period instead of a three-year performance period.

 

(2)

Relative TSR is measured for the applicable performance period based upon the change in each company’s stock price during that period. Stock prices are adjusted for dividends paid. A 20-day trading averaging period is used to determine the beginning and ending stock price values used to calculate the total shareholder return of the Company and the other companies in the Dow Jones U.S. Retail Apparel Index (“Index”). The change in value from the beginning to the end of the period is divided by the beginning value to determine total shareholder return. The Company’s total shareholder return is compared to the total shareholder return of other companies in the Index, ranked by percentile, to determine whether to modify payout for the applicable performance period based on Adjusted EPS. Modification of the payout amount is based on the Company’s percentile rank within the Index. No modifications are made if Company TSR falls between the 25th and 75th percentile of the Index. Payouts are decreased by 20% if Company TSR is below the 25th percentile of the Index and payouts are increased by 20% if Company TSR exceeds the 75th percentile of the Index except that payouts are capped at 200% of target.

 

(3)

Share price will be measured by comparing the sales price reported for the Company’s common stock on the last day of the performance period, based on the 90-day moving average stock price prior to such date, to the last sales price reported for the Company’s common stock as of the trading day immediately prior to the date of grant. Performance-based cash awards will not pay out if the Company’s closing stock price at the end of the three-year performance period has declined from the closing stock price on the grant date.

 

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More detailed information regarding performance-based long-term incentive awards granted in each of 2018, 2019, and 2020, including how Company performance is tracking relative to performance targets, is provided below.

 

2020 Performance-Based Awards

In March 2020, the Company granted our NEOs performance-based awards comprised of performance-based cash. The performance-based cash awards are set forth in the Grants of Plan Based Awards table on page 50. 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 of 2021 when it believed it had a clearer outlook on the Company’s expected long-term performance. The performance awards have performance goals based on Adjusted EBITDA measured over a 2-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 following chart identifies the performance metric, performance levels, the performance levels as a percentage of the target goal, and corresponding payouts as a percentage of the target performance-based award grant for the Company’s performance-based cash awards granted in 2020.

 

Grant Date and Performance Metric:

 

Performance Level

 

Company Performance

(as a % of target)

 

% of Performance

Awards Earned

 

March 2020; 2021-2022 Adjusted EBITDA

 

Below Threshold

 

Less than 80%

 

0% of target grant

 

 

 

Threshold

 

80%

 

50% of target grant

 

 

 

Target

 

100%

 

100% of target grant

 

 

 

Maximum

 

120% or higher

 

200% of target grant

 

 

The Committee set the two-year Adjusted EBITDA target at $54 million. This compares to an Adjusted EBITDA loss of $348 million in 2020. Accordingly, business performance must significantly improve during the two year performance period in order for the 2020 long-term performance-based cash awards to pay out.

 

2019 Performance-Based Awards

In 2019, the Company granted our NEOs performance-based awards comprised of performance-based cash. The performance-based cash awards have performance goals based on Adjusted EPS measured over a 3-year performance period commencing on the first day of the Company’s 2019 fiscal year and ending on the last day of the Company’s 2021 fiscal year, and may be increased or decreased by 20% based on Relative TSR during the 3-year performance period. In addition, no performance-based cash awards will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. Any performance-based cash awards that are earned based on the achievement of performance goals are scheduled to vest in April 2022.

The following chart identifies the performance metric, performance levels, the performance levels as a percentage of the target goal, and corresponding payouts as a percentage of the target performance-based award grant for the Company’s performance-based cash awards granted in 2019.

 

Grant Date and Performance Metric:

 

Performance Level

 

Company Performance

(as a % of target)

 

% of Performance

Awards Earned

 

March 2019; 2019-2021 Adjusted EPS; Relative TSR Modifier; Share Price Hurdle

 

Below Threshold

 

Less than 80%

 

0% of target grant

 

 

 

Threshold

 

80%

 

50% of target grant

 

 

 

Target

 

100%

 

100% of target grant

 

 

 

Maximum

 

120% or higher

 

200% of target grant

 

 

Adjusted EPS reflected a loss of $0.08 per diluted share in 2019 and a loss of $4.86 per diluted share in 2020. The Company’s TSR during the first two years of the performance period was -58.6% and its Relative TSR was at the 19th percentile of the companies included in the Index. Based on Adjusted EPS performance in 2019-2020, these awards are not expected to pay out.

 

2018 Performance-Based Awards Payout Results

In 2018, the Company granted our then current NEOs performance-based awards comprised of 50% performance-based restricted stock units and 50% performance-based cash. The performance awards had performance goals based on Adjusted EPS measured over a 3-year performance period commencing on the first day of the Company’s 2018 fiscal year and ending on the last day of the Company’s 2020 fiscal year, and may be increased or decreased by 20% based on Relative TSR during the 3-year performance period. Any performance-based awards that are earned based on the achievement of performance goals are scheduled to vest in April 2021. The threshold Adjusted EPS goal was $1.08, which was not achieved. As a result, these awards were completely forfeited.


 

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2021 COMPENSATION PROGRAM DECISIONS

In February 2021, taking into account the many uncertainties facing the Company’s business operations and overall consumer demand, the Committee made the following decisions regarding the Company’s executive compensation program for 2021:

 

 

  NEO Target Pay: Target pay opportunity for our CEO and other NEOs is expected to remain the same for 2021.

 

  Short-Term Incentive Compensation Program and Target Design Modified for 2021 Spring Season: Historically the Company’s’ short-term performance-based cash incentive compensation program provided for 75% of the target bonus opportunity based on achievement of challenging financial performance targets tied to operating income goals and 25% based on achievement of challenging operational performance targets tied to key strategic initiatives, and included threshold, target, and maximum payout opportunities. For the Spring 2021 season, the Committee determined to use Adjusted EBITDA as the financial performance metric, while eliminating an operational performance component and removing the threshold payout opportunity so that any financial performance below the target Adjusted EBITDA goal would result in no payout under the short-term program. The Committee believes that Adjusted EBITDA is an appropriate performance metric to measure performance under the Spring short-term incentive program because at the current time cash flow is the key driver of the Company’s success and its ability to create long-term shareholder value. Adjusted EBITDA focuses on the operational aspect of the business from a cash generation standpoint and is thus a better measure for cash than Operating Income. The Committee determined to eliminate an operational performance component as well as the threshold payout opportunity to further focus the executive leadership team on achieving the singular goal of meeting the Company’s operating plan for the 2021 Spring season, which is tied to the Company’s Adjusted EBITDA performance. The Company does not expect to use Adjusted EBITDA as a performance measure under the Fall short-term incentive program.

  Long-Term Incentive Mix Modified and Performance Targets Established for 2021 Long-Term Incentive Awards: In February 2021, the Committee set performance targets for the 2021 long-term performance-based awards based on challenging three-year Adjusted EBITDA goals. Similar to the rationale for establishing performance targets based on Adjusted EBITDA for the 2020 long-term performance-based awards, the Committee believes that Adjusted EBITDA is an appropriate performance metric to measure performance under our long-term incentive program at the current time because cash flow is the key driver of the Company’s future success and of long-term shareholder value creation. Adjusted EBITDA focuses on the operational aspect of the business from a cash generation standpoint and is thus a better measure for cash than EPS. In order to conserve shares while ensuring that performance-based awards continue to represent 50% of our annual long-term incentive grants to NEOs, the Committee determined that long-term incentive awards granted to NEOs in 2021 would be comprised of 50% performance-based restricted stock units and 50% time-based cash awards.

 

 


 

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TRANSFORMATION AND BUSINESS CONTINUITY BONUS

 

In February 2021, the Committee recognized a need to (i) reward executives for their extraordinary efforts in 2020 to overcome liquidity challenges and perform work to transform the brand and (ii) ensure the retention of the Company’s high caliber executive leadership team in order to advance the Company’s EXPRESSway Forward strategy and create shareholder value over the long-term.

 

Based on these considerations, the Committee, in consultation with its independent compensation consultant, determined to provide executives with a transformation and business continuity cash award in an amount equal to 50% of each executive’s total target short-term performance-based cash incentive compensation opportunity for the 2020 fiscal year. The cash award was paid out to executives in February 2021.

 

In order to promote the retention of the Company’s high performing executive leadership team and to provide an incentive to continue the work of advancing the EXPRESSway Forward long-term strategy in 2021, the cash award requires each executive to repay the full amount of the cash award in the event of a voluntary termination on or prior to the one-year anniversary of the payout. Because of this retention condition, the cash award will not be reported in the Summary Compensation Table until the condition is satisfied.  

 

The accomplishments led by the executive leadership team in 2020 that motivated the Committee to determine that it was critical to ensure their retention include, but are not limited to:

 

 

Identifying cost savings of approximately $250 million through various COVID-19 mitigation and other strategic actions.

 

Negotiating $85 million in landlord concessions through rent abatements, deferrals, reductions, and allowances.

 

Entering into a definitive loan agreement which secured $90 million in additional financing and a $50 million bridge loan.

 

Implementing the new Expressway Forward Corporate strategy.

 

Streamlining and enhancing the Company’s Go To Market process, including the establishment of the Express Edit design and merchandising vision and developing new customer co-creation product capsules.

 

Opening the first reimagined smaller format Express EDIT store experience.

 

Completing the first phase of the Company’s loyalty program relaunch.

 

Completing a replatform of the brand’s e-commerce website and implementing significant e-commerce enhancements.

 

Implementing new order management and assortment planning systems.

 

Enhancing the Company’s buy online pick up in store (BOPIS) capabilities and rolling BOPIS to the entire store fleet.

 

The table below shows the total target award amount for each NEO under the Company’s 2020 short-term performance-based cash incentive program and the amount of the cash award payout subject to each NEO’s satisfaction of the one-year retention condition.

 

Name

Cash Award Amount

Timothy Baxter

$650,000

Matthew Moellering

$371,250

Malissa Akay

$271,875

Sara Tervo

$225,000

Pericles (“Perry”) Pericleous

$162,500

 


 

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Executive Compensation

 

ADDITIONAL EXECUTIVE BENEFITS

We provide our executive officers with benefits that the Committee believes are reasonable and in the best interests of the Company and its shareholders. Consistent with our compensation objectives, we provide benefits for our executive officers, including retirement plans, life insurance benefits, housing relocation benefits, and paid time off. The Committee, in its discretion, may revise, amend, or add to an officer’s executive benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies. We do not provide any executive with special perquisites.

We have no current plans to materially change the levels of benefits we provide.

Retirement Plan Benefits

We do not sponsor a defined benefit retirement plan as we do not believe that such a plan best serves the needs of our associates or the Company at this time. We do sponsor a tax-qualified defined contribution retirement plan. Participation in the qualified plan is available to associates who meet certain age and service requirements and our executive officers participate in the qualified plan based on these requirements.

Qualified Retirement Plan

Our qualified retirement plan is available to all eligible associates, including executive officers, and allows them to elect contributions up to the maximum limits allowable under Section 401(k) of the Code. We match 100% of associate deferrals, up to 4% of compensation not in excess of the IRS maximum compensation limit. Associates’ contributions and Company matching contributions vest immediately. Please refer to footnote 11 to the Summary Compensation Table on page 50 for details of Company contributions.

Health and Welfare Benefits

Executive Life Insurance

We provide all executive officers with executive life insurance that offers a benefit equal to two times their annual base salary up to a maximum of $2 million.

Executive Disability Insurance

We provide all executive officers with disability coverage that provides a benefit of 100% base salary continuation for up to 365 days and then 60% of the executive’s base salary plus the annual average of the last three years of cash incentive compensation, up to a maximum benefit of $25,000 per month.

Employment Agreements; Severance and Post-Employment Benefits

In connection with Mr. Baxter’s employment as our Chief Executive Officer, he entered into an employment agreement with the Company. Mr. Moellering entered into an employment agreement with the Company prior to our IPO.  Their employment agreements are described under “—Employment Related Agreements” beginning on page 56.

Ms. Akay, Ms. Tervo, and Mr. Pericleous do not have employment agreements with the Company. Each have entered into a severance agreement with the Company, which are described under “—Employment Related Agreements” beginning on page 57.  

 

 

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EXECUTIVE COMPENSATION PRACTICES

 

DETERMINING COMPENSATION FOR THE CEO

The Committee works directly with Frederic W. Cook & Co. (“F.W. Cook”) to obtain independent market data, analysis, and advice related to our CEO’s total compensation package. The Committee, together with F.W. Cook, present a recommended pay package for our CEO to the independent directors of the Board for further review, discussion, and approval. Mr. Baxter does not participate in any deliberations with regard to his own compensation. The Committee takes multiple factors into consideration when determining the appropriate CEO compensation package, including the CEO’s existing compensation, the Company’s performance, the CEO’s individual performance and qualifications, peer group CEO pay levels, competitor and industry performance, our compensation objectives, and our business and succession plans.

DETERMINING COMPENSATION FOR THE OTHER NEOS

Each year, the Committee approves a compensation package for each of our executive officers (excluding the CEO), that is consistent with our compensation objectives. As part of the review and approval process, at the Committee’s request, our CEO and Senior Vice President, Chief Human Resources Officer make recommendations for the upcoming year to the Committee regarding compensation for executive officers other than for the CEO. The recommendations are based on our compensation objectives, individual and Company performance, compensation data compiled from independent third-party executive compensation surveys, publicly available data from our peer group companies, and feedback and insights from management’s compensation consultant, Meridian Compensation Partners, all of which is summarized by management and shared with the Committee.

The Committee considers individual performance when determining (i) the annual pay increases for NEOs, (ii) the amount of the short-term cash incentive compensation opportunity for NEOs, and (iii) the amount of the long-term incentives awarded to NEOs.

Individual performance is evaluated based upon several individualized leadership factors, including: attaining specific financial and operational objectives; building and developing individual skills and a strong leadership team; execution of the Company’s business strategy; and individual performance relative to job requirements.

The Committee has an opportunity to review, analyze, and discuss the information and recommendations with its independent compensation consultant, F.W. Cook, and outside the presence of management. The Committee gives considerable weight to the CEO’s evaluation of the other NEOs when approving other NEO compensation because of the CEO’s direct knowledge of each executive officer’s performance and contributions.

THE ROLE OF PEER COMPANIES AND BENCHMARKING

How The Peer Group is Determined. The Committee selects our peer group companies based on such factors as business focus, competition for executive talent, geographic proximity of corporate locations, size of business, and publicly available compensation data. The size of the group has been established so as to provide sufficient market data across the range of senior positions at Express. The Committee annually evaluates whether companies should be added or removed from our peer group companies.

Our peer group for purposes of determining 2019 NEO compensation was comprised of the following retail companies:

 

Abercrombie & Fitch

Designer Brands, Inc.

The Buckle

American Eagle Outfitters

Guess?

The Cato Corporation

Ascena Retail Group

Genesco

The Children’s Place Retail Stores

Calares

RTW Retailwinds, Inc.

Urban Outfitters

Chico’s FAS

Tailored Brands

Zumiez

In September 2020, the Committee approved changes to the Company’s peer group for purposes of setting 2021 NEO compensation. These changes included removing Ascena Retail Group, RTW Retailwinds, Inc., and Tailored Brands who all filed for bankruptcy in 2020, and adding Fossil Group, which has market capitalization value close to the Company’s and is a peer of direct peers.

 

The following chart compares the Company’s revenue and market capitalization to the median revenue and market capitalization for its new peer group.

 

In Billions

 

Express

 

Peer Group Median

 

Annual Revenue*

 

$1.2B

 

$2.2B

 

Market Capitalization*

 

$390M

 

$979M

 

 

*

Revenue based on publicly available information for the trailing four quarters. Market capitalization is as of January 30, 2021.

 

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Executive Compensation

 

How The Peer Group is Used. The Committee reviews both compensation and performance at peer companies to support its decision-making process so it can set total compensation levels that it believes are consistent with our compensation objectives to pay for performance and pay competitively. The Committee does not strictly set compensation at a given level relative to its peers (e.g., median). The pay positioning of individual executives varies based on their competencies, skills, experience, business impact, and performance, as well as internal alignment and pay relationships. Actual total compensation earned may be more or less than target compensation based on Company performance during the performance period.

SHAREHOLDER ENGAGEMENT AND ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION

We offer our shareholders the opportunity to vote annually on the Company’s executive compensation program (say-on-pay).

At our 2020 annual meeting of shareholders, shareholders demonstrated support for our 2019 executive compensation program with approximately 92% of the votes cast in support of the “say-on-pay” proposal. This level of support followed strong support received at each of our 2019 and 2018 annual meetings.

Our shareholders’ views on corporate governance and executive compensation are important to us and we value and utilize the feedback and insights that we receive. Each year, as part of our annual shareholder engagement cycle, we reach out to our largest shareholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes approximately our 20 largest shareholders.

We received feedback from several investors that helped to inform our proposal for an approval of an amendment to the 2018 Plan to increase the number of shares available for grant. In addition, our new CEO Mr. Baxter’s ongoing compensation package in general followed the structure of our former CEO’s compensation package, which was originally designed based in part on feedback received from shareholders on our executive compensation in prior years.

For additional information regarding our shareholder engagement process, see “Corporate Governance—Board Practices—Shareholder Engagement,” on page 23.

THE ROLE OF THE COMMITTEE’S COMPENSATION CONSULTANT

The Committee engages its independent executive compensation consultant, F.W. Cook, to advise the Committee about our executive compensation program and practices.

The Committee has determined that the work of F.W. Cook did not raise any conflicts of interest in 2020. In making this assessment, the Committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act, including the fact that F.W. Cook does not provide any other services to the Company, the level of fees received from the Company as a percentage of F.W. Cook’s total revenue, policies and procedures employed by F.W. Cook to prevent conflicts of interest, and whether the individual F.W. Cook advisers to the Committee own any of the Company’s stock or have any business or personal relationships with members of the Committee or our executive officers.

ANALYSIS OF RISK IN OUR COMPENSATION PROGRAM

The Committee evaluates the risks of our compensation program as part of its responsibilities. The compensation program is intended to discourage excessive risk taking by executives and associates to obtain short-term benefits that may be harmful to the Company and our shareholders over the long term. We believe that the following elements of our compensation program discourage excessive risk taking:

Short-Term/Long-Term Incentive Mix. The mix between short-term cash incentives and long-term equity and cash based incentives discourages executives and associates from maximizing short-term performance at the expense of long-term performance.

Long-Term Incentive Mix. We grant a mixture of long-term incentives, which in 2020 were comprised of 50% performance-based cash awards and 50% time-based restricted stock units and time-based restricted cash awards. Our time-based restricted stock units and restricted cash awards have 3-year vesting requirements and performance-based cash awards are subject to performance-based vesting conditions measured over a three-year period, which was reduced to two years for the performance-based awards granted in 2020 because of the delayed setting of performance targets due to the significant disruption caused by the COVID-19 pandemic on the Company’s business operations in 2020. Our long-term incentive awards are designed to incentivize the creation of long-term shareholder value.

Short-Term and Long-Term Incentive Program Design. In order to discourage excessive risk taking, both short-term cash incentive compensation awards and long-term performance-based incentive awards generally allow for a graduated payout instead of a win or lose payout structure. Each program has a minimum performance threshold below which no payout is earned and a maximum above which no additional payout is earned. In addition, a prorated payout may be earned based on the achievement between threshold and target or achievement between target and maximum.

 

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Multiple Performance Measures. In 2020, our Fall short-term cash incentive compensation program had a financial performance target based on year-end cash with a Fall internal sales gatekeeper and an operational performance target based on Fall 2020 e-commerce demand in furtherance of the Company’s long-range plan. Our performance-based cash awards granted in 2020 were subject to Adjusted EBITDA goals based on the 2021-22 performance period. The varied performance measures are designed to discourage participants from focusing on the achievement of one performance measure at the expense of another.

Stock Ownership Guidelines. We use meaningful stock ownership guidelines to align our directors’ and executive officers’ interests with our shareholders’ interests and focus our executives on attaining long-term shareholder returns.

Anti-Hedging and Anti-Pledging Policies. Under the Company’s Insider Trading Policy, all of our officers, employees and directors are prohibited from engaging in any hedging or monetization transactions involving Company securities, including equity swaps, collars, and exchange funds. In addition, our Insider Trading Policy prohibits all officers, employees and directors from holding Company securities in a margin account or pledging Company securities as collateral for a loan. These policies further align our executives’ and associates’ interests with those of our shareholders.

Clawback Policy. Our clawback policy discourages inappropriate risk-taking behavior and allows us to adjust and recover any cash incentive compensation paid or the shares vested or to be vested of a performance-based long-term incentive award in the event of a material restatement of the Company’s financial results, or in the event of management misconduct that could result in significant reputational harm to the Company. See below for more detail regarding the Company’s clawback policy.

COMPENSATION CLAWBACK POLICY

In September 2019, the Committee approved updates designed to strengthen and expand the Company’s policy concerning the recovery of incentive compensation. This updated policy applies to performance-based awards and long-term equity awards paid to our NEOs as well as other executives.

Prior to the updates made in 2019, under the policy, in the event of a material restatement of the Company’s financial results, the Committee would review the circumstances that caused the restatement and consider accountability to determine whether a covered associate was negligent or engaged in misconduct. If so, and if the amount of a cash incentive award paid or to be paid, or the shares vested or to be vested of a performance-based long-term incentive award would have been less had the financial statements been correct, the Committee will recover compensation from the covered associate as it deems appropriate.

Furthering our commitment to pay responsibly, in September 2019, the Committee approved an expansion of the current policy in order to provide the Committee discretion to clawback incentive compensation from our NEOs as well as other executives in the event of management misconduct that could result in significant reputational harm to the Company, unrelated to a financial restatement. Under the updated policy, if a covered associate engages in detrimental conduct that could result in significant reputational harm to the Company (unrelated to a financial restatement), the Committee may, in its discretion, recover all or part of the covered associate’s incentive compensation granted, awarded, earned, vested, paid, settled, or received during the three years immediately preceding the Committee’s determination that detrimental conduct occurred. The updated policy is effective for all incentive awards granted under the 2018 Plan.

This policy is in addition to any requirements which might be imposed pursuant to Section 304 under the Sarbanes-Oxley Act, and will be modified to the extent required by the Dodd-Frank Act of 2010.

STOCK OWNERSHIP GUIDELINES

We have stock ownership requirements for our executives to further build commonality of interest between management and shareholders and to encourage executives to think and act like owners. Our current stock ownership guidelines are as follows:

 

Chief Executive Officer

Lesser of 5x annual base salary or 200,000 shares

Chief Operating Officer

Lesser of 3x annual base salary or 75,000 shares

Other Executive Officers

Lesser of 2x annual base salary or 40,000 shares

Senior Vice Presidents

Lesser of 1x annual base salary or 16,000 shares

Board Members

5x annual retainer

The executives and Board members have five years to meet the guidelines. Under the guidelines, executives and directors are generally not permitted to sell any shares of our common stock until they achieve the ownership guideline and thereafter are only permitted to sell shares of our common stock to the extent that such sale would not cause the executive or director to fall below the ownership guideline. To avoid fluctuating ownership requirements, except upon a promotion, once an individual has achieved the ownership guideline, they will be considered to have satisfied the requirements as long as the shares used to meet the underlying requirements are retained. The Committee annually reviews individual executive and director stock ownership levels. During the Committee’s most recent review of ownership levels, it was confirmed that all NEOs and directors currently meet or are on track to meet the applicable ownership guideline.

POLICY REGARDING TIMING OF STOCK-BASED