GameStop isn’t the only business pushing into e-commerce. Another Reddit favorite, Express, has its own plans to stay relevant in this digital age. But is there any value beyond just being another meme stock?

Classic turnaround story

Express operates over 500 apparel stores targeted towards young shoppers. During COVID, sales took a dive as most of its stores were forced to shut down — taking down its stock with it.

But its problems go back before the pandemic. Sales were declining in the last 5 years and the company struggled without a plan. In 2019, Timothy Baxter joined Express, revamped the leadership team and revealed a turnaround plan that included:

• Expanding into other categories like beauty and activewear.
• Growing its e-commerce sales to $1b by 2024.

Over the next 2 years, Express shut down ~15% of its retail stores and grew its e-commerce sales 70% in 2020 — up from 40% in 2019.

In early 2021, the Reddit community took an interest in the stock — sending it up 389%.

Express is taking a page out of Amazon…

Like Amazon, it launched its own marketplace to sell other brands’ products. Amazon’s marketplace does over $490b in retail sales each year — 61% coming from third-party sellers. Many brands are trying to replicate this model but becoming a marketplace has its pros and cons.

• Pro: Greater sales potential by expanding the category and product selection.
• Con: Lower profitability from selling other brands’ products (i.e. Express takes a small cut of the transaction).

There’s also no shortages of apparel marketplaces — coming in all shapes and sizes:

• Farfetch (NYSE:FTCH) — a luxury fashion and streetwear marketplace offering over 3k brands from 190 countries.
• Nordstrom (NYSE:JWN) — the luxury department chain which invested in e-commerce due to COVID.

Marketplaces can be massive businesses but building one isn’t easy — especially when Express is late to the game.

Investors: The numbers aren’t pretty

Turnarounds are a tough investment. When they’re successful, they can become home runs but chances of success are low. They also require lots of cash — a position Express isn’t in after COVID:

• In 2020, Express lost over $420m — nearly going bankrupt but survived by raising cash.
• Sales are still down 23% from the 2nd quarter of 2019 (pre-pandemic).

Companies are the cheapest when they’re in their worst shapes. Just look at Netflix in 2012 and Tesla in 2019 — and both survived near-death experiences.