Casual Male 2Q net income falls on tax rate change

Casual Male Retail posts steep drop in 2nd-quarter net income on higher tax rate, flat revenue

Associated Press

CANTON, Mass. (AP) -- Casual Male Retail Group Inc. said Friday its second-quarter net income tumbled 81 percent, pulled down by a significant jump in its tax rate and flat revenue.

For the quarter ended July 28, the men's clothing and accessories company earned $1.2 million, or 3 cents per share, down from $6.6 million, or 14 cents per share, in the same quarter last year.

The company's effective tax rate for the recent quarter was 40 percent, up from 9.4 percent in the same quarter last year, as the result of the reversal of a valuation allowance in fiscal 2011. As a result, the provision for income taxes nearly tripled to $2.2 million from $738,000.

Excluding discontinued operations, the company posted earnings from continuing operations of 6 cents per share.

The profit fell a penny short of Wall Street predictions. Analysts, on average, expected a profit from continuing operations of 7 cents per share, according to a FactSet poll.

Revenue was relatively flat at $100.5 million. Analysts expected $102.4 million.

Casual Male said its revenue at stores open at least a year rose 2 percent. The metric is a key measure of a retailer's health, because it excludes sales at stores that opened or closed during the year.

The Canton, Mass., company said it continues to shift its focus toward its more profitable DestinationXL stores and away from its traditional Casual Male XL stores, with plans to open between 225 and 250 DXL stores by the end of fiscal 2015.

So far this year, the company said it has opened 13 new DXL stores and expects to have 51 of them operating by the end of the year.

As a result of sluggish spending at Casual Make XL stores stemming from the roll out of the new DXL stores, the company lowered the high end of its full-year sales guidance, saying that it now expects to post a profit of 22 cents to 25 cents per share, down from its previous range of 22 cents to 27 cents per share.

The company also cut its full-year sales guidance to a range of $405.5 million to $410 million, with a same-store sales increase of 3 percent to 4 percent. It previously projected fiscal 2012 sales of between $416.5 million to $423.9 million and a same-store sales increase of 4.7 percent to 6.6 percent.

Analysts expect a profit of 24 cents per share on revenue of $418.6 million for the year.

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