Men's Wearhouse Misses, Guides Low

Zacks

The Men's Wearhouse Inc. (MW) – one of the largest specialty retailers of menswear in the United States and Canada – recently reported its fiscal third-quarter 2012 (ended October 27, 2012) earnings of 95 cents a share that came below the Zacks Consensus Estimate of 97 cents. However, earnings soared 20.3% from 79 cents reported in the comparable prior-year quarter. Moreover, including one-time items, earnings surged 23.4% year over year.

Total net sales increased 7.9% year over year to $631 million and came in line with the Zacks Revenue Estimate. Retail Segment’s total revenue (representing 89.4% of total sales) increased 7.7% year over year to $564 million, reflecting a 6.5% increase in Retail Clothing Product to $401.7 million, coupled with 11.3% increase in Tuxedo Rental Services to $124.6 million.  Alteration and other services division’s sales increased 9.3% to $37.7 million.

Corporate Apparel Segment’s (representing 10.6% of total sales) revenue improved 10.1% to $66.9 million compared with $60.8 million in the year-ago quarter.

Gross profit increased 8.4% to $290.7 million from $268.2 million, while gross profit margin expanded 20 basis points year over year to 46.1%, reflecting a decrease in cost of sales as a percentage of total revenue.

Operating income augmented 20.8% to $72.5 million, while operating margin expanded 122 basis points to 11.5% on the back of lower SG&A expenses as a percentage of sales.

Other Financial Aspects

As of October 27, 2012, Men’s Wearhouse has a debt-free balance sheet with cash and cash equivalents of $138 million and shareholders’ equity of $1,119.6 million. Capital expenditure, during the first nine months of fiscal 2012, stood at $90.1 million.

Guidance Lowered

Following the negative comparable store sales results in November 2012 and lingering macro concerns, Men’s Wearhouse lowered its fiscal 2012 and fourth-quarter earnings guidance. The company now expects GAAP earnings per share in the range of $2.57–$2.63 for fiscal 2012, down from its earlier guidance range of $2.74–$2.80.

For the fourth quarter 2012, the company expects GAAP earnings to range within loss of 5 cents to one cent earnings, significantly down from its earlier guidance of 12–15 cents earnings.

At the end of the quarter, the company had 1,144 stores with 7,062.6 sq ft area compared with 1,175 stores with 7,020.6 sq ft area in the prior-year quarter.

Currently, Men's Wearhouse – a peer of Jos. A Bank Clothiers Inc. (JOSB) – retains a Zacks #2 Rank, which translates into a short-term Buy rating.

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