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Men's Wearhouse & David's Bridal Renew Deal

Zacks Equity Research

Recently, specialty retailer The Men's Wearhouse, Inc. (MW) extended its partnership with the country’s biggest bridal retailer, David’s Bridal for another five year tenure. The new contract has a provision to extend the deal for another five years following the expiry of the extended tenure.

Since 2007, David’s Bridal has been an integral part of Men’s Wearhouse’s tuxedo marketing strategy. The latter has a strong rental tuxedos supply business.

In Oct 2012, Men’s Wearhouse had signed a deal to supply tuxedos to The Knot.com, an online subsidiary of XO Group Inc. (XOXO).

Men’s Wearhouse’s tuxedo business is strong and can significantly impact earnings, as evident in the last quarterly results. On Sep 11, the company posted fiscal second-quarter 2013 adjusted earnings of $1.01 per share that missed the Zacks Consensus Estimate of $1.15 and decreased 12.2% year over year. The decline was primarily due to lower tuxedo rental revenues and certain non-recurring charges.

The company’s top line decreased 2.3% year over year to $647.3 million and missed the Zacks Consensus Estimate of $675 million. This was due to a decline in retail clothing sales owing to lower consumer traffic. Men’s Wearhouse also stated that the shift in tuxedo revenues and the deleveraging of occupancy costs dented margins during the quarter.

Houston-based Men’s Wearhouse is one of the largest specialty retailers in the United States and Canada, and has nearly 1,137 stores as of Sep 24, 2013.

Currently, Men’s Wearhouse carries a Zacks Rank #5 (Strong Sell). We do not recommend this stock until we see signs of improvement. However, other stocks worth considering in the same sector include Christopher & Banks Corp. (CBK) and Citi Trends, Inc. (CTRN). Both these carry a Zacks Rank #1 (Strong Buy).

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