Decline in consumer spending took a toll on the second-quarter fiscal 2013 results of The Men's Wearhouse Inc. (MW). The company posted adjusted quarterly earnings of $1.01 per share that missed the Zacks Consensus Estimate of $1.15 and decreased 12.2% year over year. However, including one-time items, earnings came in at 85 cents per share.
Citing macroeconomic challenges, Men's Wearhouse lowered its fiscal 2013 guidance, following which shares of this specialty retailer of menswear in the United States and Canada, plunged more than 14% during the aftermarket trading hours yesterday.
On the whole, apparel retailers are facing a tough time as shift in consumers’ shopping preferences toward big-ticket items hurt sales of apparel and accessories. Recently, apparel retailers came up with soft sales results for August. Stein Mart Inc. (SMRT) posted a 3.8% rise in comps, while The Gap, Inc. (GPS) witnessed a 2% increase in comps. The Buckle, Inc. (BKE) witnessed a 1% rise in comps.
Coming back to Men's Wearhouse, top line decreased 2.3% year over year to $647.3 million and missed the Zacks Revenue Estimate of $675 million.
Retail Segment’s total revenue (representing 91.7% of total sales) decreased 1.9% year over year to $593.4 million, reflecting a 1.1% decrease in Retail Clothing Product to $408.7 million, coupled with a 4.2% decline in Tuxedo Rental Services to $147.7 million. Alteration and other services division’s sales decreased 1.3% to $37.1 million.
Corporate Apparel Segment’s (representing 8.3% of total sales) revenue declined 6.6% to $53.8 million.
The company stated that the shift in tuxedo revenues and the deleveraging of occupancy costs affected the margins during the quarter. Consolidated gross profit decreased 3.6% to $308.8 million, while gross profit margin contracted 65 basis points year over year to 47.7%.
Operating income plunged 27.1% to $66.8 million, while operating margin contracted 351 basis points to 10.3%.
Other Financial Aspects
As of Aug 3, 2013, Men’s Wearhouse had a debt-free balance sheet with cash and cash equivalents of $32.5 million and shareholders’ equity of $1,002.5 million, excluding non-controlling interest of $12.5 million. Capital expenditure, during the first six months of fiscal 2013, stood at $52.3 million.
Following soft results and lingering macro concerns, Men’s Wearhouse lowered its fiscal 2013 earnings guidance. The company now expects earnings per share to be in the range of $2.40–$2.50 for fiscal 2013, down from its earlier guidance range of $2.70–$2.80. The company also lowered its comps growth rate by 2% at Men's Wearhouse and Moores.
Currently, Men’s Wearhouse holds a Zacks Rank #2 (Buy), which could witness a downward revision soon.