Tailored Brands has closed the sale of its corporate apparel business to a group led by the existing corporate apparel U.K. executive team for an all-cash deal of $62 million. Of the $62 million in total consideration, approximately $56 million was received upon closing and approximately $6 million is deferred to the first quarter of fiscal 2020.
The parent company of Men’s Wearhouse and Jos. A. Bank will use cash proceeds from the transaction to reinvest in its business in accordance with the provisions of its term loan. This will free up funds previously slated for capital expenditures for debt reduction.
In the second quarter of fiscal 2019, adjusted diluted EPS excludes net charges of $10.4 million comprised of $8.1 million of charges related to the company’s multi-year cost savings and operational excellence programs (consisting of $6.1 million of consulting costs, $1.9 million of severance costs and $0.1 million of lease termination costs) and $3.2 million of costs related to the closure of a distribution center in Canada primarily from the write-off of rental product, offset by a $0.9 million net favorable adjustment primarily related to a derivative instrument entered into for our corporate apparel business.
“We are pleased to have reached an agreement to sell our corporate apparel business,” said Dinesh Lathi, president and CEO of Tailored Brands. “The consummation of this transaction supports our previously stated strategy to focus on our core retail business in the U.S. and Canada while reducing debt. We thank the management team and employees for their many contributions and wish them well.”
For the fiscal 2019 second quarter, the company expects to report net sales in the range of $787.0 to $789.0 million. The company noted that its updated adjusted EPS guidance includes a $0.02 benefit from a lower-than-anticipated effective tax rate. In addition, the company expects to report comparable sales for each of its retail brands in line with its outlook provided on June 12, 2019.
“We are pleased to provide updated guidance for second-quarter adjusted EPS that is above our previous outlook,” added Lathi. “We remain focused on improving our performance by transforming our customer experience through three key strategic initiatives: delivering personalized products and services, inspiring and seamless experiences in and across every channel, and brands that stand for more than just price. We look forward to sharing more about our progress on these initiatives on our upcoming conference call in September.”