Weak Clothing in Q4 Can’t Slow MW

by MR Magazine Staff

NEW YORK – Men’s Wearhouse managed robust increases in sales, margins and profits despite acknowledged weakness in tailored clothing during the fourth quarter.

For the 14 weeks ended Feb. 3, the Houston-based retailer generated a 59.8% increase in net income, to $52.3 million, or 95 cents a diluted share, from $32.7 million, or 60 cents, during the 13-week 2005 quarter. Excluding various nonrecurring items, MW earned 81 cents a share, 6 cents above analysts’ estimates, versus 67 cents in the year-ago quarter.

Sales were up 12% to $556.8 million from $497 million in the shorter year-ago quarter. Comparable-store sales were flat at the MW division and down 6.1% at K&G for an overall comp drop of 1.5% in the US. Comps were up 9.8% at Moores in Canada.

Referring to the weak performance of its US stores, the company commented, “This under-plan performance stems from soft traffic levels which are reflected in soft tailored clothing sales.”

Yet, despite weakness in suits and related merchandise, gross profit increased 331 basis points to 44.6% of sales during the quarter, with the strength of the Canadian stores, better maintained margins and a strong 53rd week of selling all contributing to the margin acceleration.

Apparel sales accounted for 90.8% of revenue and were up 10.6%. Tuxedo rentals made up 2.7% of sales and were up 26.1%.

The company’s board increased the quarterly dividend 20% to 6 cents a share from 5 cents a share. The higher dividend is payable July 6 to shareholders of record June 27.

The company projected full-year earnings per diluted share of $2.80 to $2.91 based on a same-store sales increase of 1% to 2% in the US and 3% to 4% in Canada.

The projection doesn’t include projections for the After Hours chain, which Men’s Wearhouse has agreed to buy from Federated Department Stores. The company had no comment about the progress of the acquisition except to say that it is still expected it to be completed by the end of the first half of fiscal 2007. It was originally expected to be wrapped up during the first quarter but was delayed by requests for additional information from the Federal Trade Commission in January.

For the full year, net income increased 43% to $148.6 million, or $2.71 a diluted share, from $103.9 million, or $1.88. Sales were up 9.1% to $1.88 billion from $1.72 billion and gross margin grew to 43.34% of sales from 40.42%.