Men's Wearhouse Reports Fiscal 2010 Fourth Quarter Results

HOUSTON, March 9, 2011 /PRNewswire/ -- The Men's Wearhouse (NYSE: MW) today announced its consolidated financial results for the fourth quarter ended January 29, 2011.

(a)  Due to rounded numbers, total Company may not sum.

(b)  Comparable store sales change is based on the Canadian dollar.

(c)  Does not include ecommerce sales.  

GAAP diluted loss per share was $0.27 for the fourth quarter ended January 29, 2011.  Adjusted diluted loss per share was $0.19 after excluding $2.3 million ($1.6 million after tax or $0.03 per diluted share outstanding) in acquisition transaction and integration expenses, $1.1 million ($0.7 million after tax or $0.01 per diluted share outstanding) in tuxedo distribution closure costs and $2.5 million ($1.7 million after tax or $0.03 per diluted share outstanding) for a non-cash fixed asset impairment charge.  Due to rounded numbers, the adjusted loss per share may not sum. This compares to adjusted diluted loss per share guidance given December 7, 2010 of $0.19 to $0.22. In Q4 2009, revised GAAP diluted loss per share was $0.36 and adjusted diluted loss per share was $0.11.

GAAP diluted earnings per share was $1.27 for the fiscal year ended January 29, 2011.  Adjusted diluted earnings per share was $1.47 after excluding $6.4 million ($4.3 million after tax or $0.08 per diluted share outstanding) in acquisition transaction and integration expenses, $3.1 million ($2.1 million after tax or $0.04 per diluted share outstanding) in tuxedo distribution closure costs and $5.9 million ($3.9 million after tax or $0.07 per diluted share outstanding) for a non-cash asset impairment charge.  Due to rounded numbers, the adjusted earnings per share may not sum.  In fiscal 2009, revised GAAP diluted earnings per share was $0.88 and adjusted diluted earnings per share was $1.12.

During the third quarter of 2010, the Company changed the inventory valuation method used by its K&G brand from lower of cost or market, as determined by the retail inventory method, to lower of cost or market using the average cost method.  This change was done to bring all retail operations of the Company to a common valuation methodology platform.  All financial statements in this press release have been revised to reflect this change and are therefore comparable.  Prior year fourth quarter revised GAAP diluted loss per share was $0.36, unchanged from the previously reported GAAP diluted loss per share, and prior fiscal year revised GAAP diluted earnings per share was $0.88, an increase of $0.02 per share.

FOURTH QUARTER REVIEW

Dimensions and Alexandra Acquisitions

On August 6, 2010, the Company acquired Dimensions and certain assets of Alexandra, two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for a total cash consideration of approximately 61 million pounds Sterling (US$97.8 million).  The combined businesses are organized under a UK-based holding company of which Men's Wearhouse controls 86% and previous Dimensions shareholders control 14%.

The financial results of the combined UK operations, excluding transaction and integration costs, were $0.03 accretive to the Company's fourth quarter diluted earnings per share.  Transaction and integration costs were $2.3 million ($1.6 million after tax or $0.03 per diluted share outstanding).  Total sales of the combined UK operations were US$54.2 million.  

The financial results of the combined UK operations, excluding transaction and integration costs, were $0.06 accretive to the Company's fiscal 2010 diluted earnings per share.  Transaction and integration costs were $6.4 million ($4.3 million after tax or $0.08 per diluted share outstanding).  Total sales of the combined UK operations were US$104.8 million for fiscal 2010.  

Tuxedo Distribution Closures

In late August 2010, a decision was made by the Company to cease tuxedo distribution operations in November 2010 at four of the then eleven facilities that we used for tuxedo distribution.  The operations at these four facilities were assumed by other tuxedo distribution facilities in our system allowing us to more effectively manage our tuxedo rental operations.  In the fourth quarter, a charge of $1.1 million ($0.7 million after tax or $0.01 per diluted share outstanding) was incurred consisting primarily of labor costs associated with transferring and processing the tuxedo rental inventory from the closed facilities, severance payments and fixed asset write-offs.

The expected ongoing annual benefit, beginning in fiscal 2011, as a result of these closures will be a reduction in operating costs of approximately $4.0 million.

Review of Fourth Quarter Results

Total Company net sales increased 18.6% for the quarter.  

At Men's Wearhouse/Men's Wearhouse and Tux, the increase of 4.3% in comparable store sales was due to increased units per transaction, higher store traffic levels and an 11.1% comparable store increase in tuxedo rental services revenues.  

At Moores, the increase of 2.3% in comparable store sales was due to increased units per transaction and higher net sales price per unit which offset a decline in store traffic.  

At K&G, the increase of 4.5% in comparable store sales was due mainly to an increase in units per transaction and higher store traffic levels.

Corporate apparel segment net sales increased $59.4 million to $62.5 million for the quarter compared to the same prior year quarter.  The increase was primarily due to our acquisitions of Dimensions and Alexandra in the UK on August 6, 2010.

Gross margin, as a percentage of total net sales, increased 21 basis points from 37.1% to 37.3% due to an increase in tuxedo rental margins and a decrease in occupancy costs as a percent of sales offset by a decrease in retail merchandise margins and the increased mix of the lower margin corporate apparel business.  

Selling, general and administrative expenses were $225.4 million in the current year and increased 10.6% from the prior year's SG&A of $203.8 million.  The prior year quarter included $19.5 million in non-cash fixed asset impairment charges.  Excluding these charges, prior year SG&A expense was $184.3 million.  During the current quarter, the Company incurred $2.3 million in acquisition transaction and integration costs, $1.1 million in tuxedo distribution closure costs and $2.5 million for non-cash fixed asset impairment charges related primarily to K&G and Men's Wearhouse and Tux stores.  Excluding these costs, fourth quarter SG&A expenses were $219.4 million or an increase of 19.0% to the adjusted prior year quarter. SG&A related to the acquired UK operations resulted in a 7.5% increase.  The remaining 11.5% increase is primarily due to increased payroll related costs and increased marketing costs.  As a percentage of total net sales, adjusted SG&A increased 16 basis points from 40.3% to 40.5%.  

Operating loss was $23.2 million.  Excluding $2.3 million in acquisition and integration costs, $1.1 million in tuxedo distribution closure costs and the $2.5 million non-cash fixed asset impairment charge; operating loss was $17.3 million or negative 3.2% of total net sales.  This compares with the adjusted prior year operating loss of $14.8 million or negative 3.2% of total net sales, which exclude $19.5 million in pretax non-cash fixed asset impairment charges.

Total inventories of $486.5 million increased 11.9% from the prior year fourth quarter of $434.9 million.  Excluding the inventory related to the acquisitions of Dimensions and Alexandra in the UK, inventories decreased 5.7%.  

The Company had no bank debt at the end of the fourth quarter of 2010 as all debt was paid off during the quarter.

2011 GUIDANCE

For the fiscal year, GAAP diluted earnings per share is expected to be in a range of $1.71 to $1.81.  Adjusted diluted earnings per share are expected to be in a range of $1.75 to $1.85.  Adjusted earnings per share exclude acquisition integration expenses of $3.3 million ($2.2 million after tax or $0.04 per diluted share outstanding).

For the first quarter of the fiscal year, GAAP diluted earnings per share is expected to be in a range of $0.26 to $0.29.  Adjusted diluted earnings per share are expected to be in a range of $0.27 to $0.30.  Adjusted earnings per share exclude acquisition integration expenses of $0.6 million ($0.4 million after tax or $0.01 per diluted share outstanding).

The financial results of the combined UK acquisitions, excluding acquisition integration expenses, are expected to be accretive to the Company's full year and first quarter diluted earnings per share.

Footnotes to Guidance:

1. Includes US$220 million for full year FY 2011 and US$55 million for 1Q FY2011 of sales from acquired operations of Dimensions and Alexandra.
2. Includes an assumed comparable store increase in tuxedo rental revenues of 7% to 8% for the full year FY 2011 and a 1% to 2% increase in 1Q FY 2011.
3. Occupancy costs are expected to be flat for full year FY 2011 and decrease low single digit for 1Q FY 2011.  
4. Excludes acquisition integration costs.

CONFERENCE CALL AND WEBCAST INFORMATION

At 5:00 p.m. Eastern time on Wednesday, March 9, 2011, Company management will host a conference call and real time webcast to review the fourth quarter of fiscal 2010 and its outlook for the first quarter and full year of fiscal 2011.    

To access the conference call, dial 480-629-9772.  To access the live webcast presentation, visit the Investor Relations section of the Company's website at www.menswearhouse.com.  A telephonic replay will be available through March 16, 2011 by calling 303-590-3030 and entering the access code of 4418605#, or a webcast archive will be available free on the website for approximately 90 days.

(a)  91 and 94 stores, respectively, offering women's apparel.

Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,192 stores.  The Men's Wearhouse, Moores and K&G stores carry a full selection of designer, brand name and private label suits, sport coats, furnishings and accessories and Men's Wearhouse and Tux stores carry a limited selection.  Tuxedo rentals are available in the Men's Wearhouse, Moores and Men's Wearhouse and Tux stores.  Additionally, Men's Wearhouse operates a global corporate apparel and workwear group consisting of TwinHill in the United States and Dimensions and Alexandra in the United Kingdom.  

This press release contains forward-looking information. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may be significantly impacted by various factors, including sensitivity to economic conditions and consumer confidence, possibility of limited ability to expand Men's Wearhouse stores, possibility that certain of our expansion strategies may present greater risks, changes in foreign currency rates and other factors described in the Company's annual report on Form 10-K for the fiscal year ended January 30, 2010 and subsequent Forms 10-Q.

For additional information on Men's Wearhouse, please visit the Company's website at www.menswearhouse.com.  The website for Dimensions is www.dimensions.co.uk and the website for Alexandra is www.alexandra.co.uk.

SOURCE The Men's Wearhouse