Men's Wearhouse Reports Fiscal 2013 Third Quarter Results

FREMONT, Calif., Dec. 11, 2013 /PRNewswire/ -- The Men's Wearhouse (NYSE: MW) today announced its consolidated financial results for the fiscal third quarter ended November 2, 2013. 

Total net sales for the fiscal 2013 third quarter increased 2.8% to $648.9 million from $631.0 million in last year's third quarter.  GAAP diluted EPS was $0.79 for the third quarter of 2013.  Adjusted diluted EPS was $0.90 excluding one-time costs^([1]).  Third quarter results were in-line with internal expectations and were below 2012 third quarter results primarily due to lower tuxedo margin.

Total net sales for the first nine months of fiscal 2013 increased 1.7% to $1.9 billion and GAAP diluted EPS was $2.29.  Adjusted EPS for the 2013 nine month period was $2.55 excluding one-time costs^([2]).

Doug Ewert, Men's Wearhouse president and chief executive officer, commented, "We are very pleased to report our 2.6% comparable store sales increase during the third quarter in our Men's Wearhouse brand, which represents two-thirds of our consolidated sales.  We are also very pleased with the early progress in integrating our newly acquired American designer brand, Joseph Abboud®, and its U.S. manufacturing operations.  We already have several large markets with Joseph Abboud product in place and will continue to execute on our planned rollout to all stores into the summer of 2014."

THIRD QUARTER STRATEGIC REVIEW

In July 2013, the Company entered into an accelerated share repurchase agreement with J.P. Morgan Securities LLC to purchase $100.0 million of our common stock.  In September 2013, JPMorgan delivered an additional 455,769 shares, resulting in a total of 2,653,287 shares repurchased under the agreement.

On August 6, 2013, the Company successfully completed its acquisition of JA Holding, Inc., the parent company of the celebrated American clothing brand Joseph Abboud^® and a U.S. tailored clothing factory for approximately $97.5 million in cash consideration, subject to certain adjustments.  The total net cash consideration after these adjustments was approximately $95.7 million.  We believe this transaction will accelerate our strategy of offering exclusive brands with broad appeal at attractive prices.

On October 9, 2013, the Company rejected an unsolicited, non-binding proposal from Jos. A. Bank to acquire the Company for $48.00 per share believing the proposal significantly undervalued the Company and failed to reflect the Company's growth strategy and upside potential.

On November 26, 2013, the Company announced that it submitted a proposal to the Board of Directors of Jos. A. Bank to acquire all of the outstanding shares of Jos. A. Bank common stock for $55.00 per share in cash, representing an implied enterprise value of approximately $1.2 billion.

THIRD QUARTER CONSOLIDATED RESULTS REVIEW

Total net sales for the fiscal 2013 third quarter increased 2.8% or $17.9 million to $648.9 million from $631.0 million for the same prior year period.  Retail segment sales for the quarter increased by 2.0% or $11.5 million and corporate apparel sales increased by 9.6% or $6.4 million as compared to the prior year quarter.

The consolidated total gross margin was up $2.8 million or 1.0%.  The total gross margin rate decreased 84 basis points primarily due to an expected decrease in tuxedo margin due to lower rental revenue and higher per unit rental costs and royalty payments and the deleveraging of occupancy costs.  The retail segment total gross margin was up 0.4% and the corporate apparel gross margin increased 9.3%. 

GAAP SG&A expenses of $233.5 million increased by $15.3 million or 7.0% from the prior year.  Adjusted SG&A expenses of $226.0 million increased by $7.8 million from the prior year or 3.6% primarily due to increased employee related expenses.  Adjusted SG&A expenses exclude $9.7 million in costs related to the JA Holding, Inc. acquisition and integration, costs related to various strategic projects, separation costs associated with former executives and store related closure costs.  Also excluded is a $2.2 million gain from the sale of an office building in Fremont, CA. 

GAAP net earnings for the fiscal 2013 third quarter were $38.2 million, or $0.79 diluted earnings per share.  Adjusted net earnings for the fiscal 2013 third quarter were $43.1 million, or $0.90 adjusted diluted earnings per share compared to net earnings of $48.8 million, or $0.95 diluted earnings per share last year.

THIRD QUARTER SALES REVIEW

The table that follows is a summary of net sales for fiscal 2013 third quarter and year-to-date.  The dollars shown are U.S. dollars in millions and due to rounded numbers may not sum.  The Moores comparable store sales change is based on the Canadian dollar.  Comparable sales exclude the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period and include e-commerce net sales, beginning in fiscal 2013.  The inclusion of e-commerce net sales did not have a significant effect on comparable sales.

Because fiscal 2012 was a 53 week year, comparable store sales for the current year are shown on a trailing 52 week basis, comparing the most relevant time periods, as well as on a fiscal period basis.  The current quarter fiscal period basis is lower than the trailing basis comparison primarily due to the calendar shift of the 53^rd week.

Net sales at core flagship brand Men's Wearhouse stores, which represented 66% of total third quarter sales were up 5.0% from last year's third quarter sales while comparable store sales increased 2.6%.  On a comparable basis increases in clothing product average unit retails and average transactions per store more than offset a decrease in units sold per transaction. The higher margin tuxedo rental revenues comparable store sales increased 0.8% in the third quarter of 2013. 

Moores, the Canadian retail brand, was 10% of the total third quarter sales and had a comparable store sales decrease of 2.4% due mainly to decreases in units sold per transaction and average transactions per store which more than offset a slight increase in clothing product average unit retails.  The results for Moores were favorable to our internal plan.  K&G was 11% of the Company's total third quarter sales with a comparable store sales decrease of 4.4% with lower average unit retails and average transactions per store that more than offset increased units sold per transaction.  The Corporate Apparel segment, which represented 11% of total third quarter sales, had a sales increase of 9.6% due mainly to customer rollouts in the US and UK. 

2013 GUIDANCE

The full year expectation of adjusted earnings per share remains at $2.40 to $2.50.  The Company's guidance excludes costs associated with the JA Holding, Inc. acquisition and integration, separation costs associated with former executives, the non-cash goodwill impairment charge related to K&G, costs related to various strategic projects, store related closure costs, and the gain from the sale of an office building in Fremont, CA. 

CONFERENCE CALL AND WEBCAST INFORMATION

At 9:00 a.m. Eastern time on Thursday, December 12, 2013, Company management will host a conference call and real time webcast to review fiscal 2013 third quarter results and its outlook for the remainder of fiscal 2013.

To access the conference call, dial 480-629-9692.  To access the live webcast presentation, visit the Investor Relations section of the Company's website at ir.menswearhouse.com.  A telephonic replay will be available through December 19, 2013 by calling 303-590-3030 and entering the access code of 4649392#, or a webcast archive will be available free on the website for approximately 90 days.

Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,133 stores.  The Men's Wearhouse, Moores and K&G stores carry a full selection of suits, sport coats, furnishings and accessories in exclusive and non-exclusive merchandise brands and Men's Wearhouse and Tux stores carry a limited selection.  Most K&G stores carry a full selection of women's apparel.  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 Twin Hill in the United States and Dimensions, Alexandra and Yaffy 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 February 2, 2013 and Forms 10-Q.  Men's Wearhouse is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.  For additional information on Men's Wearhouse, please visit the Company's websites at www.menswearhouse.com, www.mooresclothing.com, www.kgstores.com, www.twinhill.com, www.dimensions.co.uk and www.alexandra.co.uk. 

([1]) Adjusted net earnings exclude $9.7 million ($6.4 million after tax or $0.13 per diluted share) in costs related to the JA Holding, Inc. acquisition and integration, costs related to various strategic projects, separation costs associated with former executives, and store related closure costs. Also excluded is a $2.2 million ($1.5 million after tax or $0.03 per diluted share) gain from the sale of an office building in Fremont, CA. Adjusted diluted earnings per share may not sum due to rounded numbers.

([2]) Adjusted net earnings exclude $22.1 million ($14.4 million after tax or $0.29 per diluted share) in costs related to the JA Holding, Inc. acquisition and integration, costs related to various strategic projects, separation costs associated with former executives, non-cash impairment of K&G goodwill and store related closure costs. Also excluded is a $2.2 million ($1.5 million after tax or $0.03 per diluted share) gain from the sale of an office building in Fremont, CA. Adjusted diluted earnings per share may not sum due to rounded numbers.

Contact:
Jon Kimmins, CFO
(510) 723-8639

Ken Dennard
Dennard - Lascar Associates
(832) 594-4004
[email protected]

SOURCE Men's Wearhouse

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