Casual Male's Heavier Profits

Perhaps it's a sign of our nation's desire to get healthy and bulk up, or maybe it reflects that we're fatter than ever. Whatever the reason, Casual Male Retail Group (Nasdaq: CMRG  ) is poised to benefit from the trend.

Casual Male estimates that the "plus-size for men" category is a $5.5 billion to $6 billion market, and growing. The company operates nearly 500 stores in 44 states under the Casual Male Big & Tall, Rochester Big & Tall, and Sears Canada-Casual Male brands.

Recently, though, the company has struggled to translate its expansive scope into sales and profits. Revenues for fiscal year 2004 were off 15%, and the company barely turned a $0.04-per-share profit on the year.

This year was a little better, boosted primarily by the fourth-quarter results Casual Male just reported. Quarterly revenues came in 10% higher at $129.7 million, beating analysts' expectations of just $128.4 million. Profits jumped 71% to $13.5 million, or $0.33 a share. But those figures include some special items; factoring them out reduces profits to $0.18 a stub, in line with expectations. The clothing retailer benefited from a tax break and the repurchase of $5.3 million of convertible notes. Same-store sales growth reached 7.9% for the quarter.

The turnaround that began after Casual Male's bankruptcy declaration in 2001 has been spotty at best. But after the sale of its Levi's/Dockers division in 2004, the company has been concentrating on the big-and-tall segment, which has finally begun to pay off. Casual Male has also aligned itself with former heavyweight boxing champ George Foreman, whose size apparently hasn't diminished despite years of hawking his signature "knock out the fat" grills.

Casual Male competes against the likes of Men'sWearhouse (NYSE: MW  ) and Jos. A Bank (Nasdaq: JOSB  ) , not to mention discount retailers like Wal-Mart (NYSE: WMT  ) and Target (NYSE: TGT  ) , which have begun to expand their clothing lines. However, Casual Male remains the largest retailer of big-and-tall clothes, and it has operations in Canada and the United Kingdom.

The company will also be expanding its relationship with Sears Holdings (Nasdaq: SHLD  ) . The discount retailer, which also recently completed a turnaround, will send its customers a special catalog featuring Casual Male's fashions.

"Big and tall" hasn't meant fat and profitable for Casual Male, but its turnaround seems to be on track these days. An investment in this specialty retailer might eventually result in a plus-sized portfolio.

Please join us tomorrow at Fool.com for an important announcement.

Fool contributor Rich Duprey owns shares of Casual Male and Wal-Mart. He does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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