Casual Male's Big Mistake

When plus-sized men's retailer Casual Male (Nasdaq: CMRG) decided to expand its operational waistline last year, one of the businesses it bought was Jared M., a custom tailor to sports figures, namely NBA athletes. Despite initial losses in the business, executives had been saying they had big plans for the line, and just this past summer had discussed expanding it to Major League Baseball players.

Apparently a couple of months can make a big difference in what you say and think. With the release of disappointing third-quarter results, Casual Male announced its conclusion that the Jared M. purchase wasn't such a great idea after all, and it will now sell it or get rid of it some other way. Seems management suddenly realized that a custom tailor does not seamlessly fit in the retail business. It was taking longer and proving more difficult to grow the business than Casual Male had planned, and management decided it was diverting focus from its main line of work.

This leads me to wonder if the he-man's retailer will rethink its other expansion plans, too. Those opportunities include an online, plus-sized lifestyle retail operation as well as a catalog, and Internet-based shoe sales business. Management says it likes how these businesses are growing, but then again, we were expecting Jared M. to become a national line, too.

Menswear hasn't exactly been fashionable of late. Men's Wearhouse (NYSE: MW), for example, reported last month that it was having difficulty integrating the formal wear After Hours business it acquired, while its low-end K&G stores were seeing low-end sales. That seems to jibe with Casual Male's lower-end Rochester stores, which have been giving management fits as it tries to clear out inventory and reposition the brand.

Yet where Casual Male saw a disappointing October in terms of same-store sales because of unseasonably warm weather (a phenomenon many retailers have blamed for weak sales lately), rival Jos. A. Bank (Nasdaq: JOSB) was reporting a 1.8% monthly increase.

Now, Casual Male did say that comps this month are a whole lot better, up about 7%, but with two months still to go in the quarter it's being very cautious and warning that sales will probably fall. In fact, it anticipates full-year sales to decline $20 million to $30 million from the company's previous guidance, to $470 million to $475 million. Part of that has to do with pulling Jared M. out of the equation, but much of it is still because of less business at its remaining operations.

Despite having some big ideas, Casual Male investors have instead been hit with the short end of the stick.