When I noted last week that retail in general looked saggy, I didn't mean every single retailer. There are always a few companies that stand out amid general gloom. Yesterday, we saw solid numbers posted by Costco (Nasdaq: COST) and men's clothier Jos. A Bank (Nasdaq: JOSB).
While Costco's earnings release may have left my colleague Alyce Lomax wondering whether a cooldown awaits the company, Jos. A. Bank's results left no such doubts.
Total sales grew 9.9% in the third quarter, while comparable-store sales showed a solid 3.1% increase. Management did trot out the "unseasonably warm fall weather hurting outerwear sales" excuse we've heard elsewhere, but it didn't affect overall comp sales much. Third-quarter comps equaled their nine-month year-to-date counterparts. The bricks-and-mortar segment led the way in sales, unlike last quarter, when direct sales (Internet and catalog) set the pace.
Even better, gross margin jumped 3.1%, as strong sales cleared out inventory and spared the company aggressive markdowns. Suits were the primary reason for the improvement, since they required less promotional pricing. At current inventory levels, management is confident that it has a clean inventory level for the holiday season
The margin improvement was partially offset by higher marketing costs, but I'm not concerned. For a retail company on a roll, I like to see additional investment here to drive the top line and enhance the customer shopping experience.
Operating income rose 27%, and earnings per share of $0.38 blew away analyst estimates of $0.33. That's six quarters in a row of earnings "beats" from this company. Inventories have grown at a slower rate than sales year to date. That's comforting at a time when some apparel retailers, such as Kohl's (NYSE: KSS) and Limited Brands (NYSE: LTD), are looking a bit bloated.
Overall, I can't find anything to dislike about these results. The Street agreed, rewarding Jos A. Bank's shares with a 4% hike, even as competitors like Macy's (NYSE: M) and Men's Wearhouse (NYSE: MW) traded flat or lower.
After a nice pop following second-quarter earnings, Jos. A. Bank stock has languished with the rest of retail for the past few months. With a current P/E of slightly more than 10 times trailing-12-month earnings, the company looks pretty "bankable" to me.
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