No Recovery in Sight for Men's Wearhouse
By
Timothy M. Otte
August 28, 2008
|
Investors hoping to see some improvement in Men's Wearhouse (NYSE: MW) will have to wait a while longer. For the fourth consecutive quarter, the Houston-based retailer of tailored men's clothing reported results that look downright shabby, and management offers little encouragement for the balance of this year.
I've noticed apparel retailers such as Kohl's (NYSE: KSS) and J.C. Penney (NYSE: JCP) reporting comp sales that still aren't trending up but are at least slowing their rate of decline. No such luck for Men's Wearhouse. Second-quarter comps fell 8% in U.S. stores, not noticeably better than the 8.5% slide last quarter. Having fewer customers walk through the door was the major culprit, but the average ticket was lower as well.
With comp sales down 8%, the rest of the profit-and-loss statement is predictable. Gross margin slid 27 basis points. Selling, general, and administrative expenses dramatically increased as a percentage of sales, and the adjusted earnings per share of $0.72 was well below last year's $1.00 but did manage to beat consensus analyst estimates by a penny. The one piece of encouraging news was the tuxedo rental business that Men's Wearhouse acquired from Macy's (NYSE: M) last year. That segment fell only 5% this time around, compared with 18% in the first quarter.
Management lowered its guidance for 2008 again, this time to a range of $1.50-$1.60 excluding one-time items. At the beginning of the year, the number was $1.90-$2.10, but management has had a few "opportunities" with earnings guidance in recent quarters.
Today, the company sports a trailing-12-month price-to-earnings ratio of 9. That might seem reasonable, but at the current price of $21 a stub, that's really closer to 13.5 times expected earnings this year -- not much of a bargain, when Foolish investors who believe in the sector can own Jos. A. Bank (Nasdaq: JOSB) for about the same multiple, with positive comps and a potential short squeeze to sweeten the pot.
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