Do you like surprises? Then chances are you're going to love the next earnings report from upscale clothier Jos. A. Bank (NASDAQ:JOSB). The company has a history of making analyst estimates look conservative, and has beaten them in each of the last four quarters. Jos. A. Bank ("Joe" to its friends) reports fiscal Q2 2007 results on Wednesday.

What analysts say:

  • Buy, sell, or waffle? Seven analysts follow the stock, four with a hold and three issuing a buy. Our Motley Fool CAPS community has a bullish stance on the stock, giving it four out of five stars.
  • Revenues. On average, analysts expect to see 13% sales growth to $135.1 million.
  • Earnings. Profits are predicted to rise 10.5% to $0.42 per share.

What management says:
Like most retailers, Joe pulled back the curtain on its Q2 results early last month, announcing its actual sales results for the quarter, and guesstimating how the profits picture would develop. The company missed analyst predictions for sales (which came to $134.3 million), but still expects profits "to increase approximately 10% when compared with earnings per share of $0.38 in the quarter ended July 29, 2006."

The good news -- although it won't be reflected in Wednesday's numbers -- is that things are already looking better for Q3. In its August sales report released earlier this month, Joe announced that same-store sales leapt 7.7% in comparison to August last year, helping total sales increase 14.5%. The bad news? In August, higher-margin direct marketing sales increased a mere 1.1%, which bodes ill for the current quarter's profitability.

What management does:
After growing in each of the last two quarters, Joe's rolling operating margin outclasses rivals Men's Wearhouse (NYSE:MW) and Macy's, (NYSE:M) and its gross margins -- which have grown consistently over the past year -- are strikingly higher.

Margins

1/06

4/06

7/06

10/06

2/07

5/07

Gross

61.9%

61.6%

61.7%

61.8%

61.9%

62.2%

Operating

13.3%

12.5%

12.6%

12.4%

13.4%

13.6%

Net

7.6%

7.1%

7.2%

7.1%

7.9%

8.1%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Speaking of profits, while the single-digit increase in direct marketing comps for August can't be good news for the third quarter, I wouldn't put it past Joe to pull a rabbit out of its three-piece suit and present us with another earnings beat on Wednesday.

Why? Because in the August sales report, Joe confided that even as total sales increased just 12.8%, direct marketing sales leapt 19.7%. The difference in margins earned by the two segments makes the difference in growth rates crucial, since direct marketing margins are much higher. While in a perfect world you'd want both sets of numbers to rise strongly, in the real world, the one you really want to succeed is direct sales. Come Wednesday, don't be surprised if the direct sales segment saves the day.

Try on Joe's recent performance, and see if it fits your portfolio: