Casual Male 4Q Profit Drops

Men's clothing retailer Casual Male Retail Group Inc. said Tuesday sharply lower traffic after Thanksgiving hurt fourth-quarter results amid a difficult consumer environment.

"Going into the fourth quarter, we were off to a pretty good start, with (same-store sales) up about 7 percent," company Chief Executive David Levin told The Associated Press. "Post Thanksgiving, there was attrition with customer traffic."

Traffic fell about 8 percent during the quarter, but same-store sales, or sales at stores open at least a year, fell just 0.3 percent, helped by a higher average ticket and more browsers making purchases.

For the quarter ended Feb. 2, the Canton, Mass.-based company's net income dropped 98 percent to $638,000, or 2 cents per share, from $38.7 million, or 83 cents per share, in the prior year. Casual Male cleared out Rochester Big & Tall merchandise and made other inventory adjustments during the quarter, which resulted in write-downs of about 8 cents per share. The year-ago quarter had included a hefty tax benefit of $30.5 million, or 64 cents per share.

Revenue fell nearly 8 percent to $133.9 million from $144.7 million in the fourth quarter of 2006.

Analysts polled by Thomson Financial expected earnings of 15 cents per share on revenue of $137.3 million.

"We feel (traffic falloff) was a macro issue," Levin said. "We believe when economy starts getting conservative in the marketplace, men will be the first ones to cut back."

Most retailers have struggled to keep same-store sales growing as consumers cut back on discretionary spending to deal with high gas and food prices and the weak housing market.

"In a difficult environment, how do you drive more traffic into the store? That's the biggest issue," Howard Tubin, an RBC Capital Markets analyst said. "There was some better conversion and better average ticket during the quarter," he added. "When customers came into the store, they liked what they saw."

For the year, profit dropped 99 percent to $414,000, or 1 cent per share, from $42.6 million, or 98 cents per share in the prior year. Revenue fell less than 1 percent to $464.1 million from $465.4 million in 2006.

Levin said the company plans to target men at the lower end of the "big and tall" range to boost traffic. It is increasing marketing spend to 8 percent of sales, from 7 percent, and will begin airing a TV commercial in April targeting men with a 42- to 44- inch waist. The company's peak size is a 48- to 50-inch waist.

"In the big and tall market, 65 percent is 42 or 44, its underpenetrated," Levin said. "Our marketing approach is getting that guy into the Casual Male store, who might be reluctant to go in because of the stigma of 'big and tall'."

Going forward, Casual Male expects fiscal 2008 earnings per share will range between 25 cents and 30 cents per share for the year on sales of $470 million to $480 million. Analysts expect a profit between 16 cents and 40 cents per share, with a mean consensus estimate of 28 cents per share, and revenue of $486.9 million.

The company said same-store sales, or sales at stores open at least a year, will be flat to down 2 percent.

"We're assuming business will stay as it is at least for the next few months," Levin said. "As things get better or not we'll make adjustments accordingly."

Shares rose 5 cents to $4.32 during midday trading. The stock has ranged between $3.35 and $13.44 over the past year.

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AP Business Writer Lauren Shepherd in New York contributed to this story.