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Why Shares of Tailored Brands Are Surging Today

By Timothy Green - Sep 13, 2018 at 12:46PM

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Solid comparable sales growth and a slight guidance boost overshadowed otherwise so-so results.

What happened

Shares of menswear retailer Tailored Brands ( TLRD ) jumped Thursday despite a mixed second-quarter report. The company matched analyst estimates for earnings but missed on revenue. Comparable sales growth from all of its retail brands, along with stable earnings guidance and an increase in comparable sales guidance for the full year, seems to have been enough to propel the stock higher.

Tailored Brands stock was up about 18% at 11:05 a.m. EDT.

A man in a suit.

Image source: Tailored Brands.

So what

Tailored Brands reported second-quarter revenue of $823.4 million, down 3.2% year over year and about $5 million below the average analyst estimate. Comparable sales were up across the board, with overall comparable sales up 1.7%:

Retail brand

Comparable sales change

Men's Wearhouse

1%

Jos. A. Bank

2%

K&G

3.5%

Moores

3.7%

Data source: Tailored Brands.

Comparable sales rose at Men's Wearhouse and Jos. A. Bank, the company's two largest brands, due to increases in transactions, and despite declines in units per transaction.

Non-GAAP earnings per share came in at $1.07, down from $1.19 and in line with analyst expectations. Gross margin dipped by 1.8 percentage points year over year, while selling, general, and administrative costs edged up as a percentage of revenue.

Total inventories tumbled 16.8% year over year. Tailored Brands CEO Doug Ewert gave a bit more detail: "I am also pleased with the progress we are making to move to a leaner, more efficient inventory model, which is particularly important as custom clothing becomes a larger percentage of our mix. With leaner inventories, we can improve the customer experience and free-up working capital."

Now what

Tailored Brands expects full-year comparable sales growth for Men's Wearhouse and Jos. A. Bank to be up a low single-digit percentage, unchanged from its previous outlook. But the company raised its outlook for K&G and Moores. Moores is now expected to produce a low single-digit increase, while K&G is expected to be flat-to-up slightly.

Tailored Brands also reiterated its full-year adjusted earnings outlook, calling for EPS between $2.35 and $2.50.

While Tailored Brands' second-quarter results fell short of expectations, comparable sales growth and a slight improvement to full-year guidance overshadowed the negatives.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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