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Here's Why Tailored Brands Shares Dropped Thursday Morning

By Lou Whiteman – Updated Apr 13, 2019 at 10:23AM

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Same-store growth is nowhere to be seen.

What happened

Shares of Tailored Brands (TLRD) plunged 24% on Thursday morning after the specialty apparel company reported a fiscal fourth-quarter loss and offered uninspired guidance for the first quarter.

So what

Tailored Brands reported an adjusted loss of $0.28 per share for the quarter ending Feb. 2, slightly better than consensus estimates, on adjusted net sales of $770 million, which is down 10% year over year and below estimates. The company expects adjusted earnings of $0.10 to $0.15 per share in the first quarter, well short of analysts' $0.50 forecast.

After Tailored Brands slashed guidance in January, the fourth-quarter results were expected. A weak first quarter was not.

A man in a suit.

Image source: Getty Images.

The company said it expects same-store sales at both its Men's Wearhouse and JoS A. Bank stores to be down 3% to 5% in the first quarter. CFO Jack Calandra, on a call with investors, blamed the weak guidance on "significant headwinds," including a late Easter that impacts when proms are held, as well as foreign exchange impacts and "current business trends."

The outlook caused some on Wall Street to raise a white flag. B. Riley FBR analyst Susan Anderson downgraded Tailored Brands to "neutral" from "buy" and cut her price target from $20 to $11 due to a lack of visibility on when same-store sales would stabilize. Jefferies analyst Randal Konik, meanwhile, cut his price target to $19 from $24 per share in a note titled "How Could We Be So Wrong?"

Check out the latest earnings call transcript for Tailored Brands.

Now what

Tailored Brands looks like a bargain, trading at just 5.8 times earnings and with a dividend yield of 5.89%. Of course, that means little if the company can't come up with a way to drive traffic into its stores and grow sales.

On the call, management outlined a plan to increase its e-commerce presence, shift its product lineup to reflect a more casual modern workplace, and, in Calandra's words, create "brands that stand for something more than just price." That's easier said than done. Investors aren't in a mood to hang around and find out if they can pull it off.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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