JoS. A. Bank Clothiers (NASDAQ:JOSB) bucked the gloomy retail trend yesterday, booking strong sales for the month of June. While the retailer is not perfect, investors may also learn lessons from its strengths.
Rich Smith has run an excellent heavy-duty analysis on JoS. A. Bank and determined that the stock does not make the grade as a Hidden Gems pick. The firm's chief problem is its negative free cash flow, but Rich also wonders why it is in a rush to build out expensive bricks-and-mortar stores even as its higher-margin catalog and Internet business has taken off.
In fact, JoS. A. Bank would be wise not to lose focus on the Web and catalog side, where it manages to continue squeezing out more business. Comparable store sales for the five months ended July 3 increased a healthy 11.5%, but online and catalog revenue jumped 16.8%.
Indeed, it seems as though excellence in the virtual space is separating the winners from the losers. Companies such as Gap (NYSE:GPS), Target (NYSE:TGT), and Sears (NYSE:S) would have you think that people slowed their shopping because temperatures were lower and more rain fell. But shouldn't Web sales help pick up some of this slack? People still have to buy things -- after all, Father's Day is not canceled on account of rain. As Alyce Lomax wrote yesterday, J.C. Penney (NYSE:JCP) bears these facts out. It reported that Internet-only revenue jumped 25% in June and that Father's Day marketing boosted results.
JoS. A. Bank's negative free cash flow is a definite problem. In addition, sales are probably benefiting from other factors, including improving hiring trends. But its experience may also suggest that a key to sales growth is the right blend of presence in both the bricks-and-mortar and the virtual world.
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Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.
