Although it defies evolutionary theory, some of us are born with that gene that tells us "Yeah, go poke the bear . see what happens." I'm one of them and I just can't resist a good and potentially controversial story, so sooner or later I just had to take a crack at writing up Jos. A. Bank
For those not familiar with the company, it's a retailer that sells "classically-styled" clothing for men along the same lines as Lands' End (owned by Sears Holdings
So far, so good, right? Well, what has made this story spicier in the past is that management has a different way of doing some things, and sometimes that has caused confusion, consternation, and crabbiness among analysts and investors -- particularly on the inventory side of things. And that's the curse of being "different" -- you get a lot of flak until your track record manages to silence everybody.
Anyways, Jos. A. Bank's results continue to look quite good. Sales were up more than 28%, with comp-store sales up almost 16%, catalog sales up almost 19%, and Internet sales up nearly 22%. Margins expanded nicely and operating income was up more than 52% this quarter. And while the full-year free cash flow picture wasn't great, I'm more of a fan of structural free cash flow, and the numbers by that standard were fine to me.
I can't hope to tackle every issue in what is supposed to be a brief column, so let me say my piece on inventory. By most standards of comparison, Jos. A. Bank carries quite a bit of inventory -- even when you factor in inventory builds for new stores, direct sales, and so on. As a result, that also inflates the cash conversion cycle number (though adding back rent expense makes this number look not quite as bad as well).
Here's the thing, though. By carrying a lot of inventory in styles that don't tend to be trend-sensitive, it can offer better customer service. Men don't go shopping for ambiance: They go shopping to buy something, and having what they want in stock is important. That said, one thing about inventory does strike me as odd -- why is inventory growing so much faster than accounts payable? Those two usually travel together, so I'm a little curious about how and why they're uncoupled to the extent that they are.
When it's all said and done, I find it a bit amusing that my biggest complaint with Jos. A. Bank ends up being not about the company, but the stock. I think the stock is worth about $43 -- so at today's price, it's just not that interesting to me, controversy or no.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).