Big-and-tall retailer Casual Male (NASDAQ:CMRG) will report fourth-quarter 2006 financial results tomorrow before the market opens.

What analysts say:

  • Buy, sell, or waffle? Analysts expect big things from Casual Male, with seven of the eight who cover the company saying buy. The lone holdout thinks alterations might be needed and says hold.
  • Revenues. Sales are expected to grow by 12% for the quarter, rising to $145.7 million.
  • Earnings. Profits, meanwhile, are expected to fall 5% to $0.20 per share on a GAAP basis. On an adjusted basis, excluding tax allowance reversals Casual Male experienced last year, an 11% improvement in earnings is expected.

What management says:
Despite the benefit of an extra week in the quarter, management expects sales to be less than anticipated despite a 7.5% increase in comps, which are sales at stores opened for at least a year. The same-store sales trend had been higher than 9% for Casual Male, but warm weather apparently kept people from shopping for traditional winter wear. Expenses from brand extensions have been growing incrementally for ThinkBig.com, the retailer's online plus-size lifestyle site, and the Jared M. acquisition, a big-and-tall retailer for athletes.

Casual Male has been attempting to reshape its image from a dowdy haberdasher to the leading specialty retailer for large men, squaring off against Men's Wearhouse (NYSE:MW) and Jos. A. Bank (NASDAQ:JOSB). Sales in menswear are off about 10% overall, according to market research group NPD Group.

What management does:
The makeover is apparently working, as margins have been improving steadily all along. However, while management anticipates a 100-basis-point improvement in gross margins for the coming quarter, a large portion of that will come as a result of cutting back on promotional expenses (discounting), which CEO David Levin says is part of a planned reduction. Costs associated with legal wrangling with Cutter & Buck (NASDAQ:CBUK) over an employee's non-compete clause and theft of property have also led to expected reductions in net margins this quarter.

Margin

10/05

01/06

04/06

07/06

10/06

Gross

42.2%

43.2%

43.8%

44.3%

44.9%

Operating

3.1%

4.0%

4.5%

5.0%

5.6%

Net

1.3%

2.6%

3.3%

3.5%

3.9%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Although the menswear segment looks crowded -- with retailers like Men's Wearhouse on one side, department stores like Kohl's (NYSE:KSS) on the other, discounters like Syms (NYSE:SYM) below, and high-priced suit pushers such as privately held Brooks Brothers above -- Casual Male essentially owns the niche market of plus-sized clothing for men. The sprucing up of its image and extension of its brand to more markets should bode well for the company, regardless of any temporary setbacks. However, it sells at a pretty high premium to its competitors, so the gradual decline in its stock from the highs achieved back in the fall may just continue for awhile yet.

Related Foolishness:

Casual Male has earned a three-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Fool contributor Rich Duprey owns shares of Casual Male, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.