Do you like surprises? Then chances are, you're going to love Thursday's earnings report out of upscale clothier Jos. A. Bank (NASDAQ:JOSB). The company has a history of making analyst estimates look conservative and has beaten them in each of the past five quarters. Jos. A. Bank -- "Joe" to its friends -- reports fiscal-third-quarter 2007 results on Thursday.

What analysts say:

  • Buy, sell, or waffle? The half-dozen analysts following the stock split their ratings down the middle between "hold" and "buy."
  • Revenue. On average, they expect to see 12.5% sales growth to $134.4 million.
  • Earnings. Profits are predicted to rise 10% to $0.33 per share.

What management says:
Joe gave investors a sneak peek at its Q3 numbers last month in its third-quarter 2007 sales release -- but I've got to wonder whether the analysts even read it, because the sales numbers they're expecting look awfully optimistic in light of what Joe says really happened last quarter. The company admitted that same-store sales grew a mere 3.1%, and total sales rose just 9.9%, leaving sales several million dollars short of analyst targets.

What management does:
Joe's margins have been on an upward march for several quarters now -- or rather, they had been, until last quarter. Although the company managed to beat estimates once again, both gross and net margin growth were stopped in their tracks, and the operating margin actually decreased by a whisker. The good news is that even if the operating margin has stopped growing, they're at least comparable to the margins sported by rivals Men's Wearhouse (NYSE:MW) and Nordstrom (NYSE:JWN), and superior to Macy's (NYSE:M) margins ensemble.

Margins

4/06

7/06

10/06

2/07

5/07

8/07

Gross

61.6%

61.7%

61.8%

61.9%

62.2%

62.2%

Operating

12.5%

12.6%

12.4%

13.4%

13.6%

13.5%

Net

7.1%

7.2%

7.1%

7.9%

8.1%

8.1%

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:
Now for the really bad news: Joe "earns nearly 37% operating margins on its direct sales and just 18% margins on in-store sales." The problem is, according to last month's sales report, not only did Joe's sales grow less swiftly than analysts had expected, but the company also relied more heavily on lower-margin in-store sales for the growth it did achieve. As I read the release, I see that comparable-store sales added 3.1% and high-margin direct comp sales rose by a mere 1.8%. So it seems that Q3 may have seen a pause in the trend of high-margin sales growth that powered Joe ahead earlier this year, with direct sales growth averaging 14.3% year to date.

Now, for the long term, the picture looks good, and the thesis of strong direct sales translating into outsize earnings growth appears intact. The sales report released earlier this month showed direct sales resurgent at 41.4% growth in November, eclipsing both new-store sales and comps growth. But unless I miss my guess, that's not going to save Joe from a disappointing quarterly report come Thursday. You'd best button up, just in case.

Try on Joe's recent performance, and see whether it fits your portfolio:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.