The men's fashion retailer Jos. A. Bank (UNKNOWN:JOSB.DL), known for its tailored suits, clothing, and accessories as well as its great sales promotions, recently had the tables turned on it when its rival Men's Wearhouse (NYSE:TLRD) offered to buyout the company for $1.54 billion on Nov. 26, 2013. Jos. A. Bank has since remained silent as to the surprising proposal. The company is now back in the news after its third quarter earnings report released to the public on Dec. 5, 2013. Not only should Jos. A. Bank consider its recent quarterly earnings results, but it should also decide what this means for the company's short and long-term game plan.
Proving its strength
Jos. A. Bank beat third-quarter EPS estimates by $0.01, earning $0.51 a share. The Capital IQ estimates was $0.50 a share while Jos. A. Bank estimated EPS between $0.49 and $0.51 a share. Since reporting its third quarter results, the company's stock price is up only a bit, whereas prices over the past three months have risen 34% for a few other reasons. These include its previous offer to buyout Men's Wearhouse, its newest marketing strategy, and Men's Wearhouse's recent bid to take over Jos. A. Bank.
Revenue also increased to $247.5 million from last year's third quarter reported revenue of $233 million. In addition, net income increased from $13.3 million in last year's third quarter results to $13.6 million. Unfortunately, same-store sales dropped 0.01%. This was offset by direct marketing sales rising 24% thanks to its more recent sales strategies of offering straight-forward discounts instead of deals like "buy one suit, get two or three suits for free." Jos. A. Bank expects its direct marketing sales to continue rising in future fiscal quarters as customers take favorably to its direct sales promotions.
Battling it out
Jos. A. Bank has a lot on its plate as it debates whether or not to take Men's Wearhouse's bid of $1.54 billion. Most likely, Jos. A. Bank will take its time making a decision to determine whether it is a win-win for the executive management team and investors. Seeing that both companies' share prices have risen in the past several weeks suggests that Jos. A. Bank would be wise in accepting Men's Wearhouse's bid.
Reason to hope
Men's Wearhouse has strong reason to hope that Jos. A Bank will accept its buyout offer. To Men's Wearhouse and its shareholders, Jos. A. Bank is a prize worth owning due to the cost savings and cross-brand promotions the merger would yield. Plus, after seeing how well the company did with its third quarter results, Men's Wearhouse is likely now even more convinced that Jos. A. Bank is worth owning and operating.
Jos. A. Bank's board and shareholders may very well decide that Men's Wearhouse has matched or exceeded their company's value, a realization that would likely seal the deal and cause the company to accept the buyout bid. Shareholders of both companies will benefit in some way if a deal is struck. Men's Wearhouse can only hope that Jos. A. Bank will view its bid as fair and profitable so that it will hand over the reins for good.
Shareholders in Jos. A. Bank should be content with the company's third quarter performance as well as its latest direct marketing approach. The company will continue chugging along whether or not it accepts Men's Wearhouse's bid, but investors shouldn't fret if Men's Wearhouse buys Jos. A. Bank. The merger of these two companies would be cost effective with operations being under one roof rather than two, and should Jos A. Bank shareholders wish to participate in these gains then they can always buy into Men's Wearhouse with the proceeds of the proposed buyout.
Fool contributor Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.