When fellow Fool Seth Jayson last checked in on Men's Wearhouse
Sales for the first six months of 2004 increased 12.6% over the year-ago period; comparable store sales increased 9.4%; and diluted profits per share were up an astounding 62.5% to $0.91.
The ability to increase sales only modestly, yet translate that into a profits increase many times the size of the sales increase, derives from the razor-thin margins common in the retail industry. When a retailer such as Men's Wearhouse is able to keep its costs under control and eke out even a modest increase in its gross, operating, and net margins, profits can jump impressively (as we saw last week, when looking at the results posted by warehouse store owner BJ's
That is what happened at Men's Wearhouse. The company boosted its profit margin by just over 1%. But an increase of that size, which would constitute a rounding error in a company as profitable as, say, Qualcomm
It also did not hurt that over the past year, Men's Wearhouse has bought back 8.8% of its shares outstanding. Rather than issue shares with abandon, then try to buy them back to hide the dilution -- a tactic we have written about over the past few months in regard to, for example, Symantec
So to sum up, Men's Wearhouse turned in a fine quarter and a fine first half. That may be boring, but I don't expect to hear much complaining from its shareholders.
On a related note, tune in in two weeks to see how well rival clothier Jos. A. Bank
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
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