The Men's Wearhouse
The company started its fashion show in basic bottom-line black, eschewing a red power tie -- or anything else red, for that matter. First, the company showed off a 42% profits increase for fiscal 2004 and complemented it with diluted earnings per share that increased 52%. You might think that would be a tight fit, but the company has shed (as a weighted average) 6.4% of its diluted share count through buybacks over the past year. So by the time Jan. 29 rolled around this year, that per-share profits number fit like a glove.
For its headgear, the company paired its black with a relatively tiny 11% increase in the top line -- all the better to accentuate profits further down. For the final touch, TMW threw on a polka-dotted necktie featuring 209 individual basis points of pure gross margin increase, knotted twice with a 169-basis-point operating margin increase and an even 100-basis-point increase in the net.
If TMW made one fiscal faux pas with which I'd quibble, it was in choosing construction boots for its footwear. Free cash flow, the mechanism that enables this company to walk so tall in terms of earnings, declined year-on-year from $70 million to $45 million, apparently because of a continuing build-out in store count. That investment is clearly helping drive revenue and profits growth, but it's taking its toll in capital expenditures.
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Fool contributor Rich Smith owns no shares of The Men's Wearhouse.