The Q1 2014 earnings report for The Men's Wearhouse, Inc (NYSE: MW), a potential peer of men's apparel retailers like Destination XL Group Inc (NASDAQ: DXLG) and Jos. A. Bank Clothiers Inc (NASDAQ: JOSB), is scheduled for before the market opens on Friday. Aside from the Men's Wearhouse earnings report, it should be said that Destination XL Group Inc reported Q1 2014 earnings on May 29th (Sales rebounded in April to offset weather impacted business) while Jos. A. Bank Clothiers Inc reported Q4 2013 earnings on April 2nd with Q1 2014 earnings expected on Friday. I should mention though that The Men's Wearhouse is acquiring Jos. A. Bank Clothiers Inc – a deal recently approved of by the FTC. The merger creates the fourth-largest retailer of menswear, which will have $3.5 billion in pro forma sales, 1,700 stores and about 23,000 employees.
What Should You Watch Out for With The Men's Wearhouse, Inc Earnings Report?First, here is a quick recap of the Men's Wearhouse's recent earnings history from Yahoo! Finance:
| EPS Est | 0.55 | 1.14 | 0.86 | -0.13 |
| EPS Actual | 0.65 | 1.01 | 0.90 | -0.38 |
| Difference | 0.10 | -0.13 | 0.04 | -0.25 |
| Surprise % | 18.20% | -11.40% | 4.70% | -192.30% |
Back in March, the Men's Wearhouse reported that total net sales for the fiscal 2013 13-week fourth quarter decreased 7.9% to $560.6 million from $608.4 million in last year's 14-week fourth quarter while the adjusted net loss for the fiscal 2013 fourth quarter was $17.9 million verses a net loss of $4.9 million. Total net sales for fiscal year 2013 decreased 0.6% to $2.5 billion while total Men's Wearhouse brand revenues were up 1.6% over fiscal 2012 and up 3% on a 52 week fiscal comparison. The CEO commented:
"We were not immune to the effects of weak consumer spending sentiments and severe weather disruption that impacted most retailers in December and January. Tuxedo and corporate apparel sales were in-line with internal expectations, while clothing sales in all three retail chains were lower than expected. Weather-related store closures and an aggressive promotional retail environment resulted in a traffic decline. We estimate that approximately one-quarter of the 2.5% comparable sales decrease in the fourth quarter at Men's Wearhouse was due to these closures."
Nevertheless:
"We executed an aggressive advertising and promotional plan, and made adjustments as the challenging retail environment unfolded during the quarter. We proactively increased our promotional activity, including incremental advertising spending, and reduced our expenses accordingly. Subsequently, we have seen business improve significantly in February, as both Men's Wearhouse and Moores finished the month with approximately 3% and 9% comparable sales increases respectively, overcoming additional weather-related store closures."
This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenues of $629.66M and EPS of $0.67 - down slightly from EPS of $0.69 expected ninety days ago.
On the news front, the big recent news for the Men's Wearhouse was the battle to take over Jos. A. Bank Clothiers Inc which ended around the time the company last reported earnings when a deal was struck for $65.00 per share in cash for a total value of $1.8B. However, founder, former CEO and TV pitchman George Zimmer has a mixed view about the merger:
"To the extent that the merger of Men's Wearhouse and Jos. Banks provides the combined companies employees and customers a great work environment and shopping experience respectively, I'm supportive of the move. However, having been a business leader in the industry for over 40 years, I've seen the adverse effects of Wall-Street-controlled mergers, which emphasize cost-cutting and other bottom line efficiencies that come at the expense of happy employees and satisfied customers."
What do The Men's Wearhouse, Inc Charts Say?The latest technical chart for the Men's Wearhouse shows the stock began to trend down in March:
The Men's Wearhouse, Destination XL Group Inc and Jos. A. Bank Clothiers Inc are all up since the financial crisis but DXLG is below the level it was in the 1990s.
The technical chart for Destination XL Group Inc shows a downward trend since late November while Jos. A. Bank Clothiers was in an upward trend before being acquired:
The coming earnings report and earnings call will no doubt cover a lot of details regarding the merger and the potential for the cost savings that George Zimmer is concerned about. That could mean some volatility until all the details are ironed out. But for the long haul, the merger should be a winner for the company and for shareholders.
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