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Casual Male announced it will scale back its Rochester Big & Tall chain.

Shares of Casual Male Retail Group Inc. vaulted more than 40 percent Tuesday after the men’s big and tall specialty chain reported that cost cuts and inventory control allowed it to increase profits more than 90 percent in the second quarter despite declining sales.

This story first appeared in the August 26, 2009 issue of WWD.  Subscribe Today.

David Levin, chief executive officer, also termed a success the company’s first hybrid units — which bring together its Casual Male XL and Rochester Big & Tall nameplates — saying they are “exceeding expectations” in the first four weeks in operation, and that four of the five new concept stores are among the company’s top 10 best performers.

The ceo also said the cobranded stores are “a good vehicle for us for the future.” The higher-priced Rochester division, acquired by Casual Male in 2004, has been hammered during the recession, prompting the company to add Casual Male’s lower-price merchandise to the assortment and creating a “hybrid” in five locations.

Rochester’s comps in the second quarter fell 27 percent, prompting Levin to comment: “We’re seeing the luxury segment of the market struggling more.”

Overall, the Canton, Mass.-based men’s wear retailer posted net income of $3.6 million, or 9 cents a diluted share, during the three months ended Aug. 1, 92.1 percent above the year-ago total of $1.9 million, or 5 cents a share.

Sales in the quarter fell 13.4 percent to $98.3 million from $113.5 million in 2008. Samestore sales declined 13.9 percent. Gross margin dropped 60 basis points to 44.6 percent of sales as a 260-basis point increase in fixed occupancy costs erased the firm’s 200-point improvement in merchandise margin.

Analysts polled by Yahoo Finance had expected earnings per share of 4 cents on revenues of $102 million, on average.

Investors clearly liked the results, sending the company’s shares up 91 cents, or 41.6 percent, to $3.10. They last traded above $3 on Oct. 16.

Levin said the hybrid stores, in their lives as Rochester units, previously had produced volume of about $650,000 each, about 1.5 times that of a Casual Male store. Since their relaunch, however, volume is now running about 2.3 times the Casual Male median.

The company would not provide specifics on what merchandise is performing best at the stores, saying it needs more time to evaluate them.

But the early success is prompting the company to look toward the future. In March, Levin said, the retailer will open a prototype hybrid in the Chicago market that will serve as the model for future units. “And there are already several markets on our radar screens,” he added.

Looking at the business as a whole, Levin said he is “somewhat optimistic that comps will improve in the next several months.”

For the first half of fiscal 2009, Casual Male’s profits increased 99.8 percent to $4 million, or 10 cents a diluted share, from $2 million, or 5 cents a diluted share, a year ago. Sales in the six months fell 11.4 percent to $195.8 million from $221.1 million in the comparable period. Same-store sales were off 12.3 percent, with Casual Male’s single-digit decline of 8.9 percent overshadowed by a 26.3 percent swoon at the higher-end Rochester division.