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Jos. A. Bank Net Declines in Q1

Sales said to be rebounding after rare earnings "miss."

Jos. A. Bank
Appeared In
Special Issue
Men'sWeek issue 05/31/2012

Sales couldn’t rebound quickly enough to help Jos. A. Bank Clothiers Inc.’s first-quarter earnings.

In a rare sales and revenue “miss,” the Hampstead, Md.-based men’s specialty store chain weathered a 16.7 percent decline in first-quarter profits on sales that rose 4.2 percent but fell 1 percent on a same-store basis.

“Sales started more slowly than we had planned for the first eight weeks of the quarter,” said R. Neal Black, president and chief executive officer. “After making marketing changes beginning in week nine, sales improved substantially. So far, the second quarter has started out much better than the first quarter.”

He noted that same-store sales and direct marketing revenues are up for May but cautioned that Father’s Day, “the most important selling period of the quarter, is still ahead of us.”

In the three months ended April 28, net income descended to $14.8 million, or 53 cents a diluted share, below the analyst consensus estimate of 62 cents. Year-ago profits were $17.8 million, or 64 cents.

Revenues hit $201.3 million, above the $193.3 million registered in last year’s period but below the $208.9 million consensus estimate. Like comparable-store sales, direct marketing revenues declined 1 percent. Gross margin dropped to 63.5 percent of sales from 64.8 percent in the 2011 quarter.

On the expense side of the ledger, both cost of goods sold and selling, general and administrative costs rose at a faster pace than sales. Cost of goods sold escalated at an 8.3 percent clip, to $73.6 million, while SG&A rose 7.4 percent, to $103.4 million.

Margaret Whitfield, retail analyst at Sterne Agee, noted that some of the increase in SG&A was attributable to marketing expenses, which succeeded in helping to accelerate sales in recent weeks. Still, she lowered earnings estimates for the year and reduced her price target for the stock to $57 from $62. In a research note, she pointed out that the company recently “has been more consistent with its promotions, having run a ‘Buy 1, Get 2 Free’ sale on suits and sport coats during virtually the entirety of April and May, versus promotions that changed very frequently last year.”

In Nasdaq trading Wednesday, shares fell $3.05, or 6.4 percent, to $44.74. Their 52-week high, set on Nov. 8, was $56.43, and the corresponding low, set on Aug. 19, was $40.46.

With the retailer packing up its unsold cold-weather merchandise for sale next winter, inventories rose 34 percent to $350.9 million.

“Obsolescence is not a significant concern for this merchandise,” Whitfield said, also noting that the erosion in gross margin, at 130 basis points, was smaller than the 380-basis-point decline she’d expected.

The company will hold a conference call to discuss the first-quarter results this morning.