By and  on August 29, 2012

Jos. A Bank Clothiers Inc. has put its foot back on the accelerator.

After a minor stumble in the first quarter, the Hampstead, Md.-based retailer said second-quarter profits topped expectations and that it was aggressively planning to increase its store count. The company currently operates 572 stores, but said it now envisions an 800-unit chain. The previous plan had been to grow to between 650 and 675 stores. The goal now is to eventually operate 700 full-line stores and 100 factory outlets.

The company attributed its heightened expansion plan to the “positive operating results of the new full-line and factory stores [it] has opened in the past several years” and its “strong balance sheet.”

The retailer will open 45 to 50 stores in both fiscal years 2012 and 2013, a number that includes about 10 outlets each year.

“We are very excited to announce this increase in our store growth potential and the continuance of this very important part of our overall growth program,” said R. Neal Black, chairman and chief executive officer. “This increase further solidifies the strength of our brand, which continues to gain prominence in the U.S. market through our existing store presence, our advertising and marketing campaigns and our e-commerce platforms, among other factors.”

He said the company’s previous goal was to have 600 full-line and 50 to 75 factory outlets. “We’ve mapped every zip code in the USA and we are confident in these new numbers. Now we just have to get the right real estate deals, and doing that will dictate the time frame. We have opened 16 stores already this year and we think we will get a total of 45 to 50 open both this year and next year, which includes 10 factory stores in each year.”

In the second quarter ended July 28, profits rose 12.7 percent to $23.2 million, or 83 cents a diluted share, from $20.6 million, or 74 cents, a year earlier. Earnings per share came in 10 cents ahead of the 73 cents analysts, on average, had projected.

Sales for the three months ended July 28 increased 12.9 percent to $260.3 million from $230.7 million as same-store sales rose 6.1 percent and direct marketing revenues advanced 39.3 percent.

This contrasts to the first quarter when the company had a rare sales and revenue miss, posting a 16.7 percent decline in first-quarter profits on a 4.2 percent sales gain.

In the second quarter, gross margin receded to 58.7 percent of sales from 62.4 percent in the comparable 2011 quarter, while the decline in operating margin was smaller, a descent of 70 basis points to 14.3 percent of sales from 15 percent a year ago.

Black said he attributed the uptick in the second quarter to “a refreshing of our marketing formats, particularly new creative formats on TV and in direct mail.” He detailed that suits continue to lead the way, driven by tailored and slim-fit models. “Tailored fit is particularly strong because it’s a model that a man with an average body shape can wear for a trimmer and more modern look,” Black said.

He said promotional activity remains “very important and customers still want deals. They are watching their spending and looking for value. I expect it to remain that way through the rest of the year.”

Investors, who are always eager for pleasant surprises and continued expansion, pushed shares of the firm up 14 percent to $47.44 in trading on Wall Street on Wednesday.

In a research report issued Wednesday, Margaret Whitfield of Sterne Agee raised her full-year earnings estimates for the company to $3.67 a share from $3.55, and elevated the stock’s target price to $60 from $57.

She said the comp-store sales increase in the second quarter was “led by transactions as Jos. A. Bank focused upon big-ticket items with strong unit growth in suits and dress shirts with moderate growth in sportswear and other tailored [apparel.]” The 370-basis-point decline in gross margin was “offset in part by improvement in sales and marketing and general and administrative” costs.

Looking ahead, Black said the company is seeing positive momentum so far in the third quarter.

“Keeping in mind that sales are just one component of net income, and that sales for any one month are not necessarily indicative of sales for the entire quarter, we are nevertheless pleased to announce that the third quarter has started out positively,” he said. “Both our comparable-store sales and direct marketing sales are up in fiscal August compared to the same period last year.”

The earnings “beat” in the second quarter wasn’t quite sufficient to elevate the company’s year-to-date profits. For the six months, net income was down 1 percent, to $38 million, or $1.36 a diluted share, from $38.3 million, or $1.37, in the first half of 2011. Aided by a 2.9 percent increase in same-store sales and a 19.8 percent growth rate for direct marketing, revenues expanded 8.9 percent to $461.7 million from $423.9 million.

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