Jos. A. Bank Clothiers Inc. Friday confirmed that it was actively pursuing acquisitions and said it had retained Financo LLC to assist in the search.
Although Bank has long been believed to be interested in effecting an acquisition as the store count under its flagship brand has approached and now exceeded 600, the company said after its annual meeting Friday that it “has been and is considering strategic opportunities to enhance shareholder value,” including potential purchases of other companies and brands.
Earlier this month, WWD reported that it was among the second-round bidders for Fifth & Pacific Cos. Inc.’s Lucky Brand division. The company didn’t comment on Lucky or other possible targets. Gilbert Harrison, chairman of Financo, told WWD that it was unlikely to do so “until an acquisition is finalized and available for disclosure.”
While it’s endured several difficult quarters in the recent past — first-quarter profits fell 45.5 percent on a 2.6 percent sales decline — the Hampstead, Md.-based men’s wear retailer boasts both annual sales and a market capitalization of more than $1 billion, no bank debt, more than $100 million in Internet sales and, as of Feb. 2, $377 million in cash, cash equivalents and short-term investments.
“Those assets are critical to our efforts to enhance shareholder value, both through strategic opportunities, such as acquisitions, and organic growth,” said Andrew Giordano, lead independent director. “Our pursuit of strategic opportunities is part of our philosophy of long-term planning and decision making.”
Due in part to its highly verticalized structure, the company has among the strongest margin yields in apparel retailing. Even last year, when profits and margins were down, gross margin was 58.3 percent of revenues and operating margin 12.2 percent.
Harrison noted that “after significant deliberation, the board believes that the best use of its excess cash would be to acquire another company where they can use the existing synergies and strengths within the organization. This is a company with an abundance of retailing, design, marketing, sourcing and supply chain talent, and the skills and talents of the organization, including Bob Wildrick, the chairman, can bring added value to any acquisition it would make.”
Jos. A. Bank’s statement establishes that the company has elected to use the availability of cash for acquisition purposes, rather than more short-term purposes such as stock repurchases or special dividends.
Shares of the retailer closed Friday at $39.63, down 31 cents, or 0.8 percent.