NEW YORK — Casual Male is abandoning the Jared M. business.
In releasing its third-quarter results last Tuesday, the Casual Male Retail Group said Jared M., which it purchased in the May of 2006, would be discontinued by either selling it off or shutting it down.
In a conference call with analysts, David Levin, president and CEO, said: “We have determined that the amount of resources required to make that scale of the business is not aligned with our strategic growth plans. We acquired Jared M. in May of 2006, as an opportunity to build a high-end custom business. Jared M. required its own infrastructure and took CMRG’s management group from its core competency of operating retail concepts into trying to operate a custom manufacturing business. Therefore, we feel it’s in CMRG’s best long-term interest to focus on extending our core businesses and growing our recently launched B&T Factory Direct, LivingXL and ShoesXL Direct channels.”
Additionally, Levin said the company will expand its Casual Male and Rochester brands into the European market. Through a deal with GSI Commerce, a third-party operator that will oversee the fulfillment and call center operations, the company will begin selling in six countries on the Web in August of next year with plans for further expansion beyond 2008.
“We’re optimistic about the opportunity based on the success of our London-based Rochester store,” Levin said. “It’s the second-highest-volume store in the company and continues to be one of our best comp stores year in and year out, and currently there is nothing in Europe that offers the marketplace the strength of brands and assortments that we carry today.”
Levin reiterated that over the past several months Rochester has been “in a transition period. We have been overbranded and overassorted and we have been diligently trying to reposition Rochester for the future. We are experiencing some negative impact on the gross margins in this division as we reposition the product mix going into 2008.” The retailer is having “tremendous success” attracting younger customers to the Casual Male stores, he said, and a shift in the mix at Rochester is having similar results. “In the third quarter we introduced the selection of premium denim jeans and more fashionable tops,” he said, and they are “delivering the highest sell-throughs in the division. And going forward we will be increasing our penetration into a broader assortment of young men’s product for the Rochester division.”
That said, the third quarter was no charm for the company. For the three months ended Nov. 3, the company posted a loss of $3.8 million, or 9 cents a share, from a loss of $844,000, or 2 cents, in the year-ago period. Sales dropped slightly to $106.6 million from $106.9 million last year. Total same-store sales fell 1.1 percent. Sales at the company’s retail stores were down 4.8 percent overall but the direct channel business increased 19.6 percent.
For the nine-month period the company saw a loss of $223,000, or 1 cent a share, from a gain of $3.9 million, or 11 cents, in last year’s period. Sales rose 3.3 percent to $332.1 million from $321.5 million.
Levin said the poor results came after 15 consecutive quarters of comp increases. “We strongly believe that the unseasonably warm weather, especially in October, was the significant factor in the slowdown. The good news is that we are currently up 7 percent comp through quarter four, which is more consistent with our sales performance prior to the problematic third quarter.”
Levin said the stores are “on solid ground” and shoppers are responding to the newest private-label lifestyle brand, Oak Hill, as well as the more-established Harbor Bay. The young men’s label, 626 Blue, is also experiencing growth, he noted.
Dennis Hernreich, executive vice-president, CFO and COO, said the company is now expecting sales for fiscal 2007 to be between $470 million and $475 million, down from prior guidance of $495 million to $500 million. Full-year earnings are expected to be 28 to 33 cents a share, excluding impairment charges of 4 cents per share from the Jared M. business. To achieve this, CMRG will need to produce a comparative sales increase of between 4 percent and 7 percent for the balance of the year, he said.