MIAMI — Could Jos. A. Bank be in play? That was the rumor floating around the DNR Menswear CEO Summit here last week.
Robert Wildrick, CEO of the Hampstead, Md.–based specialty store chain, was scheduled to be a keynote speaker at the event at the Four Seasons hotel in downtown Miami, but a household accident led to his cancellation. And the cancellation led to speculation.
Reached at home where he was recuperating last week, Wildrick said the company is “looking at all kinds of alternatives,” but he declined to comment on reports that the company could be preparing for an LBO or a sale.
The stock, which was trading at around $40 a share at presstime last week, is undervalued, sources said, while the company has a strong management team and an aggressive growth plan—all facts that have fueled rumors that the 382-unit chain could be a candidate for a change in ownership.
“Private equity has invested over $40 billion in the last couple of years [in the apparel industry], and there is $200 billion in untapped funds for investment in healthy, growing companies with good management,” said Gilbert Harrison, chairman and CEO of Financo Inc., an investment banking firm. “Many suitors, both strategic and private equity, have expressed interested in Jos. A. Bank but, so far, we understand the board is not interested in pursuing this course.”
Wildrick said goals for the company over the next five to seven years are to reach $1 billion in sales and increase the number of stores to over 500 while “continuing to earn money.”
Earlier this month, Bank reported a record 21 percent increase in earnings for 2006 to $43.2 million, or $2.36 a diluted share, from $35.3 million, or $1.95 a share, in the year prior. Sales rose 17.6 percent to $546.4 million from $464.6 million. The current year had 53 weeks versus 52 weeks the year before. Comparing the 53-week period in fiscal 2006 with the 53 weeks in the prior year, total same-store sales increased 4.3 percent, while direct-marketing sales climbed 23.5 percent.
Bank expects to have between 415 and 425 stores in operation by the end of 2007, Wildrick said. Over the next two years, he said, “we will determine where we are and where we are going. We’re doing a great job increasing profits and sales through better brand awareness. Before, we were just a sleepy, little Northeastern company. Now we’re known everywhere around the country. And every time we open a new store, it’s a talking billboard.”
Wildrick said the chain has stores in 42 states including 30 units in California as well as a presence in such diverse markets as Dallas, Houston, Chicago and Florida.
Wildrick said merchandising has also evolved and pointed out suits are now less than 25 percent of the company’s business, down from 50 percent in 1999. Such products as Stays Cool shirts, which wick moisture away, are “working well for us,” he said, “and we will continue to push the brand and work on quality and innovation.”
On the financial end, Wildrick said the company’s goals of generating cash while maintaining a debt-free balance sheet have been achieved. “We had over $40 million in the bank at the end of the year, and our $400,000 in debt is really just grants from the state. So, the company is debt-free, cash-positive and has a strong balance sheet.”
On the Jos. A. Bank Web site, the presentation Wildrick was expected to make at the CEO Summit was posted. It showed a history of record earnings for six consecutive years from 2001 to 2006, net income growth of no less than 22 percent a year since 1999, operating income of 13.4 percent of sales in 2006 and a return on equity of 24 percent last year. Since 1999, the company has opened 270 stores.
To prepare the company for further growth, Bank this month promoted R. Neal Black, its chief merchant, to president. “We’re restructuring in a meticulous way for growth,” Wildrick said. Sources expect Black to one day succeed Wildrick at the helm of the company.