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Men’s Wearhouse Plans K&G Exit

Company is seeking strategic alternatives for struggling discount unit.

Appeared In
Special Issue
Men'sWeek issue 03/14/2013

The Men’s Wearhouse Inc. is looking to offload its struggling K&G discount operation.

As the company late Wednesday reported a bigger-than-anticipated loss for the fourth quarter, Doug Ewert, president and chief executive officer, said it had engaged Jefferies & Co. “to assist us in evaluating strategic alternatives for our K&G operations” based on its belief that “our core strength lies primarily in our MW and Moores men’s specialty apparel retailing.”

At the end of the quarter, K&G operated 97 stores versus 120 at Moores and 926 MW units.

Wall Street’s initial reaction to the plan was positive as shares soared 12.3 percent to $32.65 in after-hours trading after closing down 0.3 percent to $29.07 during Wednesday’s regular session.

In the three months ended Feb. 2, the company trimmed its net loss slightly to $3.4 million from a loss of $3.8 million in last year’s fourth quarter, both equivalent to 7 cents a diluted share. Analysts on average expected a loss of 5 cents.

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Revenues expanded 8.2 percent to $608.4 million from $562.2 million, with gross margin flat at 40 percent of sales. Sales rose 9.1 percent to $372.7 million at MW and were up 4 percent to $67.8 million at Moores while falling 0.1 percent to $95.5 million at K&G, which saw full-year sales drop 2.4 percent to $365.9 million with comparable-store sales down 4.3 percent.

Comps at K&G were down 5.7 percent in the quarter “as customers did not respond to our promotions and new marketing campaign as well as expected,” Ewert said. Sales at MW, up 1 percent on a comp basis, were “at the low end of our guidance,” he noted, while Moore’s comp decline of 5.5 percent was below expectations.

The firm also added $155 million to its stock repurchase program, adding to $45 million remaining from a previous authorization, and said it would amend and expand its credit facility, including an extension of its maturity date to 2018.

The Houston-based company will host a conference call today to discuss the results and plans for 2013.