Jos. A. Bank Clothiers Inc. converted a 10 percent sales gain and a steep increase in gross margin into a 38 percent rise in first-quarter profits.
For the three months ended May 1, the Hampstead, Md.-based men’s apparel specialty retailer reported net income of $15.8 million, or 85 cents a diluted share, 14 cents above the 71 cents forecast by analysts polled by Yahoo Finance. In the year-ago quarter, the bottom line worked out to $11.5 million, or 62 cents.
Sales tallied $178.1 million, versus $161.9 million in the 2009 period, and rose 10.4 percent on a same-store basis. Direct sales declined 0.6 percent.
Standing out in the firm’s income statement was a 281 basis point improvement in gross margin, to 63.6 percent of sales from 60.8 percent in the year-ago quarter.
R. Neal Black, president and chief executive officer, said the first quarter marked the firm’s 16th consecutive period of year-on-year earnings growth, making 34 of the past 35 quarters more profitable than their previous-year counterpart. He said suit sales were “still good but we’re annualizing big numbers so the percentage increases aren’t as big. Sport coats are [also] strong.” He added that the consumer “is still requiring aggressive pricing and eye-catching promotions in order to get motivated to buy. It’s not getting worse, but it’s still challenging. We’re not out of the woods.” Black also expressed some concern that cotton prices, which “are so high and volatile right now” may eventually lead to “cost inflation.”
Margaret Whitfield, retail analyst at Sterne Agee, wrote in a research note that the firm hadn’t provided guidance before the earnings report and that same-store sales performance was more than twice the 5 percent her company had projected.
“Tailored merchandise, such as sport coats and blazers, and dress shirts generated strong unit growth, while sportswear and suits (up against strong sales last year) grew modestly,” the analyst wrote. Whitfield maintained her “buy” rating on the stock and raised her price target to $84 a share from its previous level of $77.
After the earnings report on Wednesday, shares advanced $2.32, or 3.8 percent, to close at $62.96.
Jos. A. Bank operates 479 stores in the U.S. Whitfield said 30 to 40 units will open during the current fiscal year, expanding square footage between 5 percent and 7 percent. “While new construction of open-air lifestyle centers has slowed significantly, management had been seeing solid opportunities in vacant existing space,” she wrote.
The firm is to hold a conference call today to discuss the results.