The holidays did not start off very merrily for Jos. A. Bank Clothiers Inc.
Despite a nearly 20 percent rise in third-quarter profits, the Hampstead, Md.-based men’s wear retailer said Wednesday that the start of the fourth quarter has been challenging.
“The fourth quarter, compared to a very strong performance last year, has started out more slowly than we had planned,” said R. Neal Black, president and chief executive officer. “November comparable-store sales declined, while our direct segment sales increased, compared to the same period last year. As a result, we have adjusted our December merchandising and marketing plans for stores. We believe our efforts will be effective and appealing to our customers.”
The downward trend in recent sales pulled shares of the retailer down $1.89, or 3.7 percent, to $49.28 in Wednesday trading.
In a telephone interview with WWD, Black said sales in the first three weeks of November were “a little slow and Black Friday wasn’t enough to make it back. But it’s really all about the next few weeks.”
The retailer, which has been running aggressive promotions since the start of the recession, said business of late has done nothing to make it change its stance. “We’re looking at how much promotional action it takes to get the customer in to shop,” Black said. In order to spur business, he said the company will explore how to make prices even “sharper” in the future and the company will “get more aggressive” in terms of promotions.
Bank, whose television ads for buy-one-get-two-or-more free have helped change the face of men’s wear retailing over the past several years, did acknowledge that “margins were down a bit” in the third quarter due to the promotional activity. Gross margin for the period slipped 140 basis points to 62.6 percent of sales from 64 percent in the year-ago period.
“If this was 2008 again and the start of the recession, I would never have said we’d still be in the same condition in 2011. I don’t like it if this is the new normal,” he said, “but here we are. Customers want prices and that’s been our way all along.”
On Black Friday, he said Jos. A. Bank experienced strong business with its selection of doorbusters, particularly its merino wool top coat for $99. “We’re surprised at how good it was considering the warm weather, but customers are responding to low prices on known items,” Black said.
Net income in the third quarter ended Oct. 29 was up 19.3 percent to $15 million, or 54 cents a diluted share, ahead of the analyst consensus estimate of 51 cents. In the 2010 period, profits were $12.6 million, or 45 cents. Sales rose 21 percent to $209.6 million from $173.3 million with same-store sales up 14.6 percent.
One bright spot for the company is its Internet business, part of a 28.6 percent jump in direct marketing revenues. “It’s been really great,” Black said. “That’s a new normal that I like. When people are buying tailored clothing electronically, you know something has evolved in the men’s business. The Internet is getting bigger and bigger and we’re ready to handle it.”
For the first nine months, net income was up 18.9 percent to $53.3 million, or $1.91 a diluted share, as sales picked up 17.4 percent to $633.6 million.
The firm will hold a conference call Thursday morning to discuss the results.