The Men’s Wearhouse Inc. expects fresh tailored clothing silhouettes and strength in big & tall to help keep its string of same-store sales increases in the U.S. alive in the third quarter.
On a conference call to discuss second-quarter results, which exceeded estimates, Doug Ewert, president and chief executive officer, told analysts and shareholders, “Gains in fashion trends are expected to provide all of our divisions an opportunity to benefit from an inevitable replenishment cycle that could be quite significant.”
He noted that the leaner, tailored clothing silhouettes favored by designers in the past few years, marked by suppressed waists on suits, slimmer pants and shirts and narrow ties, “are now becoming much more widely accepted in the middle market and currently represent only 15 percent of Men’s Wearhouse inventory. We believe it could grow significantly higher as our customers update their wardrobes over the near and mid-term.”
He cited big & tall as “the first and perhaps the most significant” growth driver being explored by the company, noting that its sales were up 20 percent year-to-date at Men’s Wearhouse and 18 percent at K&G, versus gains of 12 and 6 percent, respectively, in regular sizes at those nameplates.
Two big & tall test stores are now open, Ewert said, and, while he wouldn’t discuss overall results, he pointed out that sportswear penetration at the two units had been “much higher” than expected.
“Equally exciting is that this business is 300 basis points richer for [gross] margin than regular sizes,” he added.
In the three months ended July 30, net income was up 32.9 percent to $57.1 million, or $1.09 a diluted share, from $43 million, or 81 cents. Excluding nonrecurring charges, earnings per share were $1.11, 7 cents higher than analysts, on average, had expected.
Aided by volume from the August 2010 acquisition last year of the Dimensions and Alexandra corporate apparel businesses in the U.K., overall revenues were up 22.1 percent to $655.5 million from $538 million. Gross margin fell to 47.2 percent of sales from 48.5 percent a year ago.
Sales were up 10.8 percent at Men’s Wearhouse stores, to $407 million, and rose 10.9 percent on a comparable-store basis, while K&G picked up 5.7 percent to $92.5 million, with comps ahead 5.4 percent. In Canada, Moores sales rose 12.3 percent to $80.3 million and were up 4.4 percent on a comp basis in Canadian dollars.
The company expects third-quarter EPS of between 62 cents and 64 cents, with the higher figure corresponding to the upper end of analysts’ current estimates. Comps are expected to rise between 2 and 3 percent at Men’s Wearhouse and K&G and be flat to ahead 1 percent at Moores.