The Men’s Wearhouse Inc. is getting into the outlet business.

This story first appeared in the September 11, 2012 issue of WWD. Subscribe Today.

The men’s specialty store retailer said Thursday that during the fourth quarter, it would open five stores in outlet centers around the U.S. under the Men’s Wearhouse Outlet name and could eventually see the category growing to as large as 120 stores.

A day after reporting gains in both earnings and sales in the second quarter, Douglas Ewert, president and chief executive officer, said: “While we have the Men’s Wearhouse and Moores stores to service the middle-market customer with high-quality products and exceptional service in a specialty store environment, and K&G to service extremely price-sensitive men and women in a big-box environment, the moderate men’s wear customer is left to shop mostly in discount, department and outlet stores. We believe the moderate men’s wear market is substantially larger than the middle market and we see opportunity for a specialty store that caters to the moderate men’s wear customer with a breadth of product that appeals to both Baby Boomers and Millennials. The quality must be good. The service must be helpful and include on-site tailoring, and the prices need to be competitive with discount, department and outlet stores.”

He said there are about 200 outlet centers either in operation or under construction in the U.S. right now, and “we think that the opportunity could be as high as potentially 120 of those that could support, what we believe, will be a profitable Men’s Wearhouse Outlet concept, and then beyond that there may be opportunities in Canada as well.”

Ewert said the company will stock the stores with “mostly private-label product. There will be some branded product opportunities and then there will be some downflow opportunities from the host Men’s Wearhouse stores.” He said the “pro forma profitability outlook” for the store will be similar to that of a Men’s Wearhouse “because we’re going to be able to leverage a marketing spend and have slightly lower opening margins going in.” He added that the average out-the-door prices on suits at the outlet stores will be around $150.

Ewert said the company is not expecting any cannibalization from the core Men’s Wearhouse stores as a result of the outlet rollout. “I believe that the outlet customer is predominantly a different customer than Men’s Wearhouse,” he said.

In addition, the company will open 30 Men’s Wearhouse and three Moores stores this year.

On Wednesday, the company reported that net earnings attributable to shareholders for the three months ended July 28 rose 4.1 percent to $59.4 million, or $1.15 a diluted share, from $57.1 million, or $1.09, last year. The year-ago adjusted diluted earnings a share were $1.11 after excluding certain costs related to an acquisition integration expense and a noncash asset impairment charge.

Retail sales at the Men’s Wearhouse nameplate were up 3.2 percent to $604.7 million from $586 million. Total sales were up 1 percent to $662.3 million from $655.5 million, when including its Canadian business and its value-priced K&G operation.

Moores, its retail operation in Canada, was 12 percent of the total sales mix for the quarter and K&G’s sales accounted for 14 percent, he said.

For the third quarter, the company expects diluted EPS of between 95 cents and 98 cents, and for the fourth quarter between 12 cents and 15 cents. For the fiscal year, diluted EPS is projected at between $2.74 and $2.80. The company’s stock closed up 18.7 percent on Thursday.