Jos. A. Bank is performing ahead of expectations one year after being acquired by Men’s Wearhouse for $1.8 billion.
In a conference call Thursday morning, Jon Kimmins, chief financial officer, said comparable store sales in the first quarter at Jos. A. Bank were down 1.5 percent, “but this was significantly better than we had expected,” he said, since “the business was up against an 8.4 percent comp in the prior year.”
Traffic was also higher, he said, although “that was offset by a lower average unit retail.” And margins were also better than expected, he said, adding that the company believes sales and margins will improve “simultaneously” in the second half.
Doug Ewert, chief executive officer, said he is “encouraged with the consumer response to the changes we’re making to the model.”
These include reducing the number of promotional events, “improving the clarity and aesthetic of the messaging, and increasing the efficiency of the media spend.”
Ewert said Men’s Wearhouse will continue to “improve the value equation by permanently lowering the ticketed prices on select products. During the quarter, we re-priced a significant portion of our assortment including neckwear, accessories, casual pants and select dress shirts and sport shirts.”
At the same time, he said the company began delivering some new products to stores including Joseph Abboud shoes, which are now in all locations, and Joseph Abboud suits, which are in 75 stores. The balance between traditional fit, tailored fit and slim fit has also been enhanced, he said.
“While it’s too soon to draw conclusions from these changes, we’re encouraged by the early reads and remain optimistic that the newness coming in this fall and next year will be well-received and help return Jos. A. Bank to a healthy growth trajectory.”
Turning to Abboud, Ewert said the brand has now grown to represent 20 percent of sales at both the Men’s Wearhouse and Moores stores and the company is still predicting that it will grow to become a $1 billion brand.
He said the first Joseph Abboud store in New York City is attracting “great traffic,” and customers are responding to sportswear and sport coats, while the custom business “is really gaining traction in that location.”
Looking beyond Abboud, Men’s Wearhouse said late Wednesday that it had signed a deal to put tuxedo shops into 300 Macy’s locations by the end of 2016. The shops will be in the men’s department and will be operated and staffed by Men’s Wearhouse.
Ewert said the relationship is “a percent of sales deal, so we’re paying a licensing fee in effect.”
A one-time Macy’s executive, Ewert said Thursday that he sees opportunity to further increase market share “by leveraging off of Macy’s strong customer traffic in-store and online as well as their wedding registry service.” Much of this traffic will be Millennials, he said, which is a “particularly strong” area for Macy’s. “So this arrangement gives us access to a pretty exciting flow of customers that exposes our rental opportunities to a much broader audience.” He also expects the arrangement to boost Macy’s prom business.
In the three months ended May 2, the company registered net income of $10.4 million, or 21 cents a diluted share, 37.1 percent below the $16.5 million, or 34 cents, recorded in the 2014 quarter. On an adjusted basis, eliminating a series of items including costs for the acquisition and integration of Jos. A. Bank, earnings per share were 54 cents, 2 cents above the consensus estimate of analysts.
Total sales rose 40.4 percent to $885.1 million from $630.5 million. Wall Street expected revenues of $857.7 million. Without Bank’s $216.1 million contribution, net sales would have risen 6.1 percent.
The company also revealed it is partnering with Kenneth Cole to offer an exclusive new collection of tailored clothing under the Awearness Kenneth Cole label at its Men’s Wearhouse and Moores stores in the U.S. and Canada starting in September.
Under the terms of the deal, an unspecified contribution from the sale of all Awearness products will be donated to help veterans transition back into the workforce.