By Jean E. Palmieri
with contributions from Arthur Zaczkiewicz
 on September 9, 2015

A strong Joseph Abboud line, shoes and denim helped stave off decline at the Jos. A. Bank division in the second quarter at The Men’s Wearhouse.

Late Tuesday, the retailer said that weighed down by a 9.4 percent same-store sales decline for its Jos. A. Bank unit, total sales declined while earnings increased on stronger gross margins.

In a conference call Wednesday morning, Doug Ewert, chief executive officer, said Abboud posted a 41 percent comparable-store increase in the period and he is expecting further gains “as we expand and refine the assortments and as we build brand awareness.”

Ewert was similarly upbeat about the recent launch of Kenneth Cole Awearness brands at the Men’s Wearhouse stores in the U.S. and Moores division in Canada. The label targets a younger customer and early deliveries are running at “a robust 8 percent a week,” he said. He also pointed to the new Tuxedo Shop at Macy’s as a growth vehicle. The first 12 locations will open next month.

Overall, Ewert said slim-fit continues to grow and now represents over 45 percent of the total business at Men’s Wearhouse with an 11 percent comp increase in the quarter.

Shoes were also strong in the period, posting an 11 percent comp increase while denim was up 25 percent, he said.

The K&G division, which has been a laggard for the company for several years, is now posting “strong year-on-year growth,” he added, as the company refines its focus “on a mainstream value customer” seeking name brands at deep discount prices.

Turning to Jos. A. Bank, Ewert said the division now represents 24 percent of the company’s sales and the “operational integration is largely complete.” The biggest challenge, he said, is to “wean the customer off of the brand’s aggressive promotions.”

“These promotional offers are not working for our customers, and they’re not working for us,” he said. “Our original plan was to evolve the pricing and promotional strategy gradually over time, rather than take it on as we work integrating operations.

“With the integration largely complete, and given current market response to the Jos. Bank promotional strategy, we decided to accelerate our timeline in a more aggressive and comprehensive way. In the coming weeks, we will align the promotional offers with the buying preferences of our customers. This may create further top-line volatility as we update the promotional model to move away from buy-one-get-three-free quantity discounting, and gives customers the ability to buy a great suit at a great price one or two at a time.”

He warned that this will undoubtedly result in “declines in units per transactions as customers adapt to our new promotional strategies.” But the addition of new product, including the Joseph Abboud line, the new 1905 younger-skewed collection, an expanded shoe selection and more slim-fit models are expected to appeal to shoppers going forward, Ewert said.

In the second quarter, net income jumped to $47.8 million, or 98 cents per share, from $12.3 million, or 25 cents, in the same period last year as total sales fell 1.1 percent to $920.1 million from $929.9 million. Adjusted earnings came in at $52.2 million, or $1.07 per share.

By retail brand, Ewert said comparable-store sales rose 3.1 percent at Men’s Wearhouse, 0.7 percent at Moores and 6.7 percent at K&G. “Excluding rental revenue, Men’s Wearhouse clothing comps were 6.5 percent driven by higher average unit retails,” he added. “Men’s Wearhouse comparable-rental revenue decreased 3.3 percent, which was slightly better than internal expectations.”

Total gross margins in the quarter rose 74 basis points to 45.6 percent of sales. Operating income gained 3.1 percent to $105.7 million from $102.5 million in the prior year.

The company expects earnings-per-share guidance to be in the range of $2.70 to $2.90 for the fiscal year. In the first quarter, results beat Wall Street consensus expectations while the retailer also announced a deal with Macy’s Inc. for tuxedo sales.

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