It was not a good fourth quarter for Tailored Brands Inc.
For the three months ended Jan. 30, the company formerly known as The Men’s Wearhouse Inc. posted a net loss of $1.1 billion, or $21.86 a diluted share, compared with a net loss of $35.9 million, or 75 cents, in the same year-ago period. During the quarter, the company posted a $1.2 billion goodwill and intangible asset impairment charge, a $25.8 million asset impairment charge and an $11 million inventory write-down. The non-cash charges are related to Jos. A. Bank and a store rationalization program initiated in the fourth quarter. On an adjusted basis, the loss was 30 cents a diluted share.
Total net sales slipped 11.1 percent to $825.3 million from $928.4 million. Included in net sales was an 11.3 percent decrease in total retail sales. Retail sales included a 12.9 percent decline in retail apparel sales to $668 million, a 6.9 percent gain in rental services to $50.7 million and a 4 percent slip in alteration and other services to $49.2 million. The balance of total sales was from corporate sales of apparel products. The company said comps rose 4.3 percent at the Men’s Wearhouse nameplate. The bloodbath at Jos. A. Bank continued in the quarter with comps dropping 31.9 percent. K&G comps rose 1.9 percent, while Moores comps slipped 2.7 percent.
Wall Street’s consensus was a loss of 37 cents on an adjusted basis on revenues of $835.8 million.
For the year, the loss was $1 billion, or $21.26 a diluted share, on total net sales of $3.5 billion.
Doug Ewert, Tailored Brands’ chief executive officer, said the company will close 80 to 90 full-line Jos. A. Bank stores “which we believe have limited potential for meaningful profit improvement.”
He also said all 49 Jos. A. Bank and nine Men’s Wearhouse outlet stores will also be shuttered. “We have determined that outlet stores, which collectively were not profitable, are not sufficiently differentiated enough from our core offerings and have not resonated with our customers.”
Further, between 100 and 110 MW Tux stores were also earmarked for closure. Ewert said these closures “are a continuation of our strategy of migrating tuxedo rentals to full-line stores and reflective of our new partnership with Macy’s.” Tailored Brands operates Tuxedo Shop @ Macy’s shops, which will be rolled out this year and next. Ewert said the plan is to open 166 stores in 2016 with the balance of 122 stores to be opened in 2017.
To reverse its fortunes, Ewert said Tailored Brands has “embarked on an extensive profit improvement program that we believe will reduce our expenses by approximately $50 million in 2016. This program includes reduced distribution costs, cost reductions in our organizational structure, payroll and employee benefit reductions and savings in occupancy and goods-not-for-resale.”
He said the cash costs of the store closures and the profit improvement programs are expected to result in savings of between $45 million and $60 million for 2016. This is in addition to the non-cash charges recorded in 2015, the company said.
Ewert said the company’s “transition away from unsustainable promotions has proven significantly more difficult and expensive than we expected. We do, however, remain confident that Jos. A. Bank offers a longer-term opportunity to profitably grow market share in the men’s wear business. Additionally, our Men’s Wearhouse, Moores, and K&G brands continue to perform well, with profitability in line or ahead of our expectations.”
The ceo said he expects the store closures and other expense cuts will “right-size our store base, optimize our cost structure, return Jos. A. Bank to profitability and improve other operating aspects of Tailored Brands.”
As a result of what is expected to be a “slow recovery at Jos. A. Bank,” Ewert said fiscal year 2016 adjusted earnings per share will be in the range of $1.55 to $1.85.
The company is projecting comparable sales in the negative mid-teens and significant product margin improvement for the struggling division. Ewert concluded, “We are working hard to restore Jos. A. Bank’s profitability and strengthen the rest of our portfolio of brands. While our current initiatives are expansive, we are closely monitoring our progress and will make adjustments as necessary to create value for all our stakeholders.”
The company will hold a conference call Thursday morning to provide further details.
Shares of Tailored Brands closed down 3.3 percent to $16.36 Wednesday in New York Stock Exchange trading. After the company posted its results, the shares rose 5.8 percent to $17.30 in after-market trading.