Men's Wearhouse

Tailored Brands Inc. is bringing custom clothing to the masses.

The morning after reporting second-quarter profits fell nearly 48 percent as the former Men’s Wearhouse struggles to revamp its Jos. A. Bank chain into a less-promotional model, management said Thursday that higher-priced merchandise was among the bright spots and will be a point of differentiation going forward.

Doug Ewert, chief executive officer, pointed to custom clothing and dress shirts as “a significant growth opportunity. Though we’re in the early stages, we’re encouraged by the results so far.”

On a conference call Thursday morning, Ewert said that last year, the company launched a national marketing campaign to publicize “a limited custom offering” at its Men’s Wearhouse and Moores Canadian stores. The response “validated the opportunity to acquire new customers, expand average transaction values and create a positive customer experience. Now in our second year, we expanded our custom offerings to include dress shirts and an exclusive new clothing collection with suits starting at $400. This price point makes owning a custom suit and affordable option for a much broader audience.”

During the second quarter, he revealed, sales from custom apparel were about $1 million a week.

Next month, the company will expand custom clothing and custom dress shirts to all Jos. A. Bank stores as well. “We believe our strategy offers compelling advantages to what’s available in the marketplace, with unmatched quality, selection, value, service, speed and scale,” Ewert said. “We’re excited by the long-term possibilities to make custom clothing accessible to men of all ages and income levels.”

Another bright spot for the company is its Joseph Abboud product, which continues to gain traction. “Through the second quarter, Joseph Abboud brand sales were up 65 percent, and now represent approximately 30 percent of sales at both Men’s Wearhouse and Moores. We’re on track to exceed $500 million in retail brand sales this year and $600 million in brand sales including our global licensed partners.” The company believes the Abboud brand can eventually reach $1 billion in sales.

At Jos. A. Bank, the company is in the first year of rolling out a new collection of premium products called the Reserve collection that is designed by Abboud. Ewert said this line “is selling well and represented approximately 7 percent of sales during the second quarter.” The tailored clothing is made in the company’s New Bedford, Mass., factory and will be expanded into all categories, including custom clothing and custom dress shirts in the coming weeks, he noted.

While there was some improvement, the Bank business continues to struggle with comparable-store sales down 16.3 percent in the second quarter. This was in line with the trend in the first quarter and the company’s projections.

“Regarding Jos. A. Bank, we are now revising our full-year comp guidance for this brand from negative mid-teens to negative low double-digit,” said chief financial officer Jon Kimmins. A new advertising campaign that takes the focus off price is also expected to help sales. “To reframe the value equation and reposition Jos. A. Bank as a more lifestyle brand,” Ewert said, “the new campaign uses a man on the street concept to shift the conversation to more authentic, real and believable storytelling about our brand and our merchandise quality and style.”

For the company as a whole, the executives said that while the third quarter will continue to see declines in the mid-teens, the fourth quarter is expected to “turn slightly positive, and we now believe our Jos. A. Bank operations will be in near breakeven for the year. So again we are maintaining our guidance range for EPS of $1.55 to $1.85,” Kimmins said.

In the second quarter as reported, the company’s net profits fell 47.7 percent to $25 million, or 51 cents a diluted share, from $47.8 million, or 98 cents, a year earlier. Adjusted earnings of 99 cents a share came in 6 cents ahead of the 93 cents analysts projected. Sales for the three months ended July 30 declined 1.1 percent to $909.7 million from $920 million.

Despite the steep fall in profits, the results weren’t as bad as expected by Wall Street and Tailored Brands’ shares were soaring by more than 21 percent to $17.23.