Men's Wearhouse

The situation has gone from bad to worse for Tailored Brands.

On Wednesday, the Fremont, Calif.-based men’s wear retailer reported markedly higher losses in the fiscal fourth quarter and year, and drew on its revolving credit facility in order for it to have cash on hand to weather the current situation.

In the fourth quarter, the company reported an operating loss of $35 million compared to operating income of $13.3 million last year. On an adjusted basis, the loss was $12.3 million, compared to an operating loss of $4.3 million last year.

In the period, the generally accepted accounting principles loss from continuing operations was $38.6 million, compared to net earnings per share of $3.8 million last year. Diluted loss per share was 80 cents, compared to 8 cents in the fourth quarter of last year. Excluding certain items, adjusted loss per share from continuing operations was 46 cents, compared to 34 cents last year. Fourth-quarter pretax results include $17.4 million in write-offs of inventory associated with the company’s previously announced sale of the Joseph Abboud trademarks, and $5.2 million in charges related to its multiyear cost savings program, as well as consulting, severance and lease termination costs.

In the fourth quarter, comparable-store sales fell 3 percent while net sales dropped 5.3 percent to $691 million. By division, Men’s Wearhouse comps fell 1.9 percent, Jos. A. Bank’s dropped 5 percent and Moores was down 10 percent. The only division that showed a positive comp in the period was K&G, which was up 2.2 percent.

For the year ended Feb. 1, 2020, Tailored Brands Inc. reported operating income of $97.8 million, compared to $225.6 million last year, while operating margin decreased 410 basis points. On an adjusted basis, operating income was $142.4 million compared to $223.1 million last year.

On a GAAP basis, net earnings from continuing operations were $25.4 million compared to $98.6 million last year. Diluted earnings per share were 51 cents, compared to $1.94 last year. On an adjusted basis, net earnings from continuing operations were $54.1 million compared to $109.2 million last year. Adjusted diluted earnings per share were $1.08 compared to $2.15 last year.

Comparable-store sales for the year were down a total of 3 percent, with Men’s Wearhouse’s comps falling 3.5 percent, Jos. A. Bank’s 2.3 percent, Moores’ down 5.4 percent and K&G down 0.3 percent. Net sales decreased 4.1 percent to $2.9 billion.

In a conference call Wednesday afternoon, Dinesh Lathi, president and chief executive officer, said the corporation’s “business performance heading into March” had actually been experiencing “positive momentum,” with positive comps at Men’s Wearhouse and K&G in January, and at all four nameplates in February with total retail comparable-store sales gains of 2.4 percent.

But once the coronavirus brought “much of the economy to a halt,” sales started to decelerate and the company, like nearly every other retailer in the U.S., was forced to close its stores through at least March 28, he said.

To ensure that the company has “ample liquidity to weather this uncertain period,“ Lathi said the company took “aggressive and prudent actions” and drew $260 million from its revolving credit facility.

Jack Calandra, chief financial officer and treasurer, added that to increase liquidity, the company “is eliminating or deferring all discretionary spending. We are significantly reducing inventory buy plans, capital expenditures, advertising spend and store and headquarters’ overhead costs. These actions will meaningfully reduce cash outlays.”

Lathi said despite the sobering situation, “We are confident in the long-term prospects of our business,” thanks to a heightened focus on a “polished casual assortment,” double-digit e-commerce growth, a shift in marketing from broadcast to digital, and the strengthening of its balance sheet.

The company declined to provide any further color on performance and would not take questions from analysts as it has traditionally done on its quarterly earnings calls. In addition, it also declined to provide guidance for fiscal 2020 at this time.

As reported, in January Tailored Brands closed a $115 million deal with brand acquisition and management firm WHP Global to sell its Joseph Abboud trademark, which accounts for more than $500 million in sales at the company’s stores. Under the terms of the deal, WHP licensed Tailored Brands to be the exclusive purveyor to sell and rent Joseph Abboud branded apparel and related merchandise in the U.S. and Canada.

Tailored Brands said it would use the proceeds from the sale to pay down debt, strengthen its balance sheet and “provide additional financial flexibility to invest in our customer-facing transformation strategies.”

As reported, Tailored Brands has been struggling the past few years as it attempts to navigate the more casual workplace. Add to that that the acquisition of competitor Jos. A. Bank for $1.8 billion in 2014 added a hefty debt load on the company.

The company’s stock fell 15 cents, or 10 percent, to close at $1.34 on the New York Stock Exchange Wednesday, and continued to fall in after-hours trading.

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