Jos. A. Bank New York Flagship

Tailored Brands managed to reverse year-ago losses in the fourth quarter, but is still struggling with a serious slowdown in sales, one that is going to require a major transformation to improve.

“This is not business as usual and we are not accepting the status quo,” Dinesh Lathi, executive chairman, said on an analysts’ call Wednesday afternoon.

Lathi said the company needs to change — and quickly — to offer more personalized products and services, a better omnichannel experience and fewer promotions in favor of more “brand stories.”

Lahti was highly critical of former management, saying the company’s issues have “roots in a degree of historical under-investment and [inability to keep] pace with an evolving customer.”

He said the company does “some things well, but we have considerable work to do in order to be considered great. There are examples where we have relied on [our market position] instead of investing to build on our leading position in the category.”

Lahti slipped into the top slot at the company last year upon the retirement of former chief executive officer Doug Ewert. Although a ceo search is ongoing, sources expect Lahti will eventually be named to the position.

In the past six months, Lahti said he has studied the business with “the critical eye of an outsider and how we currently perform against the increasingly high expectations of a rapidly evolving customer.” And his findings were less than favorable.

He pointed to the “rapid growth” of the custom suit business as one area where progress needs to be made. Although sales of custom suits more than doubled in fiscal 2018 to over $220 million, “personalized products and services is about far more than just custom suits and shirts,” he said. “Evolving the assortment to a more relevant balance between formal and casual business wear will be a meaningful shift for the company.”

Additionally, the company’s fleet of stores “has not kept up with what today’s customer expects and this has contributed to our store traffic headwinds,” he said. Over the last four months, the company has been working to remerchandise its stores to make them easier to shop while enhancing visual displays. This test will be rolled out to roughly 80 Men’s Wearhouse and Jos. A. Bank stores during March and April.

The web site also needs a major update, he believes. “Our first order of business will be shoring up some of the basics like site speed, navigation, and digital merchandising.”

And the company also needs to move away from its historical dependency on price promotions. “Our research tells us this emphasis has confused the consumer when it comes to our quality and relative value,” he said. “However, thanks to some e-mail testing that we executed in the fourth quarter, we know that it doesn’t have to be this way and that our customer is interested in engaging with us on brand and editorial-oriented content.”

Lathi stressed that Tailored Brands is at the beginning of a “journey” to update its business model, but “we’re not standing still, we’re working with a great sense of urgency.”

Turning to the earnings, Lathi said, “while all of our retail brands delivered positive [comparable sales] for the full year, during the fourth quarter, comps at Men’s Wearhouse and Jos. A. Bank were down and this trend has continued into the first quarter of 2019. We attribute the current softness to both the macro-environment as well as the need for us to execute more quickly and effectively on our core growth strategies.”

That was enough to spook investors, who traded shares of the retailer down 15.6 percent to $9.87 in afterhours trading Wednesday.

By division, comps at Men’s Wearhouse in the fourth quarter fell 3.2 percent while Jos. A. Bank’s comps dropped 0.5 percent. The Moores division in Canada bucked the trend by posting positive comps, with same-store sales rising 2.8 percent. K&G was also up in the period, by 0.9 percent.

Net income for the fourth quarter ended Feb. 2 totaled $6.2 million, up from losses of $499,000 a year earlier. Total sales fell to 8.6 percent to $785.8 million from $859.9 million.

For the fiscal year, comps overall were up 1.2 percent, with Men’s Wearhouse up 0.8 percent, Jos. A. Bank up 1.4 percent, Moores up 2.4 percent and K&G up 1.5 percent.

For the full year, profits fell to $83.2 million from $96.7 million, as sales declined to $3.2 billion from $3.3 billion.

Looking ahead to the first quarter, the company is expecting there will be “significant headwinds” to overcome and is projecting earnings per share of 10 to 15 cents. Comps at both Men’s Wearhouse and Jos. A. Bank are seen declining 3 to 5 percent, while at Moores, they’re expected to drop 5 to 7 percent. K&G is seen coming in flat to up 2 percent.

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