Men's Wearhouse

Investors applauded signs of turnaround at Tailored Brands’ Jos. A. Bank division, driving the company’s stock up 39.7 percent to $26.44 on Thursday.

But just as the troublesome acquisition of Bank seems to be getting back on track, the firm’s other divisions are feeling the pain of the challenging retail environment.

Tailored Brands raised guidance for the year and is expecting full-year 2016 adjusted earnings per share will hit $1.70 to $1.85 a diluted share, up from the previous range of $1.55 to $1.85.

The updated guidance reflects the company’s expectation for Jos. A. Bank’s comparable sales to be up mid- to high-single-digits and Men’s Wearhouse’s comparable sales to be down slightly in the fourth quarter.

Eric Beder of Wunderlich Securities reiterated his “buy” rating on the stock Thursday, raising the target price to $30 from $20 and increasing the EPS projections for fiscal-year 2017 and fiscal-year 2018 to $1.79 from $1.70 and $2.16 from $2.

Moody’s was similarly upbeat, with analyst Mike Zuccaro, saying: “As expected, Tailored Brands is making progress with the Jos. A. Bank turnaround, as well as its store rationalization initiatives and goal to achieve $50 million of cost savings this year. With a focus on reducing debt, the company is on track to begin improving its leverage profile.”

For the period ended Oct. 29, the Fremont, Calif.-based retailer reported that GAAP diluted EPS was 58 cents, compared to a loss of 56 cents in the same period a year ago. Third-quarter 2016 adjusted diluted EPS was 68 cents, compared to adjusted 50 cents in the third quarter of 2015.

Net income totaled $28.4 million in the third quarter, up from losses of $27.2 million a year earlier. Sales dropped 2.1 percent to $846.9 million from $865.4 million last year.

“Our improved profitability this quarter reflects solid progress on our cost-reduction initiatives as we continue to navigate the turnaround of Jos. A. Bank and a choppy retail environment,” said Doug Ewert, president and chief executive officer of Tailored Brands.

Specifically, he said, “Our Jos. A. Bank turnaround is gaining traction. We are pleased to report a better-than-expected comparable sales decline of 9.8 percent in the third quarter, particularly since we were up against last year’s final ‘buy-one-get-three free’ event in October. While there is still work to be done, we are encouraged by the healthier trends we are seeing at Jos. A. Bank that reflect our investments in elevating the brand and customer experience through marketing, merchandising and a more engaging sales experience.” Overall sales for the division were $166 million versus $199 million last year.

During a conference call Thursday morning, he said the introduction of 1905, a younger-skewed offering, “has been well received and is growing to be an important new business.” A few weeks ago, the collection began offering custom clothing in all stores “at a very compelling price” of around $400, he added.

Custom clothing was also added for fall in the Reserve line, which skewed more classic, he continued. That offering, which retails for $600 and up for suits and $100 for two dress shirts, has also proven popular with customers, he said.

A new Jos. A. Bank web site is also driving higher conversion rates, Ewert noted.

“Overall, we’ve made a lot of positive changes at Jos. A. Bank, including fixing the promotional model,” he said. “While there is still more work to be done to increase traffic, with both our core and target customers, we’re encouraged.”

Turning to the Men’s Wearhouse division, which managed to eke out a 0.1 percent comparable sales increase in the quarter, Ewert said the results reflected “the softening traffic trend we initially saw after Father’s Day, which has continued. While the retail environment remains challenging, we are pleased with the response to premium clothing, custom clothing and performance wear, including the recently launched Kenneth Cole Awear-Tech. We plan to drive greater awareness of these innovative offerings and view them as significant growth drivers in 2017.” He also cited the strength of the Joseph Abboud “flagship collection for the premium customer,” which “continues to grow in importance, particularly as we grow customer awareness for custom clothing.”

The K&G division posted comparable-store sales declines of 3 percent in the quarter, he said with strength in men’s tailored clothing and shoes and women’s dresses and a weakness for men’s ties and other seasonal products.

The Moores division in Canada also registered a comp-store sales decline of 0.4 percent as the company continues to “face macro headwinds” in the Western part of the country.

Ewert also said continued focus on omnichannel initiatives for the company as a whole is expected to “drive additional traffic as we make it easy for customers to shop with us both online and in-store.”

He said the company was “pleased” with business over the Black Friday and Cyber Monday periods, “particularly online, where we saw significant increases.

Additionally, Ewert said the corporation is on track to achieve its planned $50 million in cost savings for fiscal 2016. And its store-closing plan is also proceeding as planned — in the third quarter, 83 stores were shuttered including 74 Men’s Wearhouse and Tux stores, bringing the total for the year to 187. In the fourth quarter, an additional 63 units will be closed, bringing the total to 250 for the year, Ewert said.

All told, the company has 1,710 stores.