Tailored Brands finds traction with Macy's exit, reaffirms yearly EPS guidance
Tailored Brands is trying to get back on solid ground, following a sluggish end to fiscal 2016. The company was hindered by its tuxedo business at Macy’s, and the two agreed in May to wind down the license agreement by July 14, 2017. As a result, Tailored Brands will close 170 tuxedo shops at Macy’s.
"We were pleased to have reached an agreement with Macy's to wind down our tuxedo rental partnership, which eliminates the risk of extended future operating losses and enables us to focus on our rental business at Men's Wearhouse, Jos. A. Bank and Moores,” said Tailored Brands Chief Executive Officer Doug Ewert.
Due to this agreement, Tailored Brands has reaffirmed its fiscal 2017 diluted EPS outlook range of $1.37 to $1.67 and its fiscal 2017 adjusted diluted EPS range of $1.60 to $1.90.
Ewert was also pleased the company’s comparable sales performance in the quarter, which improved as the quarter progressed. The positive comparable sales performance in the latter months could not offset the 5.5% decrease in total net sales to $782.9 million, nor the 5.3% decrease in retail segment net sales and the 8.0% decrease in corporate apparel segment net sales.
Men’s Wearhouse, K&G, and Moores comparable sales fell 3.1%, 7.4% and 5.3%, respectively, while Jos. A. Bank posted a 3.5% increase in comparable sales.
Net earnings on a GAAP basis increased in the quarter to $1.8 million, or $0.04 per diluted share, compared to $1.6 million, or $0.03 per diluted share, in the previous year, but adjusted net earnings decreased to $13.3 million from $13.9 million in the prior year’s comparable period.
Gross margin, on a GAAP basis, decreased $19.4 million to $332.4 million, due to a decrease in retail segment sales, SG&A expenses decreased to $259.2 million but increased 20 basis points as a percent of total sales due to deleveraging from lower sales, and operating income was $31.0 million. In addition, total debt at the end of the quarter was $1.6 billion.
"We are gaining traction on our initiatives of engaging more customers across all channels, strengthening our omni-channel experience and increasing sales of custom clothing,” said Ewert. “These initiatives support our strategy to innovate the best men's specialty store of the future by delighting our customers with an unmatched level of convenience, authority and personalization. We are committed to a balanced approach of investing in the business while maintaining discipline in our management of inventory, expense and capital, and finding opportunities to unlock additional cash flow."
Tailored Brands expects fiscal year comparable sales for Men's Wearhouse to be down low-single digits, Jos. A. Bank to increase mid-single digits, and Moores and K&G to be down mid-single digits.
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