Men's Wearhouse Reports Fiscal 2010 Fourth Quarter Results

- Q4 2010 GAAP diluted loss per share was $0.27 and adjusted diluted loss per share was $0.19.

- Fiscal 2010 GAAP diluted earnings per share were $1.27 and adjusted diluted earnings per share were $1.47.

- Company provides guidance for first quarter and full year of fiscal 2011

- Conference call at 5:00 pm Eastern today

Mar 09, 2011, 16:05 ET from The Men's Wearhouse

HOUSTON, March 9, 2011 /PRNewswire/ -- The Men's Wearhouse (NYSE: MW) today announced its consolidated financial results for the fourth quarter ended January 29, 2011.

Fourth Quarter Sales Summary – Fiscal 2010

U.S. dollars, in millions

Total Sales Change %

Comparable Store Sales Change %

Current Year

Prior Year

Current Year

Prior Year

Total Company

 $   542.1(a)

$    457.2 (a)

18.6%

Total Retail Segment

$   479.7

$    454.2

5.6%

  MW

$   311.1

$    294.3

5.7%

4.3% (c)

- 7.1% (c)

  K&G

$     96.4

$      92.7

4.0%

4.5%

- 5.0%

  Moores Canada

$     66.3

$      61.7

7.3%

2.3% (b)

1.9% (b)

Corporate Apparel Segment

$     62.5

$        3.1

1,943.7%

Year-To-Date Sales Summary – Fiscal 2010

U.S. dollars, in millions

Total Sales Change %

Comparable Store Sales Change %

Current Year

Prior Year

Current Year

Prior Year

Total Company

$    2,102.7(a)

$  1,909.6 (a)

10.1%

Total Retail Segment

$    1,976.4

$  1,896.1

4.2%

  MW

$    1,345.9

$  1,281.8

5.0%

4.7% (c)

- 4.0% (c)

  K&G

$       360.3

$     370.1

- 2.7%

- 1.5%

- 1.9%

  Moores Canada

$       246.7

$     222.1

11.1%

2.2% (b)

- 0.9% (b)

Corporate Apparel Segment

$       126.3

$       13.5

837.4%

(a)  Due to rounded numbers, total Company may not sum.

(b)  Comparable store sales change is based on the Canadian dollar.

(c)  Does not include ecommerce sales.  

GAAP diluted loss per share was $0.27 for the fourth quarter ended January 29, 2011.  Adjusted diluted loss per share was $0.19 after excluding $2.3 million ($1.6 million after tax or $0.03 per diluted share outstanding) in acquisition transaction and integration expenses, $1.1 million ($0.7 million after tax or $0.01 per diluted share outstanding) in tuxedo distribution closure costs and $2.5 million ($1.7 million after tax or $0.03 per diluted share outstanding) for a non-cash fixed asset impairment charge.  Due to rounded numbers, the adjusted loss per share may not sum. This compares to adjusted diluted loss per share guidance given December 7, 2010 of $0.19 to $0.22. In Q4 2009, revised GAAP diluted loss per share was $0.36 and adjusted diluted loss per share was $0.11.

GAAP diluted earnings per share was $1.27 for the fiscal year ended January 29, 2011.  Adjusted diluted earnings per share was $1.47 after excluding $6.4 million ($4.3 million after tax or $0.08 per diluted share outstanding) in acquisition transaction and integration expenses, $3.1 million ($2.1 million after tax or $0.04 per diluted share outstanding) in tuxedo distribution closure costs and $5.9 million ($3.9 million after tax or $0.07 per diluted share outstanding) for a non-cash asset impairment charge.  Due to rounded numbers, the adjusted earnings per share may not sum.  In fiscal 2009, revised GAAP diluted earnings per share was $0.88 and adjusted diluted earnings per share was $1.12.

During the third quarter of 2010, the Company changed the inventory valuation method used by its K&G brand from lower of cost or market, as determined by the retail inventory method, to lower of cost or market using the average cost method.  This change was done to bring all retail operations of the Company to a common valuation methodology platform.  All financial statements in this press release have been revised to reflect this change and are therefore comparable.  Prior year fourth quarter revised GAAP diluted loss per share was $0.36, unchanged from the previously reported GAAP diluted loss per share, and prior fiscal year revised GAAP diluted earnings per share was $0.88, an increase of $0.02 per share.

FOURTH QUARTER REVIEW

Dimensions and Alexandra Acquisitions

On August 6, 2010, the Company acquired Dimensions and certain assets of Alexandra, two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for a total cash consideration of approximately 61 million pounds Sterling (US$97.8 million).  The combined businesses are organized under a UK-based holding company of which Men's Wearhouse controls 86% and previous Dimensions shareholders control 14%.

The financial results of the combined UK operations, excluding transaction and integration costs, were $0.03 accretive to the Company's fourth quarter diluted earnings per share.  Transaction and integration costs were $2.3 million ($1.6 million after tax or $0.03 per diluted share outstanding).  Total sales of the combined UK operations were US$54.2 million.  

The financial results of the combined UK operations, excluding transaction and integration costs, were $0.06 accretive to the Company's fiscal 2010 diluted earnings per share.  Transaction and integration costs were $6.4 million ($4.3 million after tax or $0.08 per diluted share outstanding).  Total sales of the combined UK operations were US$104.8 million for fiscal 2010.  

Tuxedo Distribution Closures

In late August 2010, a decision was made by the Company to cease tuxedo distribution operations in November 2010 at four of the then eleven facilities that we used for tuxedo distribution.  The operations at these four facilities were assumed by other tuxedo distribution facilities in our system allowing us to more effectively manage our tuxedo rental operations.  In the fourth quarter, a charge of $1.1 million ($0.7 million after tax or $0.01 per diluted share outstanding) was incurred consisting primarily of labor costs associated with transferring and processing the tuxedo rental inventory from the closed facilities, severance payments and fixed asset write-offs.

The expected ongoing annual benefit, beginning in fiscal 2011, as a result of these closures will be a reduction in operating costs of approximately $4.0 million.

Review of Fourth Quarter Results

Total Company net sales increased 18.6% for the quarter.  

At Men's Wearhouse/Men's Wearhouse and Tux, the increase of 4.3% in comparable store sales was due to increased units per transaction, higher store traffic levels and an 11.1% comparable store increase in tuxedo rental services revenues.  

At Moores, the increase of 2.3% in comparable store sales was due to increased units per transaction and higher net sales price per unit which offset a decline in store traffic.  

At K&G, the increase of 4.5% in comparable store sales was due mainly to an increase in units per transaction and higher store traffic levels.

Corporate apparel segment net sales increased $59.4 million to $62.5 million for the quarter compared to the same prior year quarter.  The increase was primarily due to our acquisitions of Dimensions and Alexandra in the UK on August 6, 2010.

Gross margin, as a percentage of total net sales, increased 21 basis points from 37.1% to 37.3% due to an increase in tuxedo rental margins and a decrease in occupancy costs as a percent of sales offset by a decrease in retail merchandise margins and the increased mix of the lower margin corporate apparel business.  

Selling, general and administrative expenses were $225.4 million in the current year and increased 10.6% from the prior year's SG&A of $203.8 million.  The prior year quarter included $19.5 million in non-cash fixed asset impairment charges.  Excluding these charges, prior year SG&A expense was $184.3 million.  During the current quarter, the Company incurred $2.3 million in acquisition transaction and integration costs, $1.1 million in tuxedo distribution closure costs and $2.5 million for non-cash fixed asset impairment charges related primarily to K&G and Men's Wearhouse and Tux stores.  Excluding these costs, fourth quarter SG&A expenses were $219.4 million or an increase of 19.0% to the adjusted prior year quarter. SG&A related to the acquired UK operations resulted in a 7.5% increase.  The remaining 11.5% increase is primarily due to increased payroll related costs and increased marketing costs.  As a percentage of total net sales, adjusted SG&A increased 16 basis points from 40.3% to 40.5%.  

Operating loss was $23.2 million.  Excluding $2.3 million in acquisition and integration costs, $1.1 million in tuxedo distribution closure costs and the $2.5 million non-cash fixed asset impairment charge; operating loss was $17.3 million or negative 3.2% of total net sales.  This compares with the adjusted prior year operating loss of $14.8 million or negative 3.2% of total net sales, which exclude $19.5 million in pretax non-cash fixed asset impairment charges.

Total inventories of $486.5 million increased 11.9% from the prior year fourth quarter of $434.9 million.  Excluding the inventory related to the acquisitions of Dimensions and Alexandra in the UK, inventories decreased 5.7%.  

The Company had no bank debt at the end of the fourth quarter of 2010 as all debt was paid off during the quarter.

2011 GUIDANCE

For the fiscal year, GAAP diluted earnings per share is expected to be in a range of $1.71 to $1.81.  Adjusted diluted earnings per share are expected to be in a range of $1.75 to $1.85.  Adjusted earnings per share exclude acquisition integration expenses of $3.3 million ($2.2 million after tax or $0.04 per diluted share outstanding).

For the first quarter of the fiscal year, GAAP diluted earnings per share is expected to be in a range of $0.26 to $0.29.  Adjusted diluted earnings per share are expected to be in a range of $0.27 to $0.30.  Adjusted earnings per share exclude acquisition integration expenses of $0.6 million ($0.4 million after tax or $0.01 per diluted share outstanding).

The financial results of the combined UK acquisitions, excluding acquisition integration expenses, are expected to be accretive to the Company's full year and first quarter diluted earnings per share.

Guidance

Guidance

FY 2011

1Q FY 2011

Total Sales Increase

8% to 9% (1)

14% to15% (1)

Comparable Store Sales Growth (2)

    MW

+2% to +4%

+4% to +5%

    K&G

(1%) to (2%)

(1%) to (2%)

    Moores

Flat to +1%

(2%) to (3%)

Gross Profit Margin

42.25% to 42.45% (3)

40.60% to 40.75% (3)

S G & A (as % of Sales)

35.75% to 35.95% (4)

36.15% to 36.30% (4)

Effective Tax Rate

35.25%

37.00%

Weighted Average Shares Outstanding (millions)

52.6

52.6

GAAP EPS

$1.71 to $1.81

$0.26 to $0.29

Adjusted EPS

$1.75 to $1.85 (4)

$0.27 to $0.30 (4)

Foreign Exchange Conversion (avg.)

    US Dollar to GBP

1.59

1.59

    US Dollar to Canadian Dollar

1.00

1.00

Footnotes to Guidance:

  1. Includes US$220 million for full year FY 2011 and US$55 million for 1Q FY2011 of sales from acquired operations of Dimensions and Alexandra.
  2. Includes an assumed comparable store increase in tuxedo rental revenues of 7% to 8% for the full year FY 2011 and a 1% to 2% increase in 1Q FY 2011.
  3. Occupancy costs are expected to be flat for full year FY 2011 and decrease low single digit for 1Q FY 2011.  
  4. Excludes acquisition integration costs.

CONFERENCE CALL AND WEBCAST INFORMATION

At 5:00 p.m. Eastern time on Wednesday, March 9, 2011, Company management will host a conference call and real time webcast to review the fourth quarter of fiscal 2010 and its outlook for the first quarter and full year of fiscal 2011.    

To access the conference call, dial 480-629-9772.  To access the live webcast presentation, visit the Investor Relations section of the Company's website at www.menswearhouse.com.  A telephonic replay will be available through March 16, 2011 by calling 303-590-3030 and entering the access code of 4418605#, or a webcast archive will be available free on the website for approximately 90 days.

STORE INFORMATION

January 29, 2011

January 30, 2010

Number of Stores

Sq. Ft.

(000's)

Number of Stores

Sq. Ft.

(000's)

Men's Wearhouse

585

3,319.0

581

3,284.4

Men's Wearhouse and Tux

388

535.7

454

623.4

Moores, Clothing for Men

117

737.8

117

734.6

K&G (a)

102

2,394.1

107

2,475.6

Total

1,192

6,986.6

1,259

7,118.0

(a)  91 and 94 stores, respectively, offering women's apparel.

Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,192 stores.  The Men's Wearhouse, Moores and K&G stores carry a full selection of designer, brand name and private label suits, sport coats, furnishings and accessories and Men's Wearhouse and Tux stores carry a limited selection.  Tuxedo rentals are available in the Men's Wearhouse, Moores and Men's Wearhouse and Tux stores.  Additionally, Men's Wearhouse operates a global corporate apparel and workwear group consisting of TwinHill in the United States and Dimensions and Alexandra in the United Kingdom.  

This press release contains forward-looking information. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may be significantly impacted by various factors, including sensitivity to economic conditions and consumer confidence, possibility of limited ability to expand Men's Wearhouse stores, possibility that certain of our expansion strategies may present greater risks, changes in foreign currency rates and other factors described in the Company's annual report on Form 10-K for the fiscal year ended January 30, 2010 and subsequent Forms 10-Q.

For additional information on Men's Wearhouse, please visit the Company's website at www.menswearhouse.com.  The website for Dimensions is www.dimensions.co.uk and the website for Alexandra is www.alexandra.co.uk.

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

In thousands, except per share data

(Unaudited)

FOR THE THREE MONTHS ENDED

January 29, 2011 AND January 30, 2010

(In thousands, except per share data)

Three Months Ended

Variance

% of

% of

Basis

2010

Sales

2009

Sales

Dollar

%

Points

(as adjusted) (a)

Net sales:

         Clothing product

$   407,953

75.25%

$   387,084

84.66%

$  20,869

5.39%

(9.41)

         Tuxedo rental services

38,356

7.08%

35,380

7.74%

2,976

8.41%

(0.66)

         Alteration and other services    

33,343

6.15%

31,698

6.93%

1,645

5.19%

(0.78)

              Retail segment sales

479,652

88.48%

454,162

99.33%

25,490

5.61%

(10.85)

              Corporate apparel segment sales

62,454

11.52%

3,056

0.67%

59,398

1,943.65%

10.85

                 Total net sales

542,106

100.00%

457,218

100.00%

84,888

18.57%

0.00

Total cost of sales

339,947

62.71%

287,688

62.92%

52,259

18.17%

(0.21)

Gross margin (b):

         Clothing margin

211,049

51.73%

204,995

52.96%

6,054

2.95%

(1.23)

         Tuxedo margin

33,135

86.39%

27,967

79.05%

5,168

18.48%

7.34

         Alteration and other services margin

8,325

24.97%

7,985

25.19%

340

4.26%

(0.22)

         Occupancy costs

(68,216)

(14.22%)

(71,644)

(15.77%)

3,428

4.78%

1.55

              Retail segment margin

184,293

38.42%

169,303

37.28%

14,990

8.85%

1.14

              Corporate apparel segment margin

17,866

28.61%

227

7.43%

17,639

7,770.48%

21.18

                 Gross margin

202,159

37.29%

169,530

37.08%

32,629

19.25%

0.21

Selling, general and administrative expenses

225,356

41.57%

203,818

44.58%

21,538

10.57%

(3.01)

Operating loss

(23,197)

(4.28%)

(34,288)

(7.50%)

11,091

32.35%

3.22

Net interest

(367)

(0.07%)

(153)

(0.03%)

(214)

(139.87%)

0.03

Loss before income taxes

(23,564)

(4.35%)

(34,441)

(7.53%)

10,877

31.58%

3.19

Benefit from income taxes

(9,370)

(1.73%)

(15,688)

(3.43%)

6,318

40.27%

1.70

Net loss including noncontrolling interest

(14,194)

(2.62%)

(18,753)

(4.10%)

4,559

24.31%

1.48

Less:  Net loss attributable to noncontrolling interest

(108)

(0.02%)

-

0.00%

(108)

100.00%

(0.02)

Net loss attributable to common shareholders

$  (14,086)

(2.60%)

$  (18,753)

(4.10%)

$   4,667

24.89%

1.50

Net loss per diluted common share attributable to common shareholders

$      (0.27)

$      (0.36)

Weighted average diluted common shares outstanding:

52,819

52,297

(a)  Results have been adjusted for the change in inventory valuation method used by our K&G brand from the retail inventory method to the average cost method during the third quarter of fiscal 2010.  The cumulative effect of this change in accounting principle was recorded retrospectively as of February 1, 2009.  

(b)  Gross margin percent of sales is calculated as a percentage of related sales.

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

FOR THE TWELVE MONTHS ENDED

January 29, 2011 AND January 30, 2010

(In thousands, except per share data)

Twelve Months Ended

Variance

% of

% of

Basis

2010

Sales

2009

Sales

Dollar

%

Points

(as adjusted) (a)

Net sales:

         Clothing product

$1,480,492

70.41%

$1,433,913

75.09%

$46,579

3.25%

(4.68)

         Tuxedo rental services

364,269

17.32%

334,068

17.49%

30,201

9.04%

(0.17)

         Alteration and other services    

131,605

6.26%

128,121

6.71%

3,484

2.72%

(0.45)

              Retail segment sales

1,976,366

93.99%

1,896,102

99.29%

80,264

4.23%

(5.30)

              Corporate apparel segment sales

126,298

6.01%

13,473

0.71%

112,825

837.42%

5.30

                 Total net sales

2,102,664

100.00%

1,909,575

100.00%

193,089

10.11%

0.00

Total cost of sales

1,204,231

57.27%

1,110,677

58.16%

93,554

8.42%

(0.89)

Gross margin (b):

         Clothing margin

798,675

53.95%

775,882

54.11%

22,793

2.94%

(0.16)

         Tuxedo margin

308,202

84.61%

276,651

82.81%

31,551

11.40%

1.80

         Alteration and other services margin

33,479

25.44%

33,532

26.17%

(53)

(0.16%)

(0.73)

         Occupancy costs

(276,688)

(14.00%)

(289,672)

(15.28%)

12,984

4.48%

1.28

              Retail segment margin

863,668

43.70%

796,393

42.00%

67,275

8.45%

1.70

              Corporate apparel segment margin

34,765

27.53%

2,505

18.59%

32,260

1,287.82%

8.93

                 Gross margin

898,433

42.73%

798,898

41.84%

99,535

12.46%

0.89

Selling, general and administrative expenses

796,762

37.89%

729,522

38.20%

67,240

9.22%

(0.31)

Operating income

101,671

4.84%

69,376

3.63%

32,295

46.55%

1.20

Net interest

(1,141)

(0.05%)

(332)

(0.02%)

(809)

(243.67%)

0.04

Earnings before income taxes

100,530

4.78%

69,044

3.62%

31,486

45.60%

1.17

Provision for income taxes

32,852

1.56%

22,829

1.20%

10,023

43.90%

0.37

Net earnings including noncontrolling interest

67,678

3.22%

46,215

2.42%

21,463

46.44%

0.80

Less:  Net loss attributable to noncontrolling interest

(19)

0.00%

-

0.00%

(19)

100.00%

0.00

Net earnings attributable to common shareholders

$  67,697

3.22%

$   46,215

2.42%

$21,482

46.48%

0.80

Net earnings per diluted common share attributable to common shareholders (c)

$      1.27

$       0.88

Weighted average diluted common shares outstanding:

52,853

52,280

(a)  Results have been adjusted for the change in inventory valuation method used by our K&G brand from the retail inventory method to the average cost method during the third quarter of fiscal 2010.  The cumulative effect of this change in accounting principle was recorded retrospectively as of February 1, 2009.  

(b)  Gross margin percent of sales is calculated as a percentage of related sales.

(c)  Calculated based on net earnings less net earnings allocated to participating securities.

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

January 29,

January 30,

2011

2010

(as adjusted) (a)

ASSETS

Current assets:

Cash and cash equivalents

$          136,371

$        186,018

Accounts receivable, net

60,607

16,745

Inventories

486,499

434,881

Other current assets

80,531

72,732

  Total current assets

764,008

710,376

Property and equipment, net

332,611

344,746

Tuxedo rental product, net

89,465

102,479

Goodwill

87,994

59,414

Intangible assets, net

37,348

4,287

Other assets

8,892

12,850

  Total assets

$       1,320,318

$     1,234,152

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$          123,881

$          83,052

Accrued expenses and other current liabilities

139,640

117,047

Income taxes payable

3,135

23,936

  Total current liabilities

266,656

224,035

Long-term debt

-

43,491

Deferred taxes and other liabilities

69,809

62,236

  Total liabilities

336,465

329,762

Equity:

Preferred stock

-

-

Common stock

710

705

Capital in excess of par

341,663

327,742

Retained earnings

1,002,975

956,032

Accumulated other comprehensive income

38,366

32,537

Treasury stock, at cost

(412,761)

(412,626)

  Total equity attributable to common shareholders

970,953

904,390

Noncontrolling interest

12,900

-

  Total equity

983,853

904,390

   Total liabilities and equity

$     1,320,318

$    1,234,152

(a)  Results have been adjusted for the change in inventory valuation method used by our K&G brand from the retail inventory method to the average cost method during the third quarter of fiscal 2010.  The cumulative effect of this change in accounting principle was recorded retrospectively as of February 1, 2009.

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

FOR THE TWELVE MONTHS ENDED

January 29, 2011 AND January 30, 2010

(In thousands)

Twelve Months Ended

2010

2009

(as adjusted) (a)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings including noncontrolling interest

$          67,678

$         46,215

Non-cash adjustments to net earnings:

  Depreciation and amortization

75,998

86,090

  Tuxedo rental product amortization

33,485

37,184

  Other

28,074

3,167

Changes in assets and liabilities

(35,288)

(9,501)

       Net cash provided by operating activities

169,947

163,155

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(58,868)

(56,912)

Acquisition of businesses, net of cash

(97,786)

-

Proceeds from sales of available-for-sale investments

-

19,410

Proceeds from sales of property and equipment

76

797

       Net cash used in investing activities

(156,578)

(36,705)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

3,900

4,106

Payments on revolving credit facility

-

(25,000)

Payments on Canadian term loan

(46,738)

-

Cash dividends paid

(19,111)

(14,722)

Deferred financing costs

(1,577)

-

Tax payments related to vested deferred stock units

(2,748)

(1,634)

Excess tax benefits from share-based plans

1,107

392

Purchase of treasury stock

(144)

(90)

       Net cash used in financing activities

(65,311)

(36,948)

Effect of exchange rate changes

2,295

9,104

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(49,647)

98,606

Balance at beginning of period

186,018

87,412

Balance at end of period

$     136,371

$      186,018

(a)  Results have been adjusted for the change in inventory valuation method used by our K&G brand from the retail inventory method to the average cost method during the third quarter of fiscal 2010.  The cumulative effect of this change in accounting principle was recorded retrospectively as of February 1, 2009.  

Contacts:

Neill Davis, Men’s Wearhouse

(281) 776-7000

Ken Dennard, DRG&L

(713) 529-6600

SOURCE The Men's Wearhouse



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http://www.menswearhouse.com