Men's Wearhouse Reports Fiscal 2010 Second Quarter Results
- Q2 2010 GAAP diluted EPS was $0.80 and adjusted diluted EPS was $0.83 compared with Q2 2009 GAAP diluted EPS of $0.75
- Company provides guidance for third quarter of fiscal 2010
- Conference call at 5:00 pm Eastern today
HOUSTON, Sept. 8 /PRNewswire-FirstCall/ -- The Men's Wearhouse (NYSE: MW) today announced its consolidated financial results for the second quarter ended July 31, 2010.
Second Quarter Sales Summary – Fiscal 2010 |
||||||
U.S. dollars, in millions |
Total Sales |
Comparable Store Sales |
||||
Current Year |
Prior Year |
Current Year |
Prior Year |
|||
Total Company |
$ 537.0(a) |
$ 526.2(a) |
2.0% |
|||
MW |
$ 367.4(b) |
$ 359.0(b) |
2.3% |
2.7% (c) |
- 2.0% (c) |
|
K&G |
$ 87.6 |
$ 93.6 |
- 6.4% |
- 4.6% |
- 3.6% |
|
United States |
$ 465.4 |
$ 461.0 |
1.0% |
1.2% |
- 2.4% |
|
Moores |
$ 71.6 |
$ 65.2 |
9.7% |
0.6% (d) |
- 3.4% (d) |
|
Year-To-Date Sales Summary – Fiscal 2010 |
||||||
U.S. dollars, in millions |
Total Sales |
Comparable Store Sales |
||||
Current Year |
Prior Year |
Current Year |
Prior Year |
|||
Total Company |
$ 1,010.5(a) |
$ 990.3(a) |
2.0% |
|||
MW |
$ 685.7(b) |
$ 670.0(b) |
2.3% |
2.6% (c) |
- 4.4% (c) |
|
K&G |
$ 185.8 |
$ 198.1 |
- 6.2% |
- 4.8% |
- 0.6% |
|
United States |
$ 891.5 |
$ 886.0 |
0.6% |
0.9% |
- 3.5% |
|
Moores |
$ 118.9 |
$ 104.3 |
14.0% |
0.5% (d) |
- 3.7% (d) |
|
(a) Due to rounded numbers total company may not sum. (b) Total sales from retail stores and ecommerce. (c) Comparable store sales do not include ecommerce. (d) Comparable store sales change is based on the Canadian dollar. |
||||||
GAAP diluted earnings per share were $0.80 for the second quarter ended July 31, 2010. Adjusted diluted earnings per share were $0.83 after excluding $2.7 million ($1.7 million after tax or $0.03 per diluted share outstanding) in acquisition costs related to the Company's acquisition of Dimensions Clothing Limited ("Dimensions") and certain assets of Alexandra plc ("Alexandra") on August 6, 2010. This compares to diluted earnings per share guidance given June 9, 2010 of $0.75 to $0.78. Prior year second quarter GAAP diluted earnings per share were $0.75.
SECOND Quarter REVIEW
Total Company sales increased 2.0% for the quarter.
- Clothing product sales, representing 67.5% of fiscal second quarter 2010 total net sales, decreased 0.6% due mainly to a decrease in store traffic levels at Men's Wearhouse and a decrease in the average transaction value at K&G.
- Tuxedo rental sales, representing 26.5% of fiscal second quarter 2010 total net sales, increased 10.0% due mainly to an increase in units rented.
Gross margin before occupancy costs, as a percentage of total net sales, increased 226 basis points from 59.1% to 61.3%. Clothing product margins, as a percentage of related sales, increased 224 basis points due primarily to different promotional offerings, as well as the mix of products on promotion, in 2010 compared to 2009 and lower product costs. Tuxedo rental margins, as a percentage of related sales, increased 111 basis points due primarily to a decrease in rental product retirement costs in 2010.
Occupancy costs decreased, as a percentage of total net sales, by 89 basis points from 13.9% to 13.0%. On an absolute dollar basis, occupancy costs decreased 4.5% from $73.1 million in the prior year to $69.8 million due primarily to lower depreciation costs.
Selling, general and administrative expenses were $191.2 million. The prior year quarter included a cumulative adjustment of $3.1 million for gift card breakage income. Excluding this other income, SG&A expense was $177.0 million in the prior year quarter. During the current quarter, the Company incurred $2.7 million in costs associated with the August 6, 2010 acquisition of Dimensions and certain assets of Alexandra. Excluding these costs, second quarter SG&A expenses were $188.5 million or an increase of 6.5% to the adjusted prior year quarter. The increase is primarily due to increased marketing costs and increased employee benefit costs. As a percentage of total net sales, adjusted SG&A increased 146 basis points from 33.6% to 35.1%.
Operating income was $68.4 million. Excluding $2.7 million in costs associated with the acquisitions, operating income was $71.1 million or 13.2% of total net sales compared to operating income of $63.9 million or 12.1% of total net sales for the same period last year.
The effective tax rate for second quarter fiscal 2010 was 37.6%.
Cash and cash equivalent balances as of the end of the second quarter of 2010 were $281.5 million.
Total inventories of $416.4 million declined 3.3% from the prior year second quarter of $430.8 million.
Current maturities of long-term debt were $45.2 million as of the end of the second quarter of 2010.
THIRD QUARTER 2010 HIGHLIGHTS AND GUIDANCE
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 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 certain existing shareholders of Dimensions controls 14%.
The financial results of the combined operations, excluding integration and transaction costs, are expected to be neutral to $0.01 accretive to the Company's 3Q FY 2010 diluted earning per share. Total sales of the combined operations are expected in a range of US$49 million to US$51 million. Transaction costs and integration expenses for third quarter are expected to be $1.8 million ($1.1 million after tax and non-controlling interest or $0.02 per diluted share outstanding).
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 eleven facilities that we currently use for tuxedo distribution. The operations at these four facilities will be assumed by other tuxedo distribution facilities in our system allowing us to more effectively manage our tuxedo rental operations.
In the third quarter, we expect a charge of approximately $2.2 million ($1.5 million after tax or $0.03 per diluted share outstanding) consisting primarily of severance payments and fixed asset write-offs. In the fourth quarter, we expect an additional charge of approximately $0.6 million consisting primarily of severance payments, fixed asset write-offs and facility remediation.
The expected benefit to fiscal 2011 as a result of these closures would be a reduction in operating costs of approximately $4.0 million.
Third Quarter Financial Guidance Summary
For the third quarter of the fiscal year, GAAP diluted earnings per share are expected to be in a range of $0.35 to $0.42. Adjusted diluted earnings per share are expected to be in a range of $0.40 to $0.47 excluding transaction costs and integration expenses of $1.8 million ($1.1 million after tax and non-controlling interest or $0.02 per diluted share outstanding) and $2.2 million in tuxedo distribution closure costs ($1.5 million after tax or $0.03 per diluted share outstanding).
Historical Actual |
Guidance |
||
3Q FY 2009 |
3Q FY 2010 |
||
Total Sales |
+0.5% |
+ low double digits (1) |
|
Comparable Store Sales (2) |
|||
MW |
-0.2% |
+ low to mid single digit |
|
K&G |
-1.1% |
- mid single digit |
|
Moores |
+1.9% |
Flat |
|
Gross Profit Growth Rate |
-0.0% |
+ low double digits (3) |
|
S G & A Expense Growth Rate |
-2.6% (4) |
+ low double digits (5) |
|
Effective Tax Rate |
34.51% |
31.30% (6) |
|
Shares Outstanding (millions) |
52.442 |
52.811 |
|
GAAP Diluted EPS |
$0.37 |
$0.35 to $0.42 |
|
Adjusted Diluted EPS |
$0.40 to $0.47 (5) |
||
Foreign Exchange Conversion (avg.) |
|||
US Dollar to GBP |
n/a |
1.53 |
|
US Dollar to Canadian Dollar |
0.93 |
0.96 |
|
|
|||
UPDATED CONFERENCE CALL AND WEBCAST INFORMATION
At 5:00 p.m. Eastern time on Wednesday, September 8, 2010, Company management will host a conference call and real time web cast to review the fiscal second quarter and its outlook for the third quarter of fiscal 2010.
To access the conference call, dial 480-629-9770. 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 September 15, 2010 by calling 303-590-3030 and entering the access code of 4355146#, or a webcast archive will be available free on the website for approximately 90 days.
STORE INFORMATION |
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July 31, 2010 |
August 1, 2009 |
January 30, 2010 |
|||||
Number |
Sq. Ft |
Number |
Sq. Ft. |
Number |
Sq. Ft. |
||
Men's Wearhouse |
584 |
3,307.0 |
580 |
3,274.1 |
581 |
3,284.4 |
|
Men's Wearhouse and Tux |
434 |
596.4 |
473 |
644.4 |
454 |
623.4 |
|
Moores, Clothing for Men |
117 |
735.7 |
117 |
732.7 |
117 |
734.6 |
|
K&G (a) |
104 |
2,426.7 |
108 |
2,488.4 |
107 |
2,475.6 |
|
Total |
1,239 |
7,065.8 |
1,278 |
7,139.6 |
1,259 |
7,118.0 |
|
(a) 95, 94 and 94 stores, respectively, offering women's apparel. |
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Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,239 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, Form 10-Q for the quarter ended May 1, 2010 and Current Report on Form 8-K/A filed on August 16, 2010.
For additional information on Men's Wearhouse, please visit the Company's website at www.menswearhouse.com.
CONTACT: |
Neill Davis, EVP & CFO, Men's Wearhouse (281) 776-7000 |
|
Ken Dennard, DRG&E (713) 529-6600 |
||
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES |
|||||||||
FOR THE THREE MONTHS ENDED |
|||||||||
Three Months Ended |
Variance |
||||||||
2010 |
% of |
2009 |
% of |
Dollar |
% |
Basis |
|||
Net sales: |
|||||||||
Clothing product |
$362,228 |
67.46% |
$ 364,302 |
69.23% |
$(2,074) |
(0.57%) |
(1.78) |
||
Tuxedo rental services |
142,462 |
26.53% |
129,567 |
24.62% |
12,895 |
9.95% |
1.91 |
||
Alteration and other services |
32,299 |
6.01% |
32,339 |
6.15% |
(40) |
(0.12%) |
(0.13) |
||
Total net sales |
536,989 |
100.00% |
526,208 |
100.00% |
10,781 |
2.05% |
0.00 |
||
Total cost of sales |
277,406 |
51.66% |
288,420 |
54.81% |
(11,014) |
(3.82%) |
(3.15) |
||
Gross margin (a) |
259,583 |
48.34% |
237,788 |
45.19% |
21,795 |
9.17% |
3.15 |
||
Selling, general and administrative expenses |
191,168 |
35.60% |
173,896 |
33.05% |
17,272 |
9.93% |
2.55 |
||
Operating income |
68,415 |
12.74% |
63,892 |
12.14% |
4,523 |
7.08% |
0.60 |
||
Net interest |
(275) |
(0.05%) |
- |
0.00% |
(275) |
100.00% |
0.05 |
||
Earnings before income taxes |
68,140 |
12.69% |
63,892 |
12.14% |
4,248 |
6.65% |
0.55 |
||
Provision for income taxes |
25,620 |
4.77% |
24,407 |
4.64% |
1,213 |
4.97% |
0.13 |
||
Net earnings |
$ 42,520 |
7.92% |
$ 39,485 |
7.50% |
$3,035 |
7.69% |
0.41 |
||
Net earnings per diluted common share (b) |
$ 0.80 |
$ 0.75 |
|||||||
Weighted average diluted common shares outstanding: |
52,806 |
52,255 |
|||||||
(a) Gross margin as a percentage of related sales: |
|||||||||
Three Months Ended |
Variance |
||||||||
2010 |
% of |
2009 |
% of |
Dollar |
% |
Basis |
|||
Clothing margin |
$ 201,107 |
55.52% |
$ 194,115 |
53.28% |
$ 6,992 |
3.60% |
2.24 |
||
Tuxedo margin |
120,426 |
84.53% |
108,092 |
83.43% |
12,334 |
11.41% |
1.11 |
||
Alteration and other services margin |
7,853 |
24.31% |
8,649 |
26.74% |
(796) |
(9.20%) |
(2.43) |
||
Occupancy costs |
(69,803) |
(13.00%) |
(73,068) |
(13.89%) |
3,265 |
4.47% |
0.89 |
||
Gross margin |
$ 259,583 |
48.34% |
$ 237,788 |
45.19% |
$ 21,795 |
9.17% |
3.15 |
||
(b) Calculated based on net earnings less net earnings allocated to participating securities. |
|||||||||
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES |
|||||||||
FOR THE SIX MONTHS ENDED |
|||||||||
Six Months Ended |
Variance |
||||||||
2010 |
% of |
2009 |
% of |
Dollar |
% |
Basis |
|||
Net sales: |
|||||||||
Clothing product |
$ 730,599 |
72.30% |
$ 723,364 |
73.04% |
$ 7,235 |
1.00% |
(0.74) |
||
Tuxedo rental services |
214,616 |
21.24% |
200,986 |
20.29% |
13,630 |
6.78% |
0.94 |
||
Alteration and other services |
65,240 |
6.46% |
65,992 |
6.66% |
(752) |
(1.14%) |
(0.21) |
||
Total net sales |
1,010,455 |
100.00% |
990,342 |
100.00% |
20,113 |
2.03% |
0.00 |
||
Total cost of sales |
549,800 |
54.41% |
564,565 |
57.01% |
(14,765) |
(2.62%) |
(2.60) |
||
Gross margin (a) |
460,655 |
45.59% |
425,777 |
42.99% |
34,878 |
8.19% |
2.60 |
||
Selling, general and administrative expenses |
370,818 |
36.70% |
353,109 |
35.66% |
17,709 |
5.02% |
1.04 |
||
Operating income |
89,837 |
8.89% |
72,668 |
7.34% |
17,169 |
23.63% |
1.55 |
||
Net interest |
(500) |
(0.05%) |
(160) |
(0.02%) |
(340) |
212.50% |
0.03 |
||
Earnings before income taxes |
89,337 |
8.84% |
72,508 |
7.32% |
16,829 |
23.21% |
1.52 |
||
Provision for income taxes |
33,209 |
3.29% |
27,767 |
2.80% |
5,442 |
19.60% |
0.48 |
||
Net earnings |
$ 56,128 |
5.55% |
$ 44,741 |
4.52% |
$11,387 |
25.45% |
1.04 |
||
Net earnings per diluted common share (b) |
$ 1.05 |
$ 0.85 |
|||||||
Weighted average diluted common shares outstanding: |
52,717 |
52,105 |
|||||||
(a) Gross margin as a percentage of related sales: |
|||||||||
Six Months Ended |
Variance |
||||||||
2010 |
% of |
2009 |
% of |
Dollar |
% |
Basis |
|||
Clothing margin |
$ 402,165 |
55.05% |
$ 385,720 |
53.32% |
$ 16,445 |
4.26% |
1.72 |
||
Tuxedo margin |
181,254 |
84.46% |
167,479 |
83.33% |
13,775 |
8.22% |
1.13 |
||
Alteration and other services margin |
16,730 |
25.64% |
18,212 |
27.60% |
(1,482) |
(8.14%) |
(1.95) |
||
Occupancy costs |
(139,494) |
(13.81%) |
(145,634) |
(14.71%) |
6,140 |
4.22% |
0.90 |
||
Gross margin |
$ 460,655 |
45.59% |
$ 425,777 |
42.99% |
$ 34,878 |
8.19% |
2.60 |
||
(b) Calculated based on net earnings less net earnings allocated to participating securities. |
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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES |
|||||
July 31, |
August 1, |
||||
ASSETS |
|||||
Current assets: |
|||||
Cash and cash equivalents |
$ 281,500 |
$ 144,449 |
|||
Short-term investments |
- |
19,490 |
|||
Accounts receivable, net |
19,066 |
17,129 |
|||
Inventories |
416,377 |
430,777 |
|||
Other current assets |
61,762 |
51,876 |
|||
Total current assets |
778,705 |
663,721 |
|||
Property and equipment, net |
333,133 |
375,595 |
|||
Tuxedo rental product, net |
91,690 |
107,848 |
|||
Goodwill |
60,449 |
59,266 |
|||
Other assets, net |
22,850 |
16,466 |
|||
Total assets |
$ 1,286,827 |
$ 1,222,896 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||
Current liabilities: |
|||||
Accounts payable |
$ 82,163 |
$ 78,918 |
|||
Accrued expenses and other current liabilities |
129,971 |
115,488 |
|||
Income taxes payable |
7,589 |
19,276 |
|||
Current maturities of long-term debt |
45,226 |
- |
|||
Total current liabilities |
264,949 |
213,682 |
|||
Long-term debt |
- |
43,161 |
|||
Deferred taxes and other liabilities |
64,402 |
63,289 |
|||
Total liabilities |
329,351 |
320,132 |
|||
Shareholders' equity: |
|||||
Preferred stock |
- |
- |
|||
Common stock |
708 |
703 |
|||
Capital in excess of par |
332,677 |
319,029 |
|||
Retained earnings |
1,000,553 |
961,670 |
|||
Accumulated other comprehensive income |
36,308 |
33,988 |
|||
Treasury stock, at cost |
(412,770) |
(412,626) |
|||
Total shareholders' equity |
957,476 |
902,764 |
|||
Total liabilities and equity |
$ 1,286,827 |
$ 1,222,896 |
|||
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES |
|||||
FOR THE SIX MONTHS ENDED |
|||||
Six Months Ended |
|||||
2010 |
2009 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||
Net earnings |
$ 56,128 |
$ 44,741 |
|||
Non-cash adjustments to net earnings: |
|||||
Depreciation and amortization |
36,885 |
43,881 |
|||
Tuxedo rental product amortization |
20,812 |
22,089 |
|||
Other |
10,953 |
(376) |
|||
Changes in assets and liabilities |
5,510 |
(206) |
|||
Net cash provided by operating activities |
130,288 |
110,129 |
|||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||
Capital expenditures |
(25,865) |
(28,757) |
|||
Other investing activities |
23 |
- |
|||
Net cash used in investing activities |
(25,842) |
(28,757) |
|||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||
Proceeds from issuance of common stock |
1,321 |
1,051 |
|||
Payments on revolving credit facility |
- |
(25,000) |
|||
Cash dividends paid |
(9,535) |
(7,344) |
|||
Other financing activities |
(2,020) |
(1,678) |
|||
Net cash used in financing activities |
(10,234) |
(32,971) |
|||
Effect of exchange rate changes |
1,270 |
8,636 |
|||
INCREASE IN CASH AND CASH EQUIVALENTS |
95,482 |
57,037 |
|||
Balance at beginning of period |
186,018 |
87,412 |
|||
Balance at end of period |
$ 281,500 |
$ 144,449 |
|||
SOURCE Men's Wearhouse
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