This summary is based on the second quarter fiscal 2008 earnings call conducted by Men’s Wearhouse Inc. (MW: chart) on August 27, 2008.

Management:

- CEO: George Zimmer
- DRG&E: Ken Dennard
- EVP & CFO: Neill Davis

Key Investors Issues

- EPS was 63 cents a share, down from 27% from $1.00 in the prior year.
- Sales dropped 4.2% to $545.3 million.

Second Quarter Highlights

Total company sales performance of $545.3 million declined 4.2% from last year’s second quarter of $569.3 million.

- Total clothing sales of $386.1 million declined 4% from last year’s second quarter of $402.4 million while tuxedo rental revenues of $127.5 million decreased 5.3% from last year’s second quarter of $134.6 million.
- Comparable store sales expectations for K&G were initially targeted at a decline in the low teens and actually declined by 8.9%.

In Canada comparable store sales results declined 2.8% and gross margin before occupancy cost decreased 27 basis points from 60.2% to 59.93%.

- Decreased in the clothing product margins as a percentage of related sales of 110 basis points were offset by an increase in tuxedo rental gross margins as a percentage of related sales of 302 basis points.
- Occupancy costs increased as a percentage of total net sales by 154 basis points from 11.99% to 13.53% primarily due to the deleveraging affect of reduced comparable store sales and increased rental rates for renewed leases.

Selling, general and administrative expenses excluding $7.3 million in costs associated with the closing of the Golden Brand manufacturing facility in Canada were essentially flat to the prior year quarter.

- However as a percentage of total net sales, SG&A increased 144 basis points from 33.69% to 35.13% and again this increase was primarily due to the deleveraging affect of reduced sales.
- Cash reserves were approximately $120 million and total retail inventories declined year-over-year by 3.3%.
- On a per store basis, Men’s Wearhouse stores decreased 1.5%, K&G decreased 15%, Moores expressed in Canadian dollars decreased 16.1% over the prior year.
- Per store inventories at the MW Tux stores increased 4.3% due mainly to the transition to more appropriate inventory levels.
- EPS was 63 cents a share, down from 27% from $1.00 in the prior year on higher costs and lower sales.

Fiscal 2008 Outlook:

- On an adjusted basis, the EPS guidance third quarter outlook is for a range of 36 cents to 40 cents compared to the prior year actual levels of 69 cents.
- Third quarter adjusted earnings per share guidance reflects a comparable store sales decrease in the high single-digit range for Men’s Wearhouse.
- Selling, general and administrative expenses for the third quarter are essentially unchanged from previous plans which call for a year-over-year increase of approximately 3% in dollar terms.
- The firm updated the adjusted EPS outlook for the year to a new range of $1.50 to $1.60.
- This guidance reflects a comparable store sales decrease in the mid single-digit range for TMW, or Men’s Wearhouse, a high single-digit decrease at K&G, and a low single-digit decrease for Moores.

Key questions and answers from the second quarter earnings call conducted by Men’s Wearhouse Inc. (MW: chart) on August 27, 2008.

Betty Chen (Wedbush Morgan Securities): Comment on the implied guidance?

Neill Davis: As it relates to the third quarter and fourth quarter guidance and my comments concerning a more conservative posture with our clothing business, its not a reflection of any deepening trend that we have seen develop its just that there’s a belief that with the economic backdrop that exists and its just taking a more conservative posture, its not significant but its just slightly more conservative.

We have before going into the second half of the year, been considering a currency on parody that is Canadian dollar to the US dollar, and we have taken that down 6%. That can have close to a 3 cents to 4 cents impact on the bottom line on an annualized basis.

Richard Jaffe (Stifel Nicolaus): Is there still some initial margin opportunity or is the sourcing opportunity nearly maximized both for tuxedos and for suits?

George Zimmer: The way you have to think about that is that we make a choice. Its not that the opportunity maxes out but we choose to have a mix of designer and branded goods along with our private label and so that mix is what really determines the margin.
I would not say we are maxing out on our margin opportunity, but we are making a choice to level off our margin. And yes, we are playing defense for the most part, but as I sort of hinted at in my remarks, we are working on some strategic initiatives that we are not prepared to talk about now.

Janet Kloppenburg (JJK Research): Comment on the tuxedo business?

Neill Davis: Second quarter was down 5.3%, low single-digit declines expectation for the third quarter and turning to a positive increase in the fourth quarter. The margin compression that we anticipate we may experience is just simply the fact that the customer comes in the store and when they buy they seem to be buying more heavily of the items we have already marked down.