This summary is based on the fourth quarter fiscal 2008 earnings call conducted by The Men’s Wearhouse Inc. (MW) on March 11, 2009.
Management:
Chairman and CEO: George A. Zimmer
EVP, Principal Financial Officer, Treasurer and CFO: Neill P. Davis
DRG&E: Ken Dennard
Key Investor Issues:
- Full year GAAP EPS were $1.13 versus $2.73 last year.
- Year-on-year total company sales dipped 6.6% from $2,112.6 million to $1,972.4 million.
- CapEx for the full year 2009 is targeted to be in the range of $50 million to $55 million.
Fourth Quarter Financial Highlights:
The GAAP diluted EPS for the quarter of 3 cents significantly exceeded the mid-quarter updated guidance which was at the lower end of the break even to 18 cents loss range.
- The favorable variance is a result of better than expected clothing sales and margin results at Men’s Wearhouse and Moores retail stores.
- The improvement was also due to the impact of lower operating costs from initiatives implemented during the quarter and a lower effective tax rate.
Total company sales performance in the fourth quarter of $476.4 million declined 11% from last year’s fourth quarter of $535 million.
- Total clothing sales of $406.7 million declined 12.8% from last year’s fourth quarter of $466.2 million.
- Tuxedo rental revenues of $35.8 million increased 3% over last year’s fourth quarter revenues of $34.8 million.
- The initial expectations going into the quarter called for a comparable store sales decline in the mid single digit to low double digit range for core Men’s Wearhouse stores including MW Tux stores.
- Actual results for the quarter of a decline of 9.7% were better than the belated promotional posture in January.
- Comparable store sales expectations for K&G were initially targeted at a high single digit to low double digit decrease.
- Actual results were a decline of 10.7%.
Decreases in the clothing product margins as a percentage of related sales of 396 basis points were driven by a decrease in merchandise margins principally at Men''s Wearhouse stores.
- The promotional pace accelerated in the quarter based on the positive response realized from increased customer traffic.
- This contributed to better than expected earnings per share results for the quarter.
- The company ended the quarter with domestic retail apparel inventory below last year by 9.9% versus a decline in related sales of 8.6% for the year and 9.4% for the quarter.
Occupancy costs decreased on a dollar basis by 1.9%.
- Occupancy costs however increased as a percentage of total net sales by 141 basis points from 13.91% to 15.32%.
- The increase was primarily due to de-leveraging effect of reduced comparable store sales.
- Excluding $1.8 million in non-cash charges associated with an impairment charge for two K&G retail locations and an $8.8 million on a sale of a tuxedo distribution center, SG&A expenses before advertising eased 9% from the prior year quarter.
At quarter end, cash reserves and short term investments were $104.5 million and outstanding debt was $62.9 million.
- Maturity dates for outstanding debt obligations are $37.9 million due in February, 2011 and $25 million due in February, 2012.
- The company finished the year with capital expenditures of $88 million which was in line with the last guidance range.
- The management did not repurchase any shares in the quarter and therefore continue to have available approximately $44 million of remaining authorization.
The management continues reviewing all expenses.
- This includes a 20% reduction in my-base compensation.
- It also includes a 10% reduction in the Board of Directors’ compensation and a 5% reduction in other senior executive compensation.
- The total expense reductions approximate $35 million.
The management is rebranding the tuxedo rental only stores formerly MW Tux with the name Men''s Wearhouse and Tux.
- To accommodate younger tuxedo rental customer, the company is introducing designer jeans, fashion t-shirts and vests.
- This is being done along with woven shirts and more complementary shoes and belts into all regular Men''s Wearhouse stores.
- At K&G, the management is launching a new branding campaign on television and radio.
- The K&G ladies business is reportedly growing in importance.
- The management has come up with a way to refurbish 80 of the 108 K&G stores with a fresh new look and improved customer navigation for about $3 million.
- The marketing spend at K&G will increase both in dollars and more dramatically gross rating points.
First Half Fiscal 2009 Outlook:
