Men's Wearhouse to cease tuxedo distribution operations
The Men's Wearhouse announced its consolidated financial results for the second quarter ended July 31, 2010.
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 and certain assets of Alexandra plc 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 taxrate for second quarter fiscal 2010 was 37.6%.