SECOND QUARTER CONSOLIDATED RESULTS REVIEW
Total net sales for the fiscal 2013 second quarter decreased 2.3% or $15.0 million to $647.3 million from $662.3 million for the same prior year period. Retail segment sales for the quarter decreased by 1.9% or $11.2 million and corporate apparel sales decreased by 6.6% or $3.8 million as compared to the prior year quarter.
The consolidated total gross margin was down $11.5 million or 3.6% with the total gross margin rate decreasing 65 basis points primarily because of the shift in tuxedo revenues and the deleveraging of occupancy costs. The retail segment total gross margin was down 3.4% and the corporate apparel gross margin decreased 6.1%.
Adjusted SG&A expenses increased by $0.9 million or 0.4% primarily due to payroll related costs, particularly increased medical benefit costs. Adjusted SG&A expenses exclude $2.9 million in costs related primarily to the JA Holding, Inc. acquisition and separation costs associated with a former executive. Also excluded is a $9.5 million non-cash goodwill impairment charge related to K&G. These charges of $12.4 million ($8.0 million after tax) reduced second quarter diluted EPS by $0.16.
GAAP net earnings for the fiscal 2013 second quarter were $42.9 million, or $0.85 diluted earnings per share. Adjusted net earnings for the fiscal 2013 second quarter were $51.0 million, or $1.01 adjusted diluted earnings per share compared to net earnings of $59.4 million, or $1.15 diluted earnings per share last year. The Company estimates that approximately $0.10 of the comparable decrease is attributable to a shift of tuxedo prom season rentals to the first quarter caused by an earlier Easter.
Doug Ewert, Men's Wearhouse president and chief executive officer, commented, "Retail clothing sales during the second quarter were below our internal plan as we experienced a decline in customer traffic compared to last year's second quarter. We believe this is primarily due to macro issues affecting the apparel retailing space.
"Despite the difficult economic climate, we remain committed to our operating and capital allocation plans that were laid out earlier this year. Over the past six months we have improved financial flexibility, purchased the American designer brand Joseph Abboud and its U.S. manufacturing operations, and repurchased approximately $152 million of our shares; and we continue to evaluate strategic alternatives for our K&G operations.
"Along with our store growth and margin expansion initiatives, we believe these strategic and deliberate actions better position the Company for growth and will continue to unlock value for our shareholders into 2014 and beyond," said Ewert.
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