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Men's Wearhouse Q1 profit up & sees higher Q2 profit

23
May '07
The Men's Wearhouse announced its consolidated financial results for the first quarter ended May 5, 2007.

George Zimmer, Chairman and Chief Executive Officer, commented, "During the quarter we completed the acquisition of After Hours Formalwear (AH) from Federated Department Stores. With the combination of 509 AH stores and MW's existing stores, we are now the leading retailer for the rental of men's formalwear with over 1,100 stores in the United States and Canada. We are sharply focused on capturing the synergistic potential of this acquisition and thereby enhancing shareholder value."

"Our current priority for the balance of this fiscal year is to complete the operational integration of AH with MW by the end of December 2007 in order to realize maximum synergies in our business model beginning in fiscal 2008. The principal elements of the integration plan involve the formulation of a branding strategy, developing a common inventory assortment, and the assimilation of store support services."

First quarter 2007 operating income was $65.3 million compared to $46.4 million last year and net income was $40.9 million compared to $28.9 million last year. GAAP diluted earnings per share were $0.75 for the first quarter ended May 5, 2007 compared to $0.53 last year. After Hours, after acquisition funding costs, contributed $0.08 to the GAAP diluted earnings per share for the first quarter.

First Quarter Highlights:
• Total company sales increased 14.2% for the quarter. Apparel sales, representing 81.3% of total sales, increased 5.5%. Tuxedo rental revenues, representing 12.1% of total sales, increased 137.6%. Tuxedo rental revenues excluding After Hours increased 34.2%.

• Comparable store sales declined 1.3% for the company's United States based stores, below the company's guidance of +1% to +2%. The decline in comparable store sales is primarily due to soft traffic levels resulting in lower tailored clothing sales at both TMW and K&G.

• Comparable store sales increased 5.8% for the company's Canadian based stores, in-line with the company's guidance. This on plan performance is a reflection of continued gains in both traffic levels and average ticket.

• Gross profit, as a percentage of sales, increased 354 basis points from 42.07% to 45.61%. This improvement is due to both organic and acquired growth in tuxedo rental revenues as well as continued gains in merchandise margins.


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