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Men's Wearhouse reports fiscal 2008 third quarter results
20 Nov '08
4 min read
The Men's Wearhouse announced its consolidated financial results for the third quarter ended November 1, 2008.
Diluted earnings per share were $0.28 for the third quarter ended November 1, 2008. Adjusted diluted earnings per share were $0.30 after excluding $1.1 million (net of tax), $0.02 per diluted share outstanding, of closure costs incurred in connection with the Company's previously announced closure of the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand. This compares to adjusted diluted earnings per share guidance given October 8, 2008 of $0.24 to $0.28.
Third Quarter Review
-- Total Company sales decreased 10.2% for the quarter.
-- Clothing product sales, representing 72.75% of fiscal third quarter 2008 total net sales, decreased 12.9% due to decreases in the Company's comparable store sales primarily driven by a reduction in store traffic levels.
-- Tuxedo rental sales, representing 20.99% of fiscal third quarter 2008 total net sales, increased 0.4%.
-- Gross margin before occupancy costs, as a percentage of total net sales, decreased 80 basis points from 60.84% to 60.04%. Decreases in clothing product margins, as a percentage of related sales, of 154 basis points were offset by a higher margin tuxedo rental business that increased from 18.76% to 20.99% as a percentage of total sales.
-- Occupancy costs increased, as a percentage of total net sales, by 205 basis points from 13.89% to 15.94% primarily due to the deleveraging effect of reduced comparable store sales.
-- Selling, general, and administrative expenses were $179.0 million. Excluding $1.8 million in costs associated with the closing of Golden Brand, SG&A expenses of $177.1 million were lower compared to the prior year quarter of $181.3 million and as a percentage of total net sales increased 314 basis points from 35.40% to 38.54%. The basis point increase was primarily due to the deleveraging effect of reduced comparable store sales.
-- Operating income was $23.8 million. Excluding $1.8 million in costs associated with the closing of Golden Brand, operating income was $25.6 million or 5.57% of total net sales compared to $59.2 million, or 1.55% of total net sales for the same period last year.
-- The effective tax rate for the 2008 third quarter was 38.0%.
Fourth Quarter 2008 Guidance
The Company expects diluted earnings per share of $0.00 to a loss of $0.18 for the fourth quarter of 2008. This guidance assumes same store sales at MW, including MW Tux stores, to decrease in the mid single digit to low double digit range, at K&G to decrease in the high single digit to low double digit range and at Moores to decrease in the low single digit range.
Fiscal 2008 Guidance
On July 11, 2008, the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand, was closed. The pre tax cost to close the facility was $10.0 million or the equivalent of $0.12 per diluted share outstanding for the fiscal year. The pre tax cost for the first quarter was $0.9 million or the equivalent of $0.01 per diluted share outstanding. The pre tax cost for the second quarter was $7.3 million or the equivalent of $0.09 per diluted share outstanding. The pre tax cost for the third quarter was $1.8 million or the equivalent of $0.02 per diluted share outstanding.
Diluted earnings per share were $0.28 for the third quarter ended November 1, 2008. Adjusted diluted earnings per share were $0.30 after excluding $1.1 million (net of tax), $0.02 per diluted share outstanding, of closure costs incurred in connection with the Company's previously announced closure of the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand. This compares to adjusted diluted earnings per share guidance given October 8, 2008 of $0.24 to $0.28.
Third Quarter Review
-- Total Company sales decreased 10.2% for the quarter.
-- Clothing product sales, representing 72.75% of fiscal third quarter 2008 total net sales, decreased 12.9% due to decreases in the Company's comparable store sales primarily driven by a reduction in store traffic levels.
-- Tuxedo rental sales, representing 20.99% of fiscal third quarter 2008 total net sales, increased 0.4%.
-- Gross margin before occupancy costs, as a percentage of total net sales, decreased 80 basis points from 60.84% to 60.04%. Decreases in clothing product margins, as a percentage of related sales, of 154 basis points were offset by a higher margin tuxedo rental business that increased from 18.76% to 20.99% as a percentage of total sales.
-- Occupancy costs increased, as a percentage of total net sales, by 205 basis points from 13.89% to 15.94% primarily due to the deleveraging effect of reduced comparable store sales.
-- Selling, general, and administrative expenses were $179.0 million. Excluding $1.8 million in costs associated with the closing of Golden Brand, SG&A expenses of $177.1 million were lower compared to the prior year quarter of $181.3 million and as a percentage of total net sales increased 314 basis points from 35.40% to 38.54%. The basis point increase was primarily due to the deleveraging effect of reduced comparable store sales.
-- Operating income was $23.8 million. Excluding $1.8 million in costs associated with the closing of Golden Brand, operating income was $25.6 million or 5.57% of total net sales compared to $59.2 million, or 1.55% of total net sales for the same period last year.
-- The effective tax rate for the 2008 third quarter was 38.0%.
Fourth Quarter 2008 Guidance
The Company expects diluted earnings per share of $0.00 to a loss of $0.18 for the fourth quarter of 2008. This guidance assumes same store sales at MW, including MW Tux stores, to decrease in the mid single digit to low double digit range, at K&G to decrease in the high single digit to low double digit range and at Moores to decrease in the low single digit range.
Fiscal 2008 Guidance
On July 11, 2008, the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand, was closed. The pre tax cost to close the facility was $10.0 million or the equivalent of $0.12 per diluted share outstanding for the fiscal year. The pre tax cost for the first quarter was $0.9 million or the equivalent of $0.01 per diluted share outstanding. The pre tax cost for the second quarter was $7.3 million or the equivalent of $0.09 per diluted share outstanding. The pre tax cost for the third quarter was $1.8 million or the equivalent of $0.02 per diluted share outstanding.
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