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Men's Wearhouse reports fiscal 2008 Q2 results

28
Aug '08
The Men's Wearhouse announced its consolidated financial results for the second quarter ended August 2, 2008.

Diluted earnings per share were $0.63 for the second quarter ended August 2, 2008. Adjusted diluted earnings per share were $0.72 after excluding $4.5 million (net of tax), $0.09 per diluted share outstanding, of closure costs incurred in connection with the Company's previously announced planned 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 July 9, 2008 of $0.70 to $0.74.

SECOND Quarter Highlights:
• Total company sales decreased 4.2% for the quarter.

• Apparel sales, representing 70.81% of 2008 total net sales, decreased 4.0% primarily due to decreases in the Company's comparable store sales driven by a reduction in store traffic levels.

• Tuxedo rental revenues, representing 23.37% of 2008 total net sales, decreased 5.3%. This decline was primarily driven by reduced tuxedo rental sales at the Company's stores acquired from After Hours. These declines were partially offset by increases at the Company's Men's Wearhouse stores.

• Gross margin before occupancy costs, as a percentage of total net sales, decreased 27 basis points from 60.20% to 59.93%. Decreases in clothing product margins, as a percentage of related sales, of 110 basis points were offset by an increase in tuxedo rental services gross margin, as a percentage of related sales, of 302 basis points from 80.66% to 83.68%.

• Occupancy costs increased, as a percentage of total net sales, by 154 basis points from 11.99% to 13.53% primarily due to the deleveraging effect of reduced comparable store sales and increased rental rates for new and renewed leases.

• Selling, general, and administrative expenses were $198.9 million. Excluding $7.3 million in costs associated with the closing of Golden Brand, SG&A expenses of $191.6 million were essentially flat compared to the prior year quarter and as a percentage of total net sales increased 144 basis points from 33.69% to 35.13%. This increase was primarily due to the deleveraging effect of reduced net sales.

• Operating income was $54.2 million. Excluding $7.3 million in costs associated with the closing of Golden Brand, operating income was $61.5 million, or 11.27% of total net sales compared to $82.7 million, or 14.52% of total net sales for the same period last year.

• The effective tax rate for the 2008 second quarter was 39.0%.

THIRD QUARTER 2008 GUIDANCE On July 11, 2008, the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand, was closed. The Company estimates the pre tax cost to close the facility will be approximately $9.8 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 and the pre tax cost for the third quarter is estimated at $1.6 million or the equivalent of $0.02 per diluted share outstanding.


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