– Q3 2010 GAAP diluted EPS was $0.47 and adjusted diluted EPS was $0.57 compared with Q3 2009 revised GAAP diluted EPS of $0.36
– Company provides guidance for fourth quarter of fiscal 2010
– Conference call at 5:00 pm Eastern today
HOUSTON, Dec. 7, 2010 /PRNewswire-FirstCall/ — The Men’s Wearhouse (NYSE: MW) today announced its consolidated financial results for the third quarter ended October 30, 2010.
Third Quarter Sales Summary – Fiscal 2010
Total Sales Comparable Store Sales
U.S. dollars, in millions Change % Change %
Current Year Prior Year Current Year Prior Year
Total Company $ 550.1 $ 462.0 19.1%
Total Retail
Segment $ 494.6 $ 458.3 7.9%
MW $ 349.1 $ 317.6 9.9% 9.6% (c) - 0.2% (c)
K&G $ 78.0 $ 79.3 - 1.6% - 0.2% - 1.1%
Moores Canada $ 61.5 $ 56.0 9.9% 5.6% (b) 1.9% (b)
Corporate
Apparel Segment $ 55.5 $ 3.7 1,396.5%
Year-To-Date Sales Summary – Fiscal 2010
Total Sales Comparable Store Sales
U.S. dollars, in millions Change % Change %
Current Year Prior Year Current Year Prior Year
Total Company $ 1,560.6 (a) $ 1,452.4 (a) 7.5%
Total Retail
Segment $ 1,496.7 $ 1,441.9 3.8%
MW $ 1,034.8 $ 987.5 4.8% 4.8% (c) - 3.0% (c)
K&G $ 263.9 $ 277.4 - 4.9% - 3.5% - 0.8%
Moores Canada $ 180.4 $ 160.3 12.6% 2.1% (b) - 1.9% (b)
Corporate
Apparel Segment $ 63.8 $ 10.4 512.9%
(a) Due to rounded numbers total Company may not sum.
(b) Comparable store sales change is based on the Canadian dollar.
(c) Does not include ecommerce sales.
GAAP diluted earnings per share were $0.47 for the third quarter ended October 30, 2010. Adjusted diluted earnings per share were $0.57 after excluding $1.4 million ($1.1 million after tax or $0.02 per diluted share outstanding) in acquisition transaction and integration expenses, $2.0 million ($1.5 million after tax or $0.03 per diluted share outstanding) in tuxedo distribution closure costs and $3.2 million ($2.4 million after tax or $0.05 per diluted share outstanding) for non-cash asset impairment charges. This compares to adjusted diluted earnings per share guidance given September 8, 2010 of $0.40 to $0.47.
During the third quarter of 2010, the Company changed the inventory valuation method used by its K&G brand from lower of cost or market, as determined by the retail inventory method, to lower of cost or market using the weighted average cost method. This change was done to bring all retail operations of the Company to a common valuation methodology platform. All financial statements in this press release have been revised to reflect this change and are therefore comparable. Prior year third quarter revised GAAP diluted earnings per share were $0.36, a decrease of $0.01 per share.
THIRD Quarter REVIEW
Dimensions and Alexandra Acquisitions
On August 6, 2010, the Company acquired Dimensions and certain assets of Alexandra, two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for total cash consideration of approximately pounds Sterling 61 million (US$97.8 million). The combined businesses are organized under a UK-based holding company of which Men’s Wearhouse controls 86% and certain existing shareholders of Dimensions control 14%.
The financial results of the combined UK operations, excluding transaction and integration costs, were $0.03 accretive to the Company’s third quarter diluted earnings per share. Transaction and integration costs were $1.4 million ($1.1 million after tax or $0.02 per diluted share outstanding). Total sales of the combined operations were US$51 million.
Tuxedo Distribution Closures
In late August 2010, a decision was made by the Company to cease tuxedo distribution operations in November 2010 at four of the eleven facilities that we currently use for tuxedo distribution. The operations at these four facilities will be assumed by other tuxedo distribution facilities in our system allowing us to more effectively manage our tuxedo rental operations. In the third quarter, a charge of $2.0 million ($1.5 million after tax or $0.03 per diluted share outstanding) was incurred consisting primarily of severance payments and fixed asset write-offs.
The expected ongoing annual benefit, beginning in fiscal 2011, as a result of these closures will be a reduction in operating costs of approximately $4.0 million.
Review of Results
Total Company sales increased 19.1% for the quarter.
-- Retail segment net sales increased $36.3 million, or 7.9%, to $494.6
million for the quarter ended October 30, 2010 as compared to the same
prior year quarter. The increase was due mainly to a $20.1 million
increase in clothing product revenues and a $13.6 million increase in
tuxedo rental service revenue:
o The increase of 9.6% in comparable store sales at Men's
Wearhouse/Men's Wearhouse and Tux and 5.6% at Moores was due mainly to
continued unit growth in our tuxedo rental services business,
increased units per transaction and higher store traffic levels, which
more than offset a decrease in the average transaction value. At K&G,
the decrease of 0.2% in comparable store sales was due mainly to a
decrease in the average transaction value.
o Tuxedo rental service revenues as a percentage of total retail segment
net sales increased from 21.3% in the third quarter of 2009 to 22.5%
in the third quarter of 2010. In absolute dollars, tuxedo rental
service revenues increased $13.6 million or 13.9% due mainly to a
14.6% increase in paid units rented, offset partially by lower average
rental rates in the U.S.
-- Corporate apparel segment net sales increased $51.8 million to $55.5
million for the quarter ended October 30, 2010 as compared to the same
prior year quarter. The increase was due to our acquisitions of
Dimensions and Alexandra in the UK on August 6, 2010.
Gross margin, as a percentage of total net sales, decreased 101 basis points from 43.7% to 42.7% due primarily to more aggressive promotional offerings in 2010 compared to 2009 and the increased mix of the lower margin corporate apparel business.
-- In the retail segment, total gross margin as a percentage of related
sales increased from 43.9% in the third quarter of 2009 to 44.5% in the
third quarter of 2010 primarily due to improved tuxedo rental margins
and a decrease in occupancy costs. As a percentage of retail segment
sales, occupancy costs decreased by 185 basis points from 15.8% to 13.9%
primarily due to fewer open stores in 2010 and reduced depreciation
following impairment charges taken in the fourth quarter of 2009. These
improvements were partially offset by a decrease in clothing margin due
primarily to more aggressive promotional offerings in the current year.
As a percentage of related sales, clothing margin decreased 265 basis
points from 56.0% to 53.4%.
-- In the corporate apparel segment, total gross margin as a percentage of
related sales increased from 22.6% in the third quarter of 2009 to 26.5%
in the third quarter of 2010 due to our acquisitions of Dimensions and
Alexandra in the UK on August 6, 2010.
Selling, general and administrative expenses were $200.6 million in the current year and increased 16.2% from the prior year’s SG&A of $172.6 million. During the current quarter, the Company incurred $1.4 million in acquisition transaction and integration costs, $2.0 million in tuxedo distribution closure costs and $3.2 million for non-cash asset impairment charges related to 40 Men’s Wearhouse and Tux stores, some of which were partially impaired in the prior year. Excluding these costs, third quarter SG&A expenses were $194.0 million or an increase of 12.4% to the prior year quarter. SG&A related to the acquired UK operations resulted in a 6.6% increase. The remaining 5.8% increase is primarily due to increased marketing costs and increased employee benefit costs. As a percentage of total net sales, adjusted SG&A decreased 210 basis points from 37.4% to 35.3%.
Operating income was $34.4 million. Excluding $1.4 million in acquisition and integration costs, $2.0 million in tuxedo distribution closure costs and $3.2 million in non-cash asset impairment charges, operating income was $41.0 million or 7.5% of total net sales compared to operating income of $29.4 million or 6.4% of total net sales for the same period last year.
The effective income tax rate was 25.7% for the third quarter of 2010 and 34.5% for the third quarter of 2009. The effective tax rate in 2010 was lower than the statutory U.S. federal rate of 35% due to the favorable tax rate effects from release of valuation allowances related to foreign tax credit carryforwards and recognition of previously unrecognized tax benefits and related accrued interest from expirations of statutes of limitations, offset partially by the effect of state income taxes.
Cash and cash equivalent balances as of the end of the third quarter of 2010 were $197.8 million.
Total inventories of $509.4 million increased 6.9% from the prior year third quarter of $476.8 million. Excluding the inventory related to the acquisitions of Dimensions and Alexandra in the UK, inventories decreased 6.6%.
Current maturities of long-term debt were $45.6 million as of the end of the third quarter of 2010.
FOURTH QUARTER 2010 GUIDANCE
For the fourth quarter of the fiscal year, GAAP loss per share is expected to be in a range of $0.22 to $0.25. Adjusted loss per share is expected to be in a range of $0.19 to $0.22. Adjusted loss per share excludes acquisition transaction costs and integration expenses of $1.7 million ($1.1 million after tax or $0.02 per diluted share outstanding) and $1.0 million ($0.7 million after tax or $0.01 per diluted share outstanding) in tuxedo distribution closure costs consisting primarily of severance payments, fixed asset write-offs, facility remediation and labor costs associated with processing the inventory from the closed facilities.
SG&A costs in this year’s fourth quarter will also include notable increases compared to the prior year’s fourth quarter for both employee bonuses related to higher than planned full year financial performance and increased medical benefit costs due to a higher level of submitted claims. We estimate these higher costs will increase this year’s fourth quarter loss in a magnitude of the equivalent of 10 cents per share.
The financial results of the combined UK acquisitions, excluding acquisition transaction costs and integration expenses, are expected to be neutral to the Company’s fourth quarter diluted earnings per share.
Historical Actual Guidance
4Q FY 2009 4Q FY 2010
(revised)
+ high teen's to low twenties
Total Sales -4.0% digit range (1)
Comparable Store Sales (2)
MW -7.1% + mid to high single digit
K&G -5.0% + low single digits
Moores -6.6% + low single digits
+ high teen's to low twenties
Gross Profit Growth Rate -7.4% digit range (3)
S G & A Expense Growth Rate -4.3% (4) + high teen's digits (5)
Effective Tax Rate 45.55% 41.00% (6)
Shares Outstanding (millions) 52.297 52.998
GAAP Loss Per Share $0.36 $0.22 to $0.25
Adjusted Loss Per Share $0.11 $0.19 to $0.22 (5)
Foreign Exchange Conversion
(avg.)
US Dollar to GBP n/a 1.590
US Dollar to Canadian Dollar 0.95 0.98
1. Includes US$51 million to US$53 million of sales from acquired operations
of Dimensions and Alexandra in the 4Q of FY 2010.
2. Includes an assumed increase in tuxedo rental revenues of + low double
digits in the 4Q of FY 2010 compared to the prior year quarter decrease of
0.6%.
3. Occupancy costs are expected to decrease in the low single digit range in
the 4Q of FY 2010 from the prior year quarter.
4. Excludes $8.8 million pretax gain from an eminent domain sale of a
distribution center in 4Q 2008. Also excludes $1.8 million and $19.5
million in impairment charges in the 4Q 2008 and 4Q 2009, respectively.
5. Excludes acquisition transaction and integration costs and costs associated
with the closure of four tuxedo distribution centers in the 4Q of FY 2010.
Also excludes $19.5 million in impairment charges in the 4Q of FY 2009. In
the 4Q of FY 2010, SG&A expense is expected to increase a) in the high
single digit range related to the Company's acquired UK operations, b) in
the mid single digit range related to employee medical costs from a higher
level of claims and employee bonus costs due to exceeding full year
financial targets and c) in the high single digit range primarily due to
increased marketing and payroll related costs.
6. The higher effective tax rate in 4Q of FY 2009 is primarily due to a true
up the Company's annual tax provision as a result of the non-cash
impairment charge taken in 4Q of FY 2009. The estimated impact on diluted
earnings per share from this true up in 4Q of FY 2009 was a benefit of
$0.04 per share in the prior year.
UPDATED CONFERENCE CALL AND WEBCAST INFORMATION
At 5:00 p.m. Eastern time on Tuesday, December 7, 2010, Company management will host a conference call and real time web cast to review the fiscal third quarter and its outlook for the fourth quarter of fiscal 2010.
To access the conference call, dial 480-629-9725. To access the live webcast presentation, visit the Investor Relations section of the Company’s website at www.menswearhouse.com. A telephonic replay will be available through December 14, 2010 by calling 303-590-3030 and entering the access code of 4386437#, or a webcast archive will be available free on the website for approximately 90 days.
STORE INFORMATION
October 30, 2010 October 31, 2009 January 30, 2010
Number of Sq. Ft. Number of Sq. Ft. Number of Sq. Ft.
Stores (000's) Stores (000's) stores (000's)
Men's Wearhouse 586 3,319.3 581 3,279.8 581 3,284.4
Men's Wearhouse and Tux 408 561.0 469 639.9 454 623.4
Moores, Clothing for Men 117 737.1 117 734.6 117 734.6
K&G (a) 102 2,391.8 107 2,475.6 107 2,475.6
Total 1,213 7,009.2 1,274 7,129.9 1,259 7,118.0
(a) 91, 94 and 94 stores, respectively, offering women's apparel.
Founded in 1973, Men’s Wearhouse is one of North America‘s largest specialty retailers of men’s apparel with 1,213 stores. The Men’s Wearhouse, Moores and K&G stores carry a full selection of designer, brand name and private label suits, sport coats, furnishings and accessories and Men’s Wearhouse and Tux stores carry a limited selection. Tuxedo rentals are available in the Men’s Wearhouse, Moores and Men’s Wearhouse and Tux stores. Additionally, Men’s Wearhouse operates a global corporate apparel and workwear group consisting of TwinHill in the United States and Dimensions and Alexandra in the United Kingdom.
This press release contains forward-looking information. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be significantly impacted by various factors, including sensitivity to economic conditions and consumer confidence, possibility of limited ability to expand Men’s Wearhouse stores, possibility that certain of our expansion strategies may present greater risks, changes in foreign currency rates and other factors described in the Company’s annual report on Form 10-K for the fiscal year ended January 30, 2010, subsequent Forms 10-Q.
For additional information on Men’s Wearhouse, please visit the Company’s website at www.menswearhouse.com. The website for Dimensions is www.dimensions.co.uk and the website for Alexandra is www.alexandra.co.uk.
CONTACT: Neill Davis, EVP & CFO, Men's Wearhouse (281) 776-7000
Ken Dennard, DRG&L (713) 529-6600
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
FOR THE THREE MONTHS ENDED
October 30, 2010 AND October 31, 2009
(In thousands, except per share data)
Three Months Ended Variance
% of % of Basis
2010 Sales 2009 Sales Dollar % Points
(as adjusted) (a)
Net sales:
Clothing product $405,784 73.77% $333,882 72.27% $71,902 21.54% 1.50
Tuxedo rental
services 111,297 20.23% 97,702 21.15% 13,595 13.91% (0.91)
Alteration and other
services 33,022 6.00% 30,431 6.59% 2,591 8.51% (0.58)
Total net sales 550,103 100.00% 462,015 100.00% 88,088 19.07% 0.00
Total cost of sales 315,104 57.28% 259,974 56.27% 55,130 21.21% 1.01
Gross margin (b) 234,999 42.72% 202,041 43.73% 32,958 16.31% (1.01)
Selling, general and
administrative
expenses 200,588 36.46% 172,595 37.36% 27,993 16.22% (0.89)
Operating income 34,411 6.26% 29,446 6.37% 4,965 16.86% (0.12)
Net interest (274) (0.05%) (19) 0.00% (255) 1342.11% (0.05)
Earnings before
income taxes 34,137 6.21% 29,427 6.37% 4,710 16.01% (0.16)
Provision for income
taxes 8,789 1.60% 10,141 2.19% (1,352) (13.33%) (0.60)
Net earnings
including
noncontrolling
interest 25,348 4.61% 19,286 4.17% 6,062 31.43% 0.43
Less: Net earnings
attributable to
noncontrolling
interest 89 0.02% - 0.00% 89 100.00% 0.02
Net earnings
attributable to
common shareholders $ 25,259 4.59% $ 19,286 4.17% $ 5,973 30.97% 0.42
Net earnings per
diluted common share
attributable to
common shareholders
(c) $ 0.47 $ 0.36
Weighted average
diluted common
shares outstanding: 52,895 52,442
(a) Results have been adjusted for the change in inventory valuation method
used by our K&G brand from the retail inventory method to the weighted average
cost method during the third quarter of fiscal 2010. The cumulative effect of
this change in accounting principle was recorded retrospectively as of February
1, 2009.
(b) Gross margin as a percentage of related sales:
Three Months Ended Variance
2010 % of 2009 % of Basis
Related Related
Sales Sales Dollar % Points
Clothing
margin $ 187,019 53.40% $ 185,057 56.05% $ 1,962 1.06% (2.65)
Tuxedo
margin 93,813 84.29% 81,205 83.11% 12,608 15.53% 1.18
Alteration
and other
services
margin 8,424 25.51% 7,335 24.10% 1,089 14.85% 1.41
Occupancy
costs (68,978) (13.95%) (72,394) (15.80%) 3,416 4.72% 1.85
Retail
segment
margin 220,278 44.54% 201,203 43.90% 19,075 9.48% 0.64
Corporate
apparel
segment
margin 14,721 26.51% 838 22.58% 13,883 1,656.68% 3.93
Gross margin $ 234,999 42.72% $ 202,041 43.73% $ 32,958 16.31% (1.01)
(c) Calculated based on net earnings less net earnings allocated to
participating securities.
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
FOR THE NINE MONTHS ENDED
October 30, 2010 AND October 31, 2009
(In thousands, except per share data)
Nine Months Ended Variance
% of % of Basis
2010 Sales 2009 Sales Dollar % Points
(as adjusted) (a)
Net sales:
Clothing product $1,136,383 72.82% $1,057,246 72.80% $79,137 7.49% 0.02
Tuxedo rental
services 325,913 20.88% 298,688 20.57% 27,225 9.11% 0.32
Alteration and
other services 98,262 6.30% 96,423 6.64% 1,839 1.91% (0.34)
Total net sales 1,560,558 100.00% 1,452,357 100.00% 108,201 7.45% 0.00
Total cost of
sales 864,284 55.38% 822,989 56.67% 41,295 5.02% (1.28)
Gross margin (b) 696,274 44.62% 629,368 43.33% 66,906 10.63% 1.28
Selling, general
and
administrative
expenses 571,406 36.62% 525,704 36.20% 45,702 8.69% 0.42
Operating income 124,868 8.00% 103,664 7.14% 21,204 20.45% 0.86
Net interest (774) (0.05%) (179) (0.01%) (595) 332.40% (0.04)
Earnings before
income taxes 124,094 7.95% 103,485 7.13% 20,609 19.91% 0.83
Provision for
income taxes 42,222 2.71% 38,517 2.65% 3,705 9.62% 0.05
Net earnings
including
noncontrolling
interest 81,872 5.25% 64,968 4.47% 16,904 26.02% 0.77
Less: Net
earnings
attributable to
noncontrolling
interest 89 0.01% - 0.00% 89 100.00% 0.01
Net earnings
attributable to
common
shareholders $ 81,783 5.24% $ 64,968 4.47% $ 16,815 25.88% 0.77
Net earnings per
diluted common
share
attributable to
common
shareholders (c) $ 1.54 $ 1.23
Weighted average
diluted common
shares
outstanding: 52,776 52,218
(a) Results have been adjusted for the change in inventory valuation method
used by our K&G brand from the retail inventory method to the weighted average
cost method during the third quarter of fiscal 2010. The cumulative effect of
this change in accounting principle was recorded retrospectively as of February
1, 2009.
(b) Gross margin as a percentage of related sales:
Nine Months Ended Variance
2010 % of 2009 % of Basis
Related Related
Sales Sales Dollar % Points
Clothing
margin $ 587,626 54.79% $ 570,887 54.53% $ 16,739 2.93% 0.25
Tuxedo
margin 275,067 84.40% 248,684 83.26% 26,383 10.61% 1.14
Alteration
and other
services
margin 25,154 25.60% 25,547 26.49% (393) (1.54%) (0.90)
Occupancy
costs (208,472) (13.93%) (218,028) (15.12%) 9,556 4.38% 1.19
Retail
segment
margin 679,375 45.39% $ 627,090 43.49% 52,285 8.34% 1.90
Corporate
apparel
segment
margin 16,899 26.47% 2,278 21.87% 14,621 641.83% 4.60
Gross margin $ 696,274 44.62% $ 629,368 43.33% $ 66,906 10.63% 1.28
(c) Calculated based on net earnings less net earnings allocated to
participating securities.
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Inthousands)
(Unaudited)
October 30, October 31,
2010 2009
(as adjusted) (a)
ASSETS
Current assets:
Cash and cash equivalents $ 197,843 $ 198,538
Accounts receivable, net 65,069 17,304
Inventories 509,422 476,760
Other current assets 62,830 47,744
Total current assets 835,164 740,346
Property and equipment, net 333,007 370,191
Tuxedo rental product, net 86,121 100,653
Goodwill 90,580 59,111
Intangible assets, net 38,678 5,279
Other assets, net 21,831 7,376
Total assets $ 1,405,381 $ 1,282,956
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 145,138 $ 121,374
Accrued expenses and other current liabilities 130,550 106,082
Income taxes payable 12,294 24,743
Current maturities of long-term debt 45,584 -
Total current liabilities 333,566 252,199
Long-term debt - 42,985
Deferred taxes and other liabilities 72,664 63,087
Total liabilities 406,230 358,271
Equity:
Preferred stock - -
Common stock 709 704
Capital in excess of par 336,942 323,864
Retained earnings 1,023,467 979,540
Accumulated other comprehensive income 37,651 33,203
Treasury stock, at cost (412,761) (412,626)
Total equity attributable to common
shareholders 986,008 924,685
Noncontrolling interest 13,143 -
Total equity 999,151 924,685
Total liabilities and equity $ 1,405,381 $ 1,282,956
(a) Results have been adjusted for the change in inventory valuation method
used by our K&G brand from the retail inventory method to the weighted average
cost method during the third quarter of fiscal 2010. The cumulative effect of
this change in accounting principle was recorded retrospectively as of
February 1, 2009.
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS ENDED
October 30, 2010 AND October 31, 2009
(In thousands)
Nine Months Ended
2010 2009
(as adjusted) (a)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings including noncontrolling interest $ 81,872 $ 64,968
Non-cash adjustments to net earnings:
Depreciation and amortization 57,210 64,879
Tuxedo rental product amortization 31,732 33,149
Other 11,284 3,292
Changes in assets and liabilities (16,216) (3,888)
Net cash provided by operating activities 165,882 162,400
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (43,835) (44,466)
Acquisition of businesses, net of cash (97,786) -
Proceeds from sales of available-for-sale
investments - 19,410
Proceeds from sales of property and equipment 76 -
Net cash used in investing activities (141,545) (25,056)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,503 3,032
Payments on revolving credit facility - (25,000)
Cash dividends paid (14,318) (11,029)
Tax payments related to vested deferred stock
units (2,748) (1,634)
Excess tax benefits from share-based plans 952 208
Purchase of treasury stock (144) (90)
Net cash used in financing activities (13,755) (34,513)
Effect of exchange rate changes 1,243 8,295
INCREASE IN CASH AND CASH EQUIVALENTS 11,825 111,126
Balance at beginning of period 186,018 87,412
Balance at end of period $ 197,843 $ 198,538
(a) Results have been adjusted for the change in inventory valuation method
used by our K&G brand from the retail inventory method to the weighted
average cost method during the third quarter of fiscal 2010. The cumulative
effect of this change in accounting principle was recorded retrospectively
as of February 1, 2009.
SOURCE Men’s Wearhouse
Released December 7, 2010