Every Girl Crazy 'Bout a Sharp Dressed Man
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Men's Wearhouse (NYSE: MW), the "You're Going to love the way you look," company and Jos. A Bank Clothiers (NASDAQ: JOSB) are the two most direct plays on mens fashion. Are these really going to make your portfolio look sharp?
Clean shirt, new shoes
Jos A. Bank, the manufacturer and retailer of mens apparel has 603 stores in 44 states. It was founded in 1905. The stock is down 14.81% from its high of $50.84 a year ago. The short interest at 36.30% is betting it could go still lower.
Jos A. Bank reported Q4 and full year 2012 results on April 3. Although sales cracked the billion dollar mark for the first time, this didn't translate to the bottom line with full year diluted earnings per share decreasing to $2.84 from $3.49 in 2011. Margins also shrank by 380 basis points.
On their conference call CEO R. Neal Black admitted profits weren't up to their standards. He cited Hurricane Sandy for some of the holiday season shortfall as well as uneasiness caused by the sequestration affecting customers buying business wear. More markdowns and aggressive promotion didn't result in more sales, he noted.
Black added the good news was that internet sales were up 22.7% and ,"...we continue to experience a shift in the age of our average customer who is getting slightly younger over time." (source transcript).
Going forward, their first priority is increasing internet sales. Second is expanding tux rentals, just in the nick of time with prom and wedding season ramping up. Other major initiatives mentioned on the call are opening more factory stores with seven for 2013, expanding their Big and Tall offerings, and opening new full price stores at the same rate as 2012, approximately another 36.
For 2013 Black said emphasis will be away from casual to Business Casual and to newer, tailored Fit and Slim Fit offerings for business. Suits are a major and infrequent purchase for most men and Black commented, "Our opportunity is to turn over their wardrobes and replace what's hanging in their closets with updated fits."
Jos A. Bank trades at a 14.79 P/E with a 1.12 PEG. Analyst expect a 12.00% five year EPS growth rate.
Silk suit, black tie
In sharp contrast, when Men's Wearhouse reported in March, the stock surged 15% afterward although it reported a loss of $3.4 million for Q4 2012 and a loss of $0.07 per share, two cents worse than previously guided. Despite disappointing results, the Street was pleased to learn the company has engaged Jefferies to sell its K & G stores.This has been the biggest millstone around the company's neck with comp sales down over 5% and accounting for 16% of Q4 sales.
Other good news included announcing an addition of $155 million to the $45 million in place in the share repurchase program. The company also amended their credit facility with the addition of $300 million. The company also guided higher for 2013 expecting earning per share of $2.70-$2.80 for an increase of 5-9%.
Men's Wearhouse has 1,143 stores in the US and Canada under the Men's Wearhouse, Men's Wearhouse and Tux, K&G, and Moores Clothing. It also sells ladies career wear and children's clothing. It also has a corporate uniform segment in the US and UK that's doing well with a 21.5% increase in sales for Q4.
Men's Wearhouse has a 2.20% yield at a 28.00% payout ratio and a 13.25 P/E. The stock is trading down 9.51% over the last year but performing better than Jos A. Bank. Although the short interest has grown over the last month it's decidedly smaller than its rival at 5.60%.
CEO Doug Ewart echoed the concerns at Jos A. Bank saying, "We continue to closely monitor our customers' reactions to continued macro-economic uncertainties that dominate the headlines and, inevitably, their wallets and spending patterns."
Men's Wearhouse has been actively moving onto mobile with apps making it possible to plan a wedding, order online tailoring, and their Build A Tux app for formal occasions.
Socially responsible investors should be cheered to know that Men's Wearhouse was number 50 on Forbes annual list of 100 Best Companies to Work For and a corporate governance risk rating of 3. Jos A. Bank's corporate risk rating is better at 2.
Going forward it's expanding higher margin tuxedo rentals and its Big and Tall offerings. Big and Tall is by no means small potatoes to either company but a very important market underserved by department stores. According to the Men's Wearhouse 2011 Annual Report it accounted for fully half of online sales. Have you walked through the halls of a high school lately? The kids are ginormous.
Speaking of department stores, Macy's (NYSE: M) is listed as a competitor and a formidable competitor it is. It has 840 stores, including Bloomingdale's in 45 states and did $27.7 billion in sales in 2012. The main advantage these specialty retailers have over Macy's continues to be customer service, tuxedo availability, and in the case of Men's Wearhouse, custom fitting and tailoring. Price points on an individual suit vary with suits available on sale at Macy's for $175 at Macy's, $225 at Men's Wearhouse, and $275 at Jos A. Bank.
Macy's is similarly valued to Men's Wearhouse with a slightly higher P/E of 13.56 and lower yield of 1.80% at a payout ratio of 25.00%. Macy's does have more women's, children's and home goods offerings however. It's also outperforming these two, up 8.52% and with a smaller short interest of 2.50% and a PEG of .84. Analysts expect the highest growth of these at 13.37% five year EPS growth for Macy's.
Is the trend your friend?
Both Jos A. Bank and Men's Wearhouse are closely correlated to US business and hiring environments if their CEO comments are any indication.
Jos A. Bank has better growth prospects than Men's Wearhouse but only an improving economy helps these two mens clothiers. And Jos A. Bank has that high short interest. Macy's should continue to perform well no matter what as it has since the fiscal crisis. Of these three stocks Men's Wearhouse appears to be the bargain with the highest yield and lowest P/E especially once it doffs K & G stores.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!