Jos. A. Bank (NASDAQ:JOSB) and The Men’s Wearhouse (NYSE:MW) are two companies that have entered into a battle of one-upmanship through various unilateral proposals of buyout bids thrown at each other.
The apparel retail industry is challenged with various headwinds such as macroeconomic difficulties, bad weather conditions and volatile currency headwinds. Most of these companies were expecting lower results as the men’s apparel market segment was projected to decline by 3.62% during the holiday season in the last quarter. In spite of these projections and other market dynamics, let’s look for the companies that can be a better fix for your portfolio.
Jos. A. Bank’s Performance
To start with, Jos. A. Bank looks like a better investment avenue as it progressed well in the third quarter. However, rival Men’s Warehouse puts forward a proposal to buy the bargain-suit and menswear retailer for $55 per share. As a result, the stock advanced to $56.84 per share from $50.60 per share and thereafter held ground after the third-quarter earnings report.
Jos. A. Bank performed well and its results exceeded Wall Street’s expectations on both EPS and revenue. The growth in sales was primarily driven by direct marketing sales and Omni-Channel sales strategies.
Jos also made concrete and strategic investments in search engine optimization that fueled the growth of Internet sales, consequently helping the company to gain around 8% in active customers for both stores and online. The company has more than 4 million active customers and the count is continuously increasing due to these strategic initiatives.
Jos. A. Bank sees huge potential in the international market. It ships to 90 countries worldwide as compared to 70 in the same quarter a year ago. Besides, the tuxedo rental program is also growing at a good pace since it started in 2010.
Fight with Men’s Wearhouse
The battle between the two started as Jos. A. Bank abandoned the takeover bid from Men’s Wearhouse and later, Men’s Wearhouse strategically initiated a bid to acquire the former. As a result, Men’s Wearhouse stock surged and is trading at 52-week highs.
Men’s Wearhouse reported its 15th consecutive quarter of positive comparable-store sales growth. Its adjusted diluted earnings were in line with estimates as well.
In the future, the company significantly sees huge opportunity for 100 full-line Men’s Wearhouse stores and 100 outlet stores. In addition, the company is also planning to open 50 stores by the end of 2016 and will monitor its results at various stages to ensure better yields from its strategies.
The ideal investor, who wishes to buy a cheap stock, can definitely include both Men’s Wearhouse and Jos. A. Bank, as both of these stocks trade at 52-week highs, but Men’s Wearhouse is cheaper at a P/E of 27 while Jos. A. Bank trades at almost 29 times earnings. In addition, Men’s Wearhouse also pays a dividend with a yield of 1.50% while Jos. A. Bank doesn’t. Hence, investors looking for value in the men’s apparel space will be better off looking at Men’s Wearhouse as it is relatively cheap and pays a dividend.