Men’s Wearhouse (MW, Financial) is a specialty apparel retailer operating in the U.S., Puerto Rico, and Canada and operates through two segments -- Retail and Corporate Apparel. The retailer posted better-than-expected fourth-quarter and fiscal 2014 results last month, and the stock has gained over 20% since then.
Let’s recap the results and see what the company holds for long-term investors.
Fourth-quarter numbers
During the fiscal 2014, comparable-store sales, or comps, grew 3.9% year-over-year at Men’s Wearhouse, 8.6% year-over-year at Moores, and 3.7% year-over-year at K&G, while Jos. A Bank registered 2.9% year-over-year decline. Total sales for the year came in at $3.3 billion, of which $684 million came from the partial year results from Jos. A. Bank acquisition in June last year.
During the fourth-quarter fiscal 2015, comps grew 6.8% each at Men’s Wearhouse and KG, and 8.6% year-over-year at Moores. Jos. A. Bank registered 6.6% year-over-year decline, which was better than expected. As a result of comps growth and Jos. A. Bank acquisition, consolidated sales grew 65.6% year-over-year to $928.4 million, easily beating consensus estimate of $916 million.
Adjusted consolidated gross margin for the quarter increased by $154.5 million to $363.3 million, representing 74.0% growth versus the year-ago quarter. Also, the total adjusted gross margin rate increased 188 basis points.
Fourth-quarter loss came in at $0.03 per share, versus a loss of $0.38 per share in the year-ago quarter. Consensus estimate was pegged at a loss of $0.07 per share.
Men’s Wearhouse exited the fourth-quarter with cash and cash equivalents of $62.3 million, long-term debt of $1,676.2 million, and shareholders’ equity of $969.8 million.
Adding stores for growth
Men’s Wearhouse ended fiscal 2014 with 1,758 stores versus 1,124 stores last year. Going forward, for Men’s Wearhouse, the retailer plans to open 20 stores to 30 stores per year for the next two years to get to 750 stores. In addition, the company will open another half a dozen stores or so for Jos. A. Bank.
Looking ahead
Men’s Wearhouse acquired Jos. A. Bank in June last year. The retailer is upbeat about the future as the acquisition will start being accretive to the financial performance of the company. For fiscal 2015, earnings are expected to be in the range of $2.70 to $2.90. This represents a growth of 13.9% to 22.4% over the prior year historical baseline earnings per share of $2.37. In fiscal 2017, including K&G acquisition, earnings are now expected to be in the band of $5.75 to $6.25.
Final take
2015 is a transition year for Men’s Wearhouse, more with regard to Jos. A. Bank. In the long run acquisitions of last year will start turning out to be accretive on full year basis. The company has been firing on all cylinders in its own right and with acquisition of its former competitor -- Jos. A. Bank – it now has another upmarket brand under its belt to push its growth forward.
The retailer has a P/S ratio of 0.87 and a forward P/E of 14.31, and next five years compound annual growth rate is slated to be 8.30%. Hence, it is a good stock to buy.
