Tailored Brands Inc. (TLRD, Financial) is the largest specialty retailer of men's suits and the largest provider of rental product in the U.S. and Canada with over 1,800 stores including tuxedo shops within Macy’s. The company’s brands include Men’s Wearhouse, Jos. A. Bank, Joseph Abboud, Moores Clothing for Men and K&G Fashion Superstores. Tailored Brands also operates a global corporate apparel and work wear group consisting of Twin Hill in the United States and Dimensions, Alexandra and Yaffy in the U.K.
The company posted mixed quarter results with net sales decline. Operating income and EPS met expectations of the company.
First quarter results
Net sales during the first quarter at Men's Wearhouse decreased by 3.2%. Comparable sales decreased by 3.5% from the prior year quarter.
Comparable rental revenue decreased by 4.8% in the first quarter of 2016.
Jos. A. Bank comparable sales for the first quarter decreased by 16.0%. K&G comparable sales increased by 0.2%. Net sales for Moores, the Canadian retail brand, decreased by 9.0%.
The Corporate Apparel segment had a sales increase of 2.9%.
Total net sales decreased by 6.4%, or $56.3 million, and was $828.8 million. Retail segment net sales decreased by 7.0%, or $58 million. Corporate apparel sales increased by 2.9% or $1.8 million.
GAAP results
Total gross margin was $351.8 million, which marked a decrease of $29.7 million, or 7.8%from the prior year quarter. As a percent of sales, total gross margin decreased by 66 basis points and was 42.5% of net sales.
Advertising expense decreased by $2.7 million and was $47.9 million but increased slightly by 6 basis points as a percent of sales.
Selling, general and administrative expenses decreased by $2.7 million and were $272.9 million.
Operating income for the quarter was $31 million, which was $55.3 million during the prior year quarter.
Net interest expense for the first quarter was $26.5 million for both 2016 and 2015.
The effective tax rate for the first quarter was 63.7%, which was 35.8% during the prior year quarter.
Net earnings for the quarter were $1.6 million, which was $10.4 million during the prior year quarter.
Diluted EPS was 3 cents, down from 21 cents in the prior year quarter.
Total debt at the end of the first quarter 2016 was approximately $1.66 billion.
Dividend
The company declared a quarterly cash dividend of 18 cents per share on the company's common stock, payable on Sept. 23 to shareholders of record at the close of business on Sept. 13.
Expectations for 2016
The company expects 2016 annual adjusted EPS to be in the range of $1.55 to $1.85.
Steps taken:
- Making progress on transition plan for Tailored Brands.
- Execution of profit improvement program.
- Organizational realignment.
- Store base rationalization.
- Cost reductions.
Business strategy:
- Reengineering the Jos. A. Bank brand to a long-term, sustainable profit model.
- Enhancing its omni-channel capabilities.
- Rationalizing corporate expense structure.
- Rationalizing store fleet.
- Expanding its portfolio of exclusive brands.
- Broadening the reach of its rental product business.
- Greater focus on brand management.
On a concluding note
The company posted mixed first quarter results but it is constantly making efforts to improve. The company is committed to stabilizing, resizing, and rebuilding the business from which it can profitably grow on a go-forward basis. It expects to be improving in the second quarter. Investors may consider this company, since the company is taking initiatives to improve he results and I think the company is going to create shareholder returns in the near future.
Disclosure: I do not hold any position in the company.
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