The Men's Wearhouse Inc. (MW, Financial) filed Quarterly Report for the period ended 2009-10-31.
Men's Wearhouse, Inc. is one of the largest specialty retailers of menswear in the United States and Canada. Under the Men's Wearhouse brand, the company targets middle and upper middle income men by offering quality merchandise at everyday low prices. In addition to value, Men's Wearhouse, Inc. provides a superior level of customer service. The Men's Wearhouse Inc. has a market cap of $1.14 billion; its shares were traded at around $21.84 with a P/E ratio of 20 and P/S ratio of 0.6. The dividend yield of The Men's Wearhouse Inc. stocks is 1.3%. The Men's Wearhouse Inc. had an annual average earning growth of 12.8% over the past 10 years.
Total gross margin of $202.7 million for the quarter ended October 31, 2009 was unchanged from the prior year quarter. However, as a percentage of sales, total gross margin decreased from 44.1% in the third quarter of 2008 to 43.9% in the third quarter of 2009. This decrease was due mainly to lower clothing product margins, offset partially by an improved alteration services margin. As a percentage of related sales, the clothing product gross margin decreased from 57.0% in 2008 to 55.9% in 2009 due primarily to higher markdowns from increased promotional activities at our Mens Wearhouse and Moores stores. The gross margin for alteration and other services increased from 17.7% in 2008 to 24.1% in 2009 mainly as a result of reduced alteration costs combined with increased alteration sales associated with the increased unit sales from our promotional events. The tuxedo rental services gross margin decreased slightly from 83.2% in 2008 to 83.1% in 2009. Occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation, decreased from 15.9% of total sales in the third quarter of 2008 to 15.7% in the third quarter of 2009. On an absolute dollar basis, occupancy costs decreased by 1.2% from the third quarter of 2008 to the third quarter of 2009 due mainly to lower rent expense from our decreased store count.
Interest expense decreased from $1.0 million in the third quarter of 2008 to $0.3 million in the third quarter of 2009, while interest income decreased from $0.7 million in the third quarter of 2008 to $0.3 million in the third quarter of 2009. Weighted average borrowings outstanding decreased from $80.0 million in the third quarter of 2008 to $42.8 million in the third quarter of 2009, and the weighted average interest rate on outstanding indebtedness decreased from 4.5% to 1.9%. The decrease in the weighted average borrowings was due to the voluntary repayment of a portion of our Canadian term loan in October 2008 of approximately US$31.9 million and payments on our revolving credit facility of $25.0 million during the first quarter of 2009. The weighted average interest rate for the third quarter of 2009 decreased mainly due to a decrease in the effective interest rate for the Canadian term loan from 3.3% at November 1, 2008 to 1.3% at October 31, 2009. The decrease in interest income was primarily attributable to lower interest rates for the third quarter of 2009 as compared to the third quarter of 2008.
Our comparable store sales decreased 3.0% at Mens Wearhouse and 1.9% at Moores as moderate increases in units per transaction and the average transaction value, driven by our promotional activities, were more than offset by lower store traffic levels. At K&G, comparable store sales decreased 0.8% primarily due to decreases in units per transaction and average transaction value. The continuation of negative macroeconomic conditions, including high unemployment, particularly affected sales of mens apparel as buying patterns for men are considered to be more discretionary than those in other apparel areas. The lower clothing product sales were partially offset by increased revenues from our tuxedo rental services due mainly to higher average rental rates. As a percentage of total revenues, tuxedo rental service revenues increased from 19.7% in the first nine months of 2008 to 20.6% in the first nine months of 2009. Exchange rate changes from a weaker Canadian dollar also caused total sales for the first nine months of 2009 to be $15.3 million less than the comparable prior year sales.
Total gross margin decreased $39.1 million or 5.9% from the same prior year period to $628.5 million in the first nine months of 2009. As a percentage of sales, total gross margin decreased from 44.6% in the first nine months of 2008 to 43.3% in the first nine months of 2009. This decrease is due mainly to lower clothing product margin, offset slightly by improved tuxedo rental and alteration services margins. As a percentage of related sales, the clothing product gross margin decreased from 56.3% in 2008 to 54.1% in 2009 due primarily to higher markdowns from increased promotional activities at our Mens Wearhouse and Moores stores. The tuxedo rental services gross margin increased slightly from 83.1% in 2008 to 83.3% in 2009 due mainly to the absence in 2009 of costs incurred in the first quarter of 2008 associated with realignment of our tuxedo rental product inventory. The gross margin for alteration and other services increased from 20.8% in 2008 to 26.5% in 2009 mainly as a result of reduced alteration costs combined with increased alteration sales associated with the increased unit sales from our promotional events. Occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation, increased from 14.8% of total sales in the first nine months of 2008 to 15.0% in the first nine months of 2009 but, on an absolute dollar basis, decreased by 1.2%.
Selling, general and administrative expenses decreased to $525.7 million in the first nine months of 2009 from $574.5 million in the first nine months of 2008, a decrease of $48.8 million or 8.5%. As a percentage of sales, these expenses decreased from 38.4% in the first nine months of 2008 to 36.2% in the first nine months of 2009. The components of this 2.2% net decrease in SG&A expenses as a percentage of net sales and the related absolute dollar changes were as follows:
Read the The complete ReportMW is in the portfolios of David Dreman of Dreman Value Management, Chuck Royce of ROYCE & ASSOCIATES, PRIMECAP Management, Kenneth Fisher of Fisher Asset Management, LLC, Richard Snow of Snow Capital Management, L.P., Jeremy Grantham of GMO LLC.
Men's Wearhouse, Inc. is one of the largest specialty retailers of menswear in the United States and Canada. Under the Men's Wearhouse brand, the company targets middle and upper middle income men by offering quality merchandise at everyday low prices. In addition to value, Men's Wearhouse, Inc. provides a superior level of customer service. The Men's Wearhouse Inc. has a market cap of $1.14 billion; its shares were traded at around $21.84 with a P/E ratio of 20 and P/S ratio of 0.6. The dividend yield of The Men's Wearhouse Inc. stocks is 1.3%. The Men's Wearhouse Inc. had an annual average earning growth of 12.8% over the past 10 years.
Highlight of Business Operations:
Our comparable store sales (which are calculated by excluding the net sales of a store for any month of one period if the store was not open throughout the same month of the prior period) decreased 0.2% at Mens Wearhouse as the impact of lower store traffic levels more than offset the effect of increases in units per transaction, driven by our promotional activities, and the average transaction value. At Moores, store traffic levels were also lower than in the prior year quarter, but promotion-driven increases in units per transaction and an increased average transaction value were more than offsetting and resulted in a comparable store sales increase of 1.9%. Comparable store sales decreased 1.1% at K&G as decreases in units per transaction and average transaction value more than offset an increase in store traffic. The continuation of negative macroeconomic conditions, including high unemployment, particularly affected sales of mens apparel as buying patterns for men are considered to be more discretionary than those in other apparel areas. Tuxedo rental service revenues, as a percentage of total revenues, increased slightly from 21.0% in the third quarter of 2008 to 21.1% in the third quarter of 2009. Alteration services revenues also increased due mainly to the increases in units per transaction at Mens Wearhouse and Moores.Total gross margin of $202.7 million for the quarter ended October 31, 2009 was unchanged from the prior year quarter. However, as a percentage of sales, total gross margin decreased from 44.1% in the third quarter of 2008 to 43.9% in the third quarter of 2009. This decrease was due mainly to lower clothing product margins, offset partially by an improved alteration services margin. As a percentage of related sales, the clothing product gross margin decreased from 57.0% in 2008 to 55.9% in 2009 due primarily to higher markdowns from increased promotional activities at our Mens Wearhouse and Moores stores. The gross margin for alteration and other services increased from 17.7% in 2008 to 24.1% in 2009 mainly as a result of reduced alteration costs combined with increased alteration sales associated with the increased unit sales from our promotional events. The tuxedo rental services gross margin decreased slightly from 83.2% in 2008 to 83.1% in 2009. Occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation, decreased from 15.9% of total sales in the third quarter of 2008 to 15.7% in the third quarter of 2009. On an absolute dollar basis, occupancy costs decreased by 1.2% from the third quarter of 2008 to the third quarter of 2009 due mainly to lower rent expense from our decreased store count.
Interest expense decreased from $1.0 million in the third quarter of 2008 to $0.3 million in the third quarter of 2009, while interest income decreased from $0.7 million in the third quarter of 2008 to $0.3 million in the third quarter of 2009. Weighted average borrowings outstanding decreased from $80.0 million in the third quarter of 2008 to $42.8 million in the third quarter of 2009, and the weighted average interest rate on outstanding indebtedness decreased from 4.5% to 1.9%. The decrease in the weighted average borrowings was due to the voluntary repayment of a portion of our Canadian term loan in October 2008 of approximately US$31.9 million and payments on our revolving credit facility of $25.0 million during the first quarter of 2009. The weighted average interest rate for the third quarter of 2009 decreased mainly due to a decrease in the effective interest rate for the Canadian term loan from 3.3% at November 1, 2008 to 1.3% at October 31, 2009. The decrease in interest income was primarily attributable to lower interest rates for the third quarter of 2009 as compared to the third quarter of 2008.
Our comparable store sales decreased 3.0% at Mens Wearhouse and 1.9% at Moores as moderate increases in units per transaction and the average transaction value, driven by our promotional activities, were more than offset by lower store traffic levels. At K&G, comparable store sales decreased 0.8% primarily due to decreases in units per transaction and average transaction value. The continuation of negative macroeconomic conditions, including high unemployment, particularly affected sales of mens apparel as buying patterns for men are considered to be more discretionary than those in other apparel areas. The lower clothing product sales were partially offset by increased revenues from our tuxedo rental services due mainly to higher average rental rates. As a percentage of total revenues, tuxedo rental service revenues increased from 19.7% in the first nine months of 2008 to 20.6% in the first nine months of 2009. Exchange rate changes from a weaker Canadian dollar also caused total sales for the first nine months of 2009 to be $15.3 million less than the comparable prior year sales.
Total gross margin decreased $39.1 million or 5.9% from the same prior year period to $628.5 million in the first nine months of 2009. As a percentage of sales, total gross margin decreased from 44.6% in the first nine months of 2008 to 43.3% in the first nine months of 2009. This decrease is due mainly to lower clothing product margin, offset slightly by improved tuxedo rental and alteration services margins. As a percentage of related sales, the clothing product gross margin decreased from 56.3% in 2008 to 54.1% in 2009 due primarily to higher markdowns from increased promotional activities at our Mens Wearhouse and Moores stores. The tuxedo rental services gross margin increased slightly from 83.1% in 2008 to 83.3% in 2009 due mainly to the absence in 2009 of costs incurred in the first quarter of 2008 associated with realignment of our tuxedo rental product inventory. The gross margin for alteration and other services increased from 20.8% in 2008 to 26.5% in 2009 mainly as a result of reduced alteration costs combined with increased alteration sales associated with the increased unit sales from our promotional events. Occupancy cost, which is relatively constant on a per store basis and includes store related rent, common area maintenance, utilities, repairs and maintenance, security, property taxes and depreciation, increased from 14.8% of total sales in the first nine months of 2008 to 15.0% in the first nine months of 2009 but, on an absolute dollar basis, decreased by 1.2%.
Selling, general and administrative expenses decreased to $525.7 million in the first nine months of 2009 from $574.5 million in the first nine months of 2008, a decrease of $48.8 million or 8.5%. As a percentage of sales, these expenses decreased from 38.4% in the first nine months of 2008 to 36.2% in the first nine months of 2009. The components of this 2.2% net decrease in SG&A expenses as a percentage of net sales and the related absolute dollar changes were as follows:
Read the The complete ReportMW is in the portfolios of David Dreman of Dreman Value Management, Chuck Royce of ROYCE & ASSOCIATES, PRIMECAP Management, Kenneth Fisher of Fisher Asset Management, LLC, Richard Snow of Snow Capital Management, L.P., Jeremy Grantham of GMO LLC.
