Don’t count out the retailers just yet. Men’s Wearhouse Inc. (MW) recently reported fiscal fourth quarter results which saw double digit sales gains as tuxedo rentals remained hot. This Zacks #1 Rank (strong buy) has a price-to-sales ratio of just 0.7.
Men’s Wearhouse is a men’s apparel specialty retailer. It operates 1,192 stores under three brands: Men’s Wearhouse, Moores and K&G.
The company carries brand name and private label suits, sport coats, and accessories. Tuxedo rentals are also available at some of the stores.
Men’s Wearhouse also operates a global corporate apparel and workwear segment which includes TwinHill in the United States and Dimensions and Alexandra in the United Kingdom.
Q4 Sales Jumped 18.6%
Who wants to buy a tuxedo, when you can just rent one instead?
On Mar 9, Men’s Wearhouse reported its fiscal fourth quarter 2010 results which saw sales rise 18.6%. Tuxedo same store sales were perticularly hot, climbing 11.1% at its Men’s Wearhouse and Men’s Wearhouse and Tux chains.
Higher tuxedo rental sales, combined with higher store traffic levels and increased units per transaction, boosted same store sales by 4.3% in the quarter at the Men’s Wearhouse chains.
But same store sales also rose 2.3% at Moores and 4.5% at K&G.
Gross margin increased 21 basis points to 37.3% from $37.1% due to an increase in tuxedo rental margins.
Another Surprise on the Zacks Consensus Estimate
The company surprised on the Zacks Consensus Estimate by 1 cent. Earnings per share were a loss of 19 cents compared to the consensus of a loss of 20 cents.
It was the 7th earnings surprise in a row.
Zacks Consensus Estimates Rise
The company expects adjusted earnings per share in the range of $1.75 to $1.85, which excludes acquisition integration expenses for the UK acquisitions.
Since the earnings results, analysts have raised guidance to get within the companyy’s guidance range.
The fiscal 2011 Zacks Consensus Estiamte jumped to $1.81 from $1.69 which is earnings growth of about 20%.
The growth is expected to continue into fiscal 2012, as analysts forecast further EPS growth of 14.9% with earnings to rise to $2.08 per share.
Founder and CEO to Leave in June
Consistent with the company’s succession plans which were announced in January 2011, Douglas Ewert will succeed George Zimmer, the founder and CEO, after the company’s annual shareholder meeting on June 15.
Ewert has been with Men’s Wearhouse since 1995 and advanced to president and chief operating officer in 2008 so he has been closely tied to current management and their outlook for the company.
Analysts don’t seem concerned with the change in management, at least as far as the estimate projections.
Still a Value Stock
Men’s Wearhouse has several value characteristics in addition to its low price-to-sales ratio.
Its price-to-book ratio is 1.5, which is well under the 3.0 I use as a cut-off to determine “value.”
But the company’s P/E ratio is a little on the high side, at 14.9x forward estimates. I don’t look at stocks over 15, so it skated in just under the cut-off.
Men’s Wearhouse is expected to report first quarter results on June 8.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
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