Men’s Wearhouse cuts Q3 EPS guidance

The Men's Wearhouse’s preliminary comparable sales results and an adjusted EPS outlook for the fiscal third quarter ended October 31, 2015 reflects significant comparable sales weakness at Jos. A. Bank. Comparable sales decreased 14.6 percent at Jos. A. Bank, far below the company's earlier expectations. Based on the preliminary results, the company now expects adjusted EPS to be in the range of 0.46 dollar to 0.51 dollar for the third quarter, down from the company's previous expectation of 0.87 dollars.

”We are obviously disappointed by the third quarter results at Jos. A. Bank,” said Doug Ewert, Men's Wearhouse Chief Executive Officer, adding, “Toward the end of the quarter, we reduced the number of Buy-One-Get-Two Free and Buy-One-Get-Three Free days in anticipation of our final Buy-One-Get-Three Free event. While we expected top-line volatility, as we previously stated, we did not anticipate that the impact from the traffic decline would occur to this degree.”

Expectations for third and fourth quarters

Third quarter comparable sales increased 5.3 percent at Men's Wearhouse with clothing comps of 7.2 percent driven by higher transactions per store and tuxedo comps of 0.7 percent. K&G comparable sales for the quarter increased 3.7 percent driven by higher transactions per store. Moores comparable sales decreased 5.4 percent primarily driven by weakening macro-economic conditions in Canada.

Fourth quarter comparable sales at Jos. A. Bank are now expected to decrease between 20 percent and 25 percent resulting from both a decline in traffic continuing from the third quarter trend and a previously expected decline in units per transaction as customers adapt to the shift in the promotional strategy. The company expects its legacy retail brands to average a comparable sales increase of 3 percent to 4 percent.

Jos. A. Bank gross margin rates for the fourth quarter, however are still expected to improve significantly. Clothing margin before occupancy is expected to increase approximately 500 basis points over the prior year and, including occupancy, to increase approximately 200 basis points. The gross margin dollars, however, are now expected to be well below last year's fourth quarter given the anticipated traffic declines.

With the updated outlook, the company now believes adjusted EPS for fiscal 2015 will be between 1.75 dollars and 2 dollars against previous guidance of 2.70 dollars to 2.90 dollars for adjusted EPS.