Clothing product sales drop at Men's Wearhouse
Source: Men's Wearhouse Date: 2009-03-13
The Men's Wearhouse announced its consolidated financial results for the fourth quarter and fiscal year ended January 31, 2009.
Diluted earnings per share were $0.03 for the fourth quarter ended January 31, 2009. Adjusted loss per share was $0.06. This excludes a $5.8 million (net of tax) or $0.11 per diluted share outstanding gain from an eminent domain sale of a distribution center and a $1.2 million (net of tax) or $0.02 per diluted share outstanding non-cash fixed asset impairment charge.
Diluted earnings per share were $1.13 for fiscal year 2008. Adjusted diluted earnings per share were $1.17. This excludes a $6.6 million (net of tax) or $0.13 per diluted share outstanding cost to close the Canadian based manufacturing facility operated by the Company's subsidiary, Golden Brand, a $5.8 million (net of tax) or $0.11 per diluted share outstanding gain from an eminent domain sale of a distribution center and a $1.2 million (net of tax) or $0.02 per diluted share outstanding non-cash fixed asset impairment charge.
FOURTH QUARTER REVIEW:
• Total Company sales decreased 11.0% for the quarter.
• Clothing product sales, representing 85.4% of fiscal fourth quarter 2008 total net sales, decreased 12.8% due to decreases in the Company's comparable store sales primarily driven by a reduction in store traffic levels.
• Tuxedo rental sales, representing 7.5% of fiscal fourth quarter 2008 total net sales, increased 3.0%.
• Gross margin before occupancy costs, as a percentage of total net sales, decreased 294 basis points from 56.68% to 53.74%. Decreases in clothing product margins, as a percentage of related sales, of 396 basis points were offset by the impact of the higher margin tuxedo rental revenues that increased from 6.50% to 7.52% as a percentage of total sales.
• Occupancy costs increased, as a percentage of total net sales, by 141 basis points from 13.91% to 15.32% primarily due to the deleveraging effect of reduced comparable store sales.
• In the fourth quarter, the Company realized a pretax gain of $8.8 million from an eminent domain sale of a distribution center and incurred a pretax non-cash fixed asset impairment charge in the amount of $1.8 million. Selling, general, and administrative expenses, excluding these items, decreased 7.1% from the prior year quarter of $207.3 million to $192.6 million due primarily to cost-cutting measures implemented during the quarter.
• Operating loss excluding the $8.8 million gain on the distribution center sale and the $1.8 million impairment charge was $9.6 million or negative 2.0% of total net sales compared to $21.5 million or 4.0% of total net sales for the same period last year.
• The Company realized an income tax benefit for the quarter due to favorable developments on certain outstanding income tax matters and a true up of the tax provision for the full year.
FISCAL 2009 GUIDANCE:
Due primarily to the lack of forward visibility as to macro economic conditions, the Company is implementing modifications to its forward guidance practices beginning with fiscal 2009. The Company will provide specific financial related guidance for the first half of the fiscal year and plans to update that guidance when it reports first quarter earnings. The Company has provided below additional guidance around certain elements which management believes will influence the Company's annual results. Finally, the Company will eliminate its past practice of providing mid quarter updates on earnings per share guidance.
For the first half of the fiscal year, the Company expects GAAP diluted earnings per share in a range of $0.45 to $0.65.
The Company anticipates comparable store sales of its retail apparel business to decline in a range of 6% to 10% and comparable store sales of its tuxedo rental revenues to increase in a range of 7% to 9%. Total Company sales are expected to decrease in the 4% to 7% range.
The Company expects first quarter results, on a diluted EPS basis, to be break even to a mid single digit range loss and that the second quarter will drive the majority of first half estimated earnings results which is due to the tuxedo rental business seasonality favoring the second fiscal quarter of the year.
Gross margins before occupancy costs for the first and second quarter are expected to be below the prior year as the Company continues a more aggressive posture in strengthening its value proposition for customers. Occupancy costs are expected to be flat to a modest reduction for the first half in dollar terms; however, as a percentage of revenues, these costs will deleverage from the prior year rate.
The Company has implemented a variety of cost containment and operational changes that have resulted in an immediate reduction in payroll and benefit costs in the fourth quarter of fiscal 2008. Further, the actions are expected to drive reported selling, general and administrative expenses, excluding advertising costs, for the first half of the year down by 7% to 9% from the prior year. This expected rate of reduction will enable the Company to realize expense leverage for the first half of the year.
Net interest expense is expected to decline for the first half and full year due to positive increases in free cash flow.
This guidance includes an estimated annual effective tax rate of approximately 38.0%; however, the Company expects continuing variability in quarterly tax rates.
Fully diluted shares outstanding of 52.1 million are estimated for the year. The Company's share repurchase program will be influenced by several factors including business and market conditions.
The Company anticipates opening new stores throughout the year. Currently the aggregate number of new openings is expected to be up to 10; however, the Company remains flexible to take advantage of real estate opportunities that may arise.
