Thursday was not a great day for shareholders in Tailored Brands (TLRD) . The stock plummeted 25%.
The parent company of names like JoS. A. Bank and Men's Wearhouse suffered big fallout in reaction to fourth-quarter sales declines, and weaker-than-desired 2019 guidance. The business continues to shrink.
Fourth-quarter earnings are not as good as they look and the solution to the problem sounds like it will require some marketing increases. I'm a customer of the company, but I don't own any of the stock.
The company seems intent on diversifying its lineup in order to achieve better sales numbers. It would seem that the demand for nice clothes (in the sense of formal and upscale) might not be what it used to be.
I love running to JoS. A. Bank if I need dress shirts or anything of the sort. Apparently, my business alone just isn't cutting it, though.
Across the four different sales locations, JoS. A. Bank, Men's Wearhouse, K&G, Moores, along with corporate apparel, net sales decreased in each category over the fourth quarter. Total net sales across all of the businesses declined 10.7% to $768.1 million. On a comp sales basis, retail fell 1.5%.
Retail, as a whole, has shown a bit of a disconnect in year-over-year earnings thanks to a fiscal 53rd week in 2017. To that end, Tailored Brands estimates that the extra week created a $0.05 disparity in earnings per share. Going off of that comparison, things still don't line up for the year, as 2018 earnings of $1.64 per share don't come close to adjusted 2017 earnings of $1.90 (this figure includes the removal of the $0.05 estimate for the 53rd week). Over the past few years, earnings have been very erratic as the company attempts to grapple with the trend of declining sales.
Regarding the fourth quarter alone, the company did report positive GAAP earnings of $0.12 a share. The problem is it had to use a big nice tax benefit to do it. On an adjusted basis for that taxes benefit, the company actually had a loss of $0.28 a share.
Guidance moving forward is no more encouraging than the past. The company expects EPS of $0.10 to $0.15 for the fiscal first quarter. Compared to the year ago quarter, earnings have the potential to drop by more than 50%. The only piece of the business where Tailored expects to report flat to positive sales is K&G. The rest of the businesses are expected to post sales declines. Both Men's Wearhouse and JoS. A. Bank are expected to have comp sales declines of 3-5%.
One positive thing I can say about Tailored is that the stock is incredibly cheap. At $8.75, the stock is trading at less than 6x trailing full-year earnings. The stock's decline also drastically increased the dividend yield to around 8%. This might be the redeemer.
For those that didn't own Tailored Brands before, you now have a very cheap stock if you wish to bet on a recovery.
What is the basis on which Tailored Brands is pitting that recovery? The company is pushing into more casual clothing trends to incorporate into its stores.
I do like the idea of a more diversified portfolio of inventory that can reach a broader audience. That said, it might be tough to draw in new customers considering the stores are fairly well known for a specific type of attire. It'll take some big-time marketing -- in other words, big-time expenses.
While I am a big fan of shopping at JoS. A. Bank, I'm not a fan of the stock. Retail is a hard business right now. The names that aren't doing well currently feel like tough places to put money. Not even the now 8% dividend yield can tempt me here.