Tailored Brands, Inc. (TLRD) has had one tough run of it.
The owner of names like Men's Wearhouse and Jos. A. Bank has had a slew of quarterly sales declines. The company's most recent results did not challenge the disparaging trend. The retailer advocated that they are in the "early stages" of plans to turn things around, and second-quarter guidance did not provide much to be excited about.
The poor comp sales, combined with weaker earnings even on an adjusted basis, lead me to think it'd be premature to try to call a bottom on this stock.
In the first quarter of 2019, net sales revenues declined 4.5% to $781.4 million. Retail alone fell 4% to $724.7 million.
What's so concerning about Tailored Brands' decline is how it's spread over the entire business.
Men's Wearhouse, the largest part of the business, had comparable sales declines of 4.5% to $427.8 million. Jos. A. Bank, the second largest piece of the company, had comp sales declines of 0.7% to $166.9 million. K&G had comp declines of 0.5% to $87.7 million, and Moores had declines of 4.6% to $42.3 million.
Whether the company is being affected by poor management, or more so from a shift in consumer tastes, is up for debate. It does seem that people wear suits far less often these days. Moreover, the company noted that rentals are declining, as more groups are choosing to buy suits to wear for special events. I actually love Jos. A. Bank because I can get what I need at a lower price than many other establishments. When I see the way their sales are trending, I can see why those prices are getting so low.
Indeed, the company is stuck in a shifting market.
The men's suit market in the United States has reportedly declined by 8% since 2015. When looking at how sports and athletic clothing has done so well in the same time period, it's not hard to pinpoint Tailored Brands' problem. The company is making moves to adapt. They sell jeans, and more casual attire that can be adaptable to many situations. However, for a company that is so associated with more upscale and high-brow merchandise, I think it might be a tough transition to make.
When I think of Men's Wearhouse, I don't think "casual."
Tailored Brands reported earnings of $0.14 per diluted share. On an adjusted basis, earnings came in at $0.21 per diluted share. Those GAAP earnings represent a 48% decline from 2018's earnings of $0.27 per diluted share.
The company provided second-quarter guidance that is a bit murky in terms of earnings. The company expects adjusted second-quarter earnings of $0.65-$0.70 per diluted share. Tailored Brands did not provide an outlook for GAAP earnings estimates.
What the company did provide were some less-than-appealing comparable sales estimates. Tailored Brands expects Men's Wearhouse comp sales to decrease 3% to 5% in the second quarter. Joseph A. Banks comp sales are expected to decline 2% to 4%. Moores comps were guided to be down 2% to 4%, and K&G's for a 2% decline to 0% change. Overall, net corporate apparel sales are forecasted to decrease 4% to 6%.
Thus far, I see very little in this story that provides momentum for the stock price. Yes, the retailer beat estimates in the first quarter, but the overall trend is still in decline. Until sales shift in an upward direction, I don't see how TLRD stock can find a spring in its step. Other areas of men's apparel, like jeans and casual clothing have a great deal of established competitors. It'll be tough to really find a niche in that marketplace.
Trading at such a low valuation, it's a tough call on what to rate Tailored Brands. The stock has been in freefall for the better part of the last 12 months. The saving grace here is the dividend payment, and fact that the valuation is so low.
At the same time you have to ask yourself how long they'll remain profitable if things continue on the current path in terms of sales declines.
It's a murky situation, and I'd say TLRD is simply a stock to avoid at present.