Men’s Wearhouse Profit Tops Estimates on Rising Sales

Men’s Wearhouse Inc. (MW), the retailer that spurned Jos. A. Bank (JOSB) Clothiers Inc. as a buyer only to pursue it as a target, reported fiscal third-quarter earnings that exceeded analysts’ projections as sales increased.

Net income for the quarter ended Nov. 2 fell to $38.2 million, or 79 cents a share, from $48.8 million, or 95 cents, a year earlier, the Houston-based company said in a statement yesterday. Earnings on an adjusted basis were 90 cents a share, above the average analyst estimate of 86 cents, according to data compiled by Bloomberg.

Men’s Wearhouse made a buyout offer of about $1.54 billion for Jos. A. Bank last month and its smaller rival has said it’s evaluating the proposal. The larger retail chain let a previous takeover offer from Hampstead, Maryland-based Jos. A. Bank expire, saying it was too low and opportunistic amid a time of upheaval for the company after it removed founder George Zimmer as executive chairman over strategy disagreements in June.

“Longer term, we believe Men’s Wearhouse’s more focused marketing and promotional efforts, coupled with a better product assortment will fuel sales growth,” Richard Jaffe, a New York-based analyst at Stifel Nicolaus & Co., said in a note to clients last week. Jaffe has a hold rating on the shares.

Sales in the quarter rose 2.8 percent to $648.9 million, surpassing the $627.4 million average of analysts’ estimates.

‘Compelling Proposal’

The Men’s Wearhouse offer of $55 a share for Jos. A. Bank is 8.7 percent higher than the smaller retailer’s closing share price on Nov. 25, the day before the bid. The offer is 32 percent higher than on Oct. 8, the day before Jos. A. Bank bid for the bigger company.

“We strongly believe our proposal is compelling and would deliver substantial benefits to both companies,” Men’s Wearhouse Chief Executive Officer Doug Ewert said on a conference call with analysts and investors today.

Men’s Wearhouse is ready to work with Jos. A. Bank’s board of directors, Ewert said. Men’s Wearhouse has said it will fund its offer with cash on hand and debt financing.

The retailer, taking the advice of its largest shareholder, Eminence Capital LLC, is turning the tables on Jos. A. Bank to expand its base of men’s clothing stores. A deal, which would create a company with about 1,700 stores, would add to earnings in the first year after closing, helped by as much as $150 million in annual savings in purchasing, customer service and marketing over three years, Men’s Wearhouse has said.

The shares gained 2.9 percent to $51.91 at the close in New York. They have risen 67 percent this year, compared with a 24 percent advance in the Standard & Poor’s 500 Index.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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