The Big And The Tall Stride Into Casual Male

Hefty Gains
Men with waistlines above 44 inches -- there are some 20 million of them in America -- and those over 6 feet are beautiful in the eyes of the Casual Male Retail Group (CMRG ), the top retailer of men's outsize apparel, with 530 stores in 44 states. Its largest rival, Dahle's Big & Tall Superstores, has 16 shops. "I don't normally invest in retail, but Casual Male grabbed me because of its strong niche market -- and new management that's turning it around by upgrading merchandise and stores," says Rodney Hathaway of Heartland Advisors, which has bought shares. Now at 7.22, the stock could hit 14 in a year, says Hathaway, based on rising operating margins (up from 2.2% in 2004 to 10% by 2007), mainly from new high-margin brands and cost-cutting. Paula Kalandiak of Roth Capital Partners rates the stock a buy because of favorable demographics (more obesity in young men), 16 straight months of rising store results, and increasing sales of its new George Foreman line, which carries the highest margins. Kalandiak expects earnings of 25 cents a share on sales of $436 million for the year ending Jan. 30, 2006, and 41 cents on $488.6 million for 2007. "If traffic increases, especially in holidays such as Father's Day, there will be upside to our numbers," says Kalandiak.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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