Tailored Brands is a specialty retailer of men's tailored clothing and the largest men's formalwear provider in the U.S. and Canada. Key brands that the company owns includes Men’s Wearhouse and Joseph A. Bank.
While the company’s EPS result exceeded the consensus target, on the top line, total company sales, which rose 0.2% year/year to $812.7 mln, fell short of expectations. Meanwhile, retail comp growth in the quarter was +2.3%, with all brands achieving positive change versus the prior year quarter. Men's Wearhouse came in at +1.7%, Jos. A. Bank at +3.8%, K&G at +4.0%, and Moores at +1.2%.
Adding to the negativity of the top line miss, the company issued a poor fourth quarter outlook due to weaker sales in its Men's Wearhouse stores.
This is notable since Men Wearhouse is the company's largest segment, making up 53% of sales in 2017. Men’s Wearhouse and Joseph A. Banks combined makes up 75% of total company sales.
Comparable sales softened during the third quarter due to lower transactions at Men's Wearhouse, and that weakness continued into November. Given that, the company has become more cautious on fourth quarter comparable sales performance at Men's Wearhouse stores.
Tailored Brands is forecasting a loss of ($0.29) - ($0.24) for the fourth quarter, which falls far short of current expectations. The company expects comparable sales for Men's Wearhouse to be down low-single-digits, for Jos. A. Bank and Moores to be up low-single-digits, and for K&G to be flat-to-up slightly.
As a result, the company had to reduce its full year 2018 earnings forecast to $2.30-2.35 from $2.30-2.50 after cutting Men's Wearhouse guidance to expectations to be flat-to-up slightly versus its previous guidance of up low-single-digits. Guidance for its Jos. A. Bank segment was reaffirmed to be up low-single-digits, and comps in its other two brands were reaffirmed as well.
Of course, the company is doing what it can to turn its Men's Wearhouse business around, but for now, they have to reflect current conditions. Also, the company believes that the growth strategies that have been implemented that created four consecutive quarter of positive comps at its Men’s Wearhouse brand will continue to drive future growth in the segment going forward.
Looking at the balance sheet for a moment, it is notable to see the company continue its focus on debt reduction. In the third quarter, $40 mln more in total debt was reduced, showing an overall reduction of $300 mln from a year ago. So there's one bright spot. Separately, inventories declined $98 mln to $875 mln at the end of the third quarter.
Overall, the company has hit a rough patch in its Men’s Wearhouse brand, which, again, makes up just over half of its total company sales, and this is really weighing on shares of TLRD this morning. Shares of TLRD just hit another new low for the day and are now down 30%.