Men's Warehouse (
MW
)
Back in early January Men's Warehouse hit the Rank-Buy list
showing strong momentum in the stock and fundamentals.
In the time since, the stock has rallied 25% hitting a
new 52 week high of $40.51.
That run was later justified by a stronger than expected
earnings report on March 7th. After this recent rally does
Men's Warehouse have more room to run?
Company Description
The clothing company founded in Houston in 1973 has come a long way
since its humble beginnings. Although George Zimmer's
trademark motto hasn't changed, (aside from his now distinctly
scratchy voice) the company's size, reach and profitability has
soared. So has its stock…
In a world where competition for price and business is
tough, Men's Warehouse is not only guaranteeing "you'll like the
way you look" but they are honing in on a niche market that has
become not only price sensitive, but more prudent and discerning in
their purchases - The middle class.
Strong Earnings Trends
The most recent upside surprise added to MW's long string of
earnings beats, bringing their average surprise to 24% over the
past year.
MW reported a Q4 earnings loss of 7 cents (unadjusted), which
was much less than the 13 cent loss Zacks Consensus Estimate going
into the report. The loss was also a huge improvement over
the 19 cent loss in the year ago quarter.
The Men's Warehouse brand of the business, which is one of four,
saw revenues increase almost 10%. It represents about 60% of
the company's total revenue.
The retailer benefited from higher product margins which were
driven mainly by increasing prices in the US and a favorable mix of
higher margin products. Gross margins for the quarter also
increased 2.7% compared to Q42010. Their top line sales of
562.2 million for the quarter did fall just a bit short of
expectations of 563.1 million.
Redemption for the top line shortfall came in the company's
forward looking guidance. For Q12012 Men's Wear expects
earnings in a range of $0.53 to $0.54, and sales growth of 2 to 2.5
percent. The current Zacks Consensus Estimate stands at 62
cents for the quarter, 8 cents higher than their top end.
For the full fiscal year 2012, MW expects earnings in a range of
$2.70 to $2.78 per share, with sales growth of 4 to 5 percent.
Men's Wear anticipates gross margins in the year to
continue to increase motivated by higher average unit retail prices
and continued occupancy cost leverage.
Still Strong?
Men's Warehouse has maintained its Zacks Rank 1 and is delivering
results fundamentally. With a forward P/E of 15.24, the stock
is fairly priced even considering the recent run.
The reality is that continued performance will be dictated more
by the broad market itself which is still chugging along.
That's not to say one should throw caution to the wind and ignore
any warning signals, but for now MW remains a momentum
stock.
READ JANUARY 12th ARTICLE
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He
is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
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Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is
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MENS WEARHOUSE (
MW
): Free Stock Analysis Report
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