The Men's Wearhouse Inc.
) reported a fiscal second-quarter earnings surprise of 2.7% early
this month, marking its 9th beat in the past 10 quarters. Shares of
this menswear retailer have gained nearly 31.3% in the past two
months. Furthermore, a fairly impressive dividend yield of 2.1% and
an enhanced earnings per share guidance for the full year make this
Zacks #2 Rank (Buy) an attractive pick for investors looking for
both growth and income.
Fiscal Second-Quarter Beat
On September 5, The Men's Wearhouse reported fiscal second-quarter
2012 earnings of $1.15 per share, beating the Zacks Consensus
Estimate of $1.12 and increasing 3.6% year over year. Results were
driven by increased gross margin in the retail segment and a lower
Revenue crept up 1% year over year to $662.3 million from $655.5
million. However, it marginally missed the Zacks Consensus Estimate
of $663 million.
Gross profit increased 3.6% to $320.3 million from $309.2 million
in the year-ago quarter, primarily due to lower costs of goods sold
as a percentage of sales. Consequently, gross profit margin
expanded 120 basis points to 48.4% from 47.2%.
Increased merchandise gross profit led to a 2.9% increase in
operating income to $91.6 million from the prior-year level of
$89.0 million. Consequently, operating margin expanded 20 basis
points to 13.8%.
Men's Wearhouse raised its guidance for fiscal 2012, while also
setting out targets for the third and fourth quarters of fiscal
2012. The company expects earnings per share between $2.74 and
$2.80 in fiscal 2012, up from its prior guidance of $2.70 to $2.78.
Earnings per share for the third quarter are forecasted at 95 cents
to 98 cents, while the fourth quarter is seen at 12 cents to 15
Total net revenue for fiscal 2012 is anticipated to increase
between 4.8% and 5.6%, versus the prior guidance of 4% to 5%. Sales
for the third quarter are expected to advance between 8.8% and
9.3%, while the fourth quarter is forecasted to increase 11.3% to
Guidance Drives Estimates
The Zacks Consensus Estimate for fiscal 2012 rose 2.2% to $2.78 per
share in the last 30 days on upward movement in 5 of 6 estimates.
This represents year-over-year growth of 17.2%.
The Zacks Consensus Estimate for fiscal 2013 advanced 1.6% to $3.11
per share over the same time frame as 5 of 7 estimates moved
upwards. This reflects year-over-year growth of 11.8%.
In addition to maintaining a steady earnings growth, Men's
Wearhouse has been rewarding shareholders with regular quarterly
dividend payments for the past several years. Currently, the
company pays a quarterly dividend of 18 cents per share, which
yields a solid 2.1%. The company has a payout ratio of 25%, while
its 5-year annual dividend growth rate stands at 21.98%.
Men's Wearhouse currently trades at a forward P/E of 12.4x,
reflecting a 24.4% discount to the peer group average of 16.4x. On
a price-to-book basis, shares trade at 1.6x, a 41.6% discount to
the peer group average. The company's compelling fundamentals are
well supported by its long-term estimated earnings per share (EPS)
The chart below indicates a steady growth in the company's share
price in the last two months, reflecting an upside of about 31.3%.
Currently, shares of Men's Warehouse are trading above its 50 and
200-day moving averages. Average volume also remains fairly strong
at roughly 595K daily.
Operating nearly 730 core Men's Wearhouse and Moores brand
full-line stores in the United States and Canada, the company has
successfully expanded the demographic appeal of these brands.
Furthermore, the company's strong brand positioning, strategic
marketing initiatives, store expansion plans, consistently rising
estimates and an impressive dividend yield offers considerable
Founded in 1973 and headquartered in Houston, Texas, Men's
Wearhouse is among the leading specialty menswear retailers in the
United States and Canada with 1,153 stores. The company mainly
offers a full range of men's designer, brand name and private label
suits, suit separates, sport coats, slacks, sportswear, outerwear,
dress shirts, shoes, and accessories for men, as well as tuxedo
rentals. The company operates its stores mainly under the brand
names Men's Wearhouse, Moores, K&G stores and Men's Wearhouse
and Tux stores. Its K&G stores also feature a collection of
women's apparel. The company sells its products through
menswearhouse.com and kgstores.com. It holds a market
capitalization of $1.75 billion.
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