Men’s Wearhouse warned that it could miss the lower end of its guidance if the poor sales performance of Jos. A. Bank continues. The stock price of the company plunged more than 18% to $15.05 per share during the extended trading on Wednesday.
According to Men’s Wearhouse, the same store sales at Jos. A. Bank declined more than 35% this quarter until the first week of December. The company said the average same-store sales of its other brands were up 5.5%.
Men’s Wearhouse is focused on Jos. A. Bank’s recovery
Men’s Wearhouse acquired Jos. A. Bank for approximately $1.5 billion last year, with an expectation that the deal will be accretive to its earnings in the full-year of operations. The company also expected to achieve run-rate synergies of around $100 million to $150 million by the end of 2016.
In a statement, Doug Ewert, CEO of Men’s Wearhouse said overhauling Jos. A. Bank was more challenging than expected. According to him, “We are looking at every opportunity for cost reduction, including store rationalization, labor, advertising and all relevant shared service costs. We are challenging all assumptions and are fully focused on accelerating the Jos. A. Bank recovery.”
Jos. A. Bank was famous for its buy-one, get-three free marketing strategy, but Men’s Wearhouse decide to phase it out. The change did not sit well with customers, which resulted to the brand’s sales decline.
Ewer said, “We underestimated the impact to the near-term performance as we began to execute the difficult, but necessary, corrective steps. We remain confident that these steps will restore a long-term, sustainable, profit model.”
Men’s Wearhouse 3Q results
For the third quarter ended October 31, Men’s Wearhouse posted a GAAP of loss of $0.56 per share. The company recorded non-cash impairment charge of $90.1 million after performing an interim valuation of the Jos. A. Bank trade name.
Its adjusted EPS was $0.50 excluding non-operating items and non-cash impairment charges. The company’s total net sales were $865.4 million, down 2.8%.
The same-store sales at Men’s Wearhouse increased 5.3% during the quarter. The comparable clothing sales increased 7.2% primarily due to an increase in average transactions per store while its comparable rental revenue rose 0.7%.