Home > Stock Analysis

Men's Wearhouse Hems Earnings Guidance

Posted: Sep 04, 2008 09:42 AM by Glenn Curtis

Tickers in this Article: MW, JOSB

Suit retailer Men's Wearhouse (NYSE:MW) released its second-quarter numbers last week, and they were better than expected. In fact, the Texas-based company earned 72 cents per share on an adjusted basis in the period ended August 2. That was about a penny north of Street expectations. Despite this earnings beat, I think the stock should be avoided.

Get Free Stock Analysis By Email

Dressing Down The Full Year
In conjunction with its earnings, Men's Wearhouse expects full-year earnings to come in at $1.50-1.60 per share excluding certain costs. This is a problem because in late May when it released its first quarter results it offered up guidance of $1.75-1.85 per share. Now investors are left wondering if the bar will be lowered again. If latest guidance doesn't hold, I think the stock could get smacked. (To learn more, read Can Earnings Guidance Accurately Predict The Future?)

A second issue for me is that even if management is right on the mark, it means that the company trades at about 14.1-times the current year estimate. Personally, I'd prefer to pick up the stock a little cheaper given management's downward guidance trend and the lackluster retail environment in general.

Sales Down 8%
During the second quarter, comparable store sales at Men's Wearhouse's U.S.-based stores were off 8%. I think it's safe to say that the company wasn't exactly going up against a strong comparison, considering that in the Q2 last year comps were up a mere 1.1%. Frankly, I expected better. The tough operating environment excuse only goes so far.

The decline looks even worse when stacked against the 6.4% increase in comps put up by rival Jos. A. Bank (Nasdaq:JOSB) in its first quarter. I realize that's not a 100% apples-to-apples comparison, but I did think it is worth mentioning. Jos. A. Bank is due to release its second-quarter numbers today, and I will be watching closely.

Bottom Line
Men's Wearhouse's second quarter earnings came in north of analyst estimates, but any celebration was quickly silenced by the company's gloomy full year forecast. For now, I believe the stock should be avoided.

For more on analyzing companies in this sector, be sure to read our related article Analyzing Retail Stocks.

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS