Menswear retailer Jos. A Bank Clothiers Inc. (JOSB) has more than tripled its sales in the last decade and achieved earnings growth in 31 of the past 32 quarters, including 13 quarters in a row. What makes this retailer tick despite the gloomy economic situation that curbs consumer spending?
Established in 1905, Jos. A Bank sells men's classically-styled tailored and casual clothing, sportswear, footwear and accessories, through 474 stores in 42 states and the District of Columbia. The retailer provides a distinctive collection of clothing and accessories necessary to dress the career man from head to toe.
The retailer typically prices its products 20% to 30% below competition, but has grown gross profit margins from 48.3% in 1999 to 61.9% in 2008 and operating margins from 1.8% to 13.7%.
In the trailing twelve months, the company's gross margin is 61.36%, higher than its competitor Men's Wearhouse, Inc.'s (MW) 42.13%, and the industry's 39.89%. The company's operating margin for the period is 14.39%, more than double MW's 5.06% and the industry's 5.28%.
In the last five years, the company has maintained its gross margin above 60%, thanks in part to its sourcing strategies. The retailer designs and directly sources substantially all of its products, eliminating middlemen like importers and resellers, and contracting directly with manufacturers. The sourcing technique has served to reduce product costs in the last nine years, helping the company boost its gross profit margins.
In fiscal 2008, the company used one agent to source about 42% of its total product purchases and expects to continue this relationship in fiscal 2009. Also, about 89% of the product purchases were sourced from suppliers outside the U.S. last year, keeping its costs low.
While recession has dampened the expansion plans of many retailers, Jos. A Bank has turned the economic crisis to its advantage, to explore real estate opportunities at reasonable lease rates. Thus, accelerating its store expansion program to open 30 to 40 new stores in fiscal 2010, an increase over the 10 to 15 new stores it plans to open in fiscal 2009. The retailer's long-term plan is to operate 600 stores.
With a focus on updated classic clothing or traditional cuts, the company says it experiences much less fashion risk than other retailers that offer more frequently changing fashions.
Some interesting product offerings from the retailer include a "Separates" collection that allows customers to customize their suits by selecting separate jackets and pants and making fabric choices. While, "The Traveler" collection includes wrinkle-resistant, stain-resistant suits and cashmere sweaters, the "Stays Cool" suit features fabrics and linings using various technologies, to keep the customer cool and comfortable in any climate.
Sales have more than tripled in the last decade from $194 million in 1999 to $696 million in 2008. The company has reported same-store sales of 5.6% in 2002, 8.2% in 2003, 8.4% in 2004, 10.6% in 2005, 4.3% in 2006, 3.8% in 2007 and 8.9% in 2008 and 5.2% for the first six months of 2009.
Profit has increased several fold from $1 million in 1999 to $58 million in 2008. The company has beat earnings estimates in the last four quarters by an average 16.2%.
Analysts are bullish about the company's earnings prospects in the third quarter, and the full year. In the last 90 days, earnings per share or EPS estimates have been revised up by 3 cents to 54 cents for the third quarter and by 22 cents to $3.68 from $3.46 for the full year.
In the last four-year period, the company has reported nil debt and grown cash and short-term investments from $7 million in 2005 to $123 million in 2008.
A couple of disturbing things about JOSB stock includes low insider ownership and high percentage of shorts. Corporate insiders own just 1.28% of the company's outstanding float. Low insider ownership usually does not speak well for insider confidence in the stock.
Also, the short percentage of the float is quite high at 24.4%, as of Nov 13. Higher shorts indicate that more people are betting that the stock may decline. The short percentage of the float for competitor Men's Wearhouse is just 9.6% - less than half of the shorts for JOSB.
JOSB trades at 11.5 times its 2009 estimates, while peer Men's Wearhouse trades at a higher 18.2X.
A near-term catalyst to the stock price could be the company's third quarter results. The company has announced a conference call on Thursday, December 3, 2009 at 11:00 a.m. Eastern Time, to discuss its third-quarter results.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.