Men's Wearhouse, Inc. (MW) said Wednesday after the markets closed that its second quarter profit rose 8% from last year, helped by higher sales and improved margins. The company's quarterly earnings per share also came in above analysts' expectations as did its quarterly sales. At the same time, the company provided an upbeat outlook for the third quarter.
The Houston, Texas-based men's apparel retailer reported GAAP net income for the second quarter of $42.5 million or $0.80 per share, compared to $39.5 million or $0.75 per share for the year-ago quarter.
Excluding $0.03 per share in acquisition costs related to the company's acquisition of Dimensions Clothing Ltd. and certain assets of Alexandra plc last month, adjusted earnings for the latest quarter were $0.83 per share.
On average, 7 analysts polled by Thomson Reuters expected the company to earn $0.77 per share for the second quarter. Analysts' estimates typically exclude special items.
In June, the company had forecast second quarter GAAP earnings to be in the range of $0.75 to $0.78 per share.
Second quarter gross margin before occupancy costs increased to 61.3% from 59.1% a year ago. Clothing product margins for the quarter increased 224 basis points due mainly to different promotional offerings, as well as the mix of products on promotion, and lower product costs.
Operating income for the second quarter rose to $68.4 million or 12.7% of total net sales from $63.9 million or 12.1% of total net sales in the prior year quarter. Excluding the acquisition related costs, operating income for the latest quarter was $71.1 million or 13.2% of total net sales.
Total net sales for the second quarter increased 2% to $536.99 million from $526.21 million in the same quarter last year, helped by strong growth in Tuxedo rentals. Five analysts had a consensus revenue estimate of $535.01 million for the second quarter.
Clothing product sales for the quarter declined 0.6% year-over-year to $362.2 million due mainly to a decrease in store traffic levels at Men's Wearhouse and a decrease in the average transaction value at K&G. Tuxedo rental sales rose 10% to $142.5 million.
Brand wise, second quarter sales of Men's Wearhouse grew 2% to $367.4 million, while sales of off-price retail chain K&G Superstores declined 6% to $87.6 million. Revenue from Canadian store chain Moores, Clothing for Men rose 10% to $71.6 million.
Same-store sales at its namesake stores rose 2.7% in the second quarter, but declined 4.6% at K&G Superstores.
At the end of the second quarter, the company operated 1,239 stores under the Men's Wearhouse, Moores, K&G and Men's Wearhouse and Tux brands, compared to 1,278 stores a year ago.
Looking forward to the third quarter, the company forecast GAAP earnings of $0.35 to $0.42 per share and adjusted earnings of $0.40 to $0.47 per share, which excludes acquisition transaction and integration costs and costs associated with the closure of four tuxedo distribution centers. Analysts currently expect the company to earn $0.40 per share for the third quarter.
The company said it expects total sales for the third quarter to increase in in low double digits. The company expects same-store sales to increase in the low to mid single digit range at its namesake stores and to decrease in mid single digit at K&G in the third quarter.
Men's Wearhouse shares, which have traded in a range of $17.66 to $27.67 over the past year, closed Wednesday's regular trading session at $21.00, up 11 cents. The stock is currently gaining 20 cents in after hours trading.
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