Earnings surge at Jos. A Bank 'Great quarter, great year,' an analyst declares


March 19, 1998|By William Patalon III | William Patalon III,SUN STAFF

Jos. A. Bank Clothiers Inc. reported fourth-quarter operating earnings yesterday that were 160 percent higher than a year ago. Earnings per share also jumped -- 138 percent -- according to an earnings statement released by the company.

The Hampstead-based marketer of tailored and casual clothing said earnings from continuing operations were $1.3 million, or 19 cents per share, in the fourth quarter ended Jan. 31, compared with a profit of $500,000, or 8 cents per share, in the year-earlier quarter.

"Great quarter, great year," said Davenport & Co. analyst Kenneth Gassman of Richmond, Va., in a conference call with top company officials yesterday.

The 1997 numbers excluded a one-time charge of $1.5 million dealing with the company's planned sale of its manufacturing operation and to account for the operating losses generated by that unit. With this charge factored in, the company would have reported a net loss of $300,000, or 4 cents per share, for the fourth quarter.

However, analysts typically look at the performance of a company's "continuing" operations, since those are the businesses that will carry the company forward.

During the fourth quarter, Jos. A. Bank announced a deal to sell its two remaining manufacturing plants to a Syracuse, N.Y., firm, a subsidiary of M.S. Pietrafesa LP, the maker of Polo by Ralph Lauren tailored clothing. The factories consist of a sewing plant on West North Avenue and a cutting room on Brookhill Road in Northwest Baltimore. The sale is expected to close very soon, the company said.

For the year, Bank said it earned $2.5 million, or 36 cents per share, from continuing operations, compared with $700,000, or 10 cents a share, reported for 1996. With the $1.5 million charge, earnings would have been flat with the company reporting earnings of $700,0000, or 10 cents a share, for the full year 1997. The per-share earnings of 36 cents for the year beat the sole posted estimate of 30 cents a share, according to Nelson's, an earnings advisory service. Company officials said they were very comfortable with analysts' earnings estimates of 50 cents to 55 cents a share for the fiscal year that will end Jan. 31.

That would represent a profit jump of 39 percent, a growth rate more than twice the company's leading price/earnings (P/E) ratio of about 15. A leading P/E is a ratio of a company's stock price to its forecasted earnings and is one way analysts gauge how fairly a company's stock is valued by investors.

Bank's sales in the fourth quarter jumped 11.3 percent, to $52.5 million, from $47.1 million in 1996. Sales for the whole year rose 12.4 percent, to $172.2 million, compared with $153.2 million the year before.

Same-store sales -- an important measure of a retailer's health -- leaped 5.6 percent in the fourth quarter and 4.1 percent in the year. Those figures do not include sales from eight new stores opened in existing markets last year.

"We are thrilled by this year's results and the success of the new stores we opened this year," said Timothy F. Finley, chairman and chief executive officer.

The company said it plans to open 65 stores in the next three years -- some of them relocations -- including 17 stores this year.

By divesting its manufacturing operations, Bank is embracing a business model more like that of some of the athletic shoe companies: It outsources production and concentrates on designing and marketing products -- its real expertise. That model has worked extremely well for companies such as Nike Inc. Just as the "Nike" name is the strength of its brand, so, too, is the Jos. A. Bank name. Using its resources to market that brand name -- instead of having fo focus on manufacturing issues -- was the correct step to take, Finley and Chief Financial Officer David E. Ullman said in an interview yesterday.

As recently as four years ago, Bank's factories made all its tailored clothing. In 1997, the company's factories made about 35 percent to 40 percent of its clothing.

Jos. A. Bank Clothiers, established in 1905, is a retailer, cataloger and marketer of classic, traditional tailored and casual clothing with 90 stores in 27 states and Washington, D.C.

Company executives yesterday pretty much ruled out growth through acquisitions, saying Bank will generate store and sales growth internally.

Pub Date: 3/19/98

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