Clothier is takeover prospect

Jos. A. Bank shares sell below book value, despite performance

CEO expects some looks

Company projecting record earnings for fiscal 4th quarter

February 02, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

With its shares selling at half their book value, Jos. A. Bank Clothiers Inc. is in a position to be attractive to suitors, the retailer's chief executive officer said yesterday.

Bank's stock was unchanged yesterday, closing at $3.50 per share. The company's stock is trading at 57 cents on the dollar, with the company's book value at $6.19 per share.

"It is clear that when a company is performing very well and is undervalued, as we are, in a market which is starting to shift to small-cap stocks, that people would be looking at us," Robert N. Wildrick, the chief executive, said yesterday.

The company also released projections yesterday for higher earnings in the fourth quarter, compared with the last three months of the previous fiscal year.

But Wildrick declined to comment on whether the Hampstead-based men's apparel chain has been approached by a potential buyer, or is even for sale. Jos. A. Bank has not recently hired an investment banker, he said.

"We don't comment on speculations," he said.

The men's apparel industry, like other sectors of retailing, has gone through major consolidations, analysts said.

"It's down to two or three players," said Kenneth M. Gassman, a retail analyst with Davenport & Co. in Richmond, Va. "I think it's an incredibly cheap stock, and, yes, it is a potential takeover target, no question. Jos. Bank is more likely to be an `acquiree' than an acquirer."

Wildrick, who was charged with boosting stock value when he took over as CEO in November, made the comments yesterday while announcing earnings projections for the fourth quarter that ended Jan. 29.

Earnings for the quarter, excluding one-time charges, are expected to beat earnings of 32 cents per share for the fourth quarter of 1998, the company said. Those are expected to be record-setting earnings for a single quarter.

Sales at stores open at least a year, a key measure of a retailer's performance, rose 5.5 percent during the quarter, Bank said.

The company plans to release actual earnings by the end of the month.

Wildrick attributed a recent reversal in performance to better management of inventory, tighter cost controls and changes in marketing, such as more aggressively pricing key merchandise categories.

Sales have been strong not only in the stores but on the Internet and in the catalog, he said.

Wildrick stepped in in November at a company with sagging sales and stock prices, partly the result of customers discarding suits for more casual dress.

During the third quarter, which ended Oct. 30, sales fell 6.2 percent at locations open at least a year and total sales dipped 1.9 percent. The retailer had posted a net loss of $236,000 for the quarter. It was the first loss since the fourth quarter of 1997.

Bank began reversing its sales slump during the fourth quarter. The company broke monthly sales records in December, reporting total sales of $30.4 million, the highest ever in a single month.

Also in December, sales at stores open at least a year -- a key indicator of financial health -- jumped 9 percent, one of the biggest increases on a month-to-month basis in the past two years. In November, same-store sales rose 5.7 percent.

Bank has performed better than rival chains, based on the ratio of market capitalization to sales. Bank has a market value of $22.9 million, with annual sales of $194 million, giving it a relatively low market value to sales ratio of 11 percent.

Yet Bank's stock, which peaked at just over $9 per share during the past two years, has generated little interest on Wall Street.

"I believe it is obvious that our stock is significantly undervalued, given the recent sales performance and our prospect for 2000," Wildrick said.

Part of the undervaluation is a function of being part of the men's apparel industry, analysts said.

"Wall Street is not watching this industry at all," Gassman said. "While Jos. A. Bank is doing OK, I think Wall Street doesn't see a catalyst for growth in the menswear industry.

"Casual Friday was supposed to be a catalyst. That didn't work," Gassman said. "Baby boomers are retiring who don't care about suits, so it's difficult to point to a catalyst for growth."

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