Jos. Bank earnings in 2Q beat forecasts

Clothier cautious about rest of year

September 08, 2006|By Andrea K. Walker | Andrea K. Walker,Sun reporter

Jos. A. Bank Clothiers Inc. officials expressed caution yesterday about the retailer's outlook for the rest of the year even as it announced earnings that beat analysts' expectations.

The Hampstead-based men's apparel chain reported net income of $7 million, or 38 cents a share, for the second quarter that ended July 30. That was an increase from $5.3 million, or 30 cents a share, a year ago.

Analysts surveyed by Thomson Financial had expected a 35-cent profit on sales of $116 million. Actual sales were $119.1 million, compared with $98.6 million a year ago.

Bank's current quarter, however, started with a surprise 6.1 percent sales decline last month at stores open at least a year, compared with a 12.9 percent increase the year before. Disclosure of the drop caused the company's stock to drop more than 16 percent in one day.

Yesterday, Bank stuck with earlier estimates that it expects to earn $2.15 per share in fiscal 2006, a 10 percent increase over fiscal 2005 earnings of $1.95 per share, but did not raise them. Companies often raise their estimates for future periods if they performed better than expected in the previous quarter.

"We need to earn $1.45 the second half compared to 70 cents in the first half," said Robert N. Wildrick, president and chief executive officer. "So there is still significant work to be done and profits to generate."

Company officials and analysts said there is still time to meet the goals. The fourth quarter is the busiest and most profitable part of the retail year.

"Given the volatility and softness in August, management knows there's a certain level of variability in their business and overall want to have more of a conservative outlook for the year," said Richard Jaffe, an analyst with Stifel, Nicolaus & Co. Inc.

Jos. A. Bank officials still do not have a clear answer for why August sales dropped.

Between Father's Day and Labor Day are heavy clearance periods for its stores, said David Ullman, chief financial officer. Still, sales were good the first week in August before dropping off the final weeks of the month.

"We've been looking for the reason and so far we haven't found it," Wildrick said. " ... We haven't seen any great trend that we can point to. We don't like to see a dip in a couple of weeks that can affect us like this. We were encouraged to see it wasn't a trend as it started to improve the first week of [September]. But we can't give you an intelligent answer on it because we just don't know."

When announcing the August sales last week, the company said sales had picked up in the first couple of days this month. Wildrick said yesterday that he would not say whether sales had continued to improve since then.

"I would have felt better about the situation if they had affirmed their positive comps from the first few days of the month - affirmed that the trend had continued," said Margaret Whitfield, an analyst with Ryan Beck & Co.

Whitfield acknowledged that sometimes companies won't comment on sales figures until a full reporting period is over.

"It's a clearance period so you can't really figure out if the [customer] is slowing down his spending," she said.

Whitfield said the company has a lot of ground to make up because sales last year were so strong.

"They do have a challenging set of sales comparisons to go up against," Whitfield said. "They have to make double-digit comps for the remainder of the year with the exception of November."

Ullman said sportswear and dress shirts led sales in the second quarter. He also said the company continued to see higher than expected health-care costs, although the situation had improved. The company's lower-priced suits didn't sell as well in the first quarter, but picked up in the second quarter. The company also said it expects to open 50 more stores by the end of the year.

Jos. A. Bank stock rose yesterday 3.91 percent, or 94 cents, to close at $25.

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