Jos. A. Bank Clothiers Inc. said Wednesday that third-quarter profit increased 26 percent as the company continued to use deep discounts to lure buyers despite the bad economy.
But at least one analyst said the heavy promotions are beginning to hurt profitability.
The Hampstead men's retailer said earnings were $11.7 million, or 63 cents per share for the quarter that ended Oct. 31, compared with $9.3 million, or 50 cents per share, for the same period a year ago.
Comparable store sales rose 3.3 percent, while direct marketing sales, which include Internet and catalog sales, increased by 21.2 percent.
R. Neal Black, president and CEO of Jos. A. Bank, said he could not talk publicly about earnings until after a call with analysts this morning.
"Despite the continued pressure we are facing from the difficult national economy, our business model is performing very well," Black said in a news release.
Richard Jaffe, an analyst with Stifel Nicolaus who follows the company, said Jos. A. Bank is holding its ground.
"They're managing the business very well in a tough environment," Jaffe said. "They're promoting a little bit more deeply, and savings to consumers are a little bit better."
But Jaffe said the discounting is starting to hurt profitability. Gross profit was $100.8 million, or 62.5 percent of net sales in the third quarter, compared with $94.3 million, or 63.2 percent of net sales in the third quarter of last year.
"They're having to discount a little bit more to generate sales, and it's eating into margins," Jaffe said.
Still, the company is performing better than most retailers, many of which are posting sales declines, because of the heavy discounts.
Black has said in the past that promotions have drawn in new shoppers and that consumers are buying more items per transaction. He said the promotions are "sharper" than last year's.
Black has also said that the company has been able to keep costs down by negotiating lower leasing prices at its stores and paying less for manufacturing overseas because of the economy. Freight costs are down because shipping is cheaper than last year, Black has said. The company also cut back on major expansion plans this year until the economy improves.
Jos. A. Bank stock rose $1.12, or 2.6 percent, to close at $43.92 on Wednesday.