Jos. A. Bank targets big-and-tall set

Clothier to expand product line, offer tuxedo-rental program, open 30 stores

April 02, 2010|By Andrea K. Walker | andrea.walker@baltsun.com

Expanding waistlines might not be good for the nation's health, but it could mean a new revenue stream for men's clothier Jos. A. Bank.

The Hampstead retail chain is bringing its line of clothing for "portly" and tall men to more of its stores and expanding its product line for online sales. The company, which for several years has offered a limited selection of items for the big-and-tall set, such as longer neckties and larger-size dress shirts, said that population is one that has been underserved.

Targeting larger men is one way to attract new customers and bring in sales as the company looks for ways to grow beyond opening new stores, Jos. A. Bank executives said during an earnings conference call Thursday. The company also announced that it plans to roll out to all stores a pilot tuxedo-rental program it started last year. And executives indicated that they might begin aggressively expanding the outlet business, telling analysts to expect an announcement in a few weeks.

"These are the things that we can build internally using our existing resources as opposed to buying another company," R. Neal Black, Jos. A. Bank chief executive and president, said in a telephone interview after Thursday's conference call. "We have to have some organic growth projects we're working on in order to sustain our growth beyond the limit of opening new stores."

The retailer also said it will ramp up the opening of full-priced stores this year. It had pulled back during the recession but now says it will open 30 stores nationwide this year. It will focus on moving into spaces left by retailers that have gone out of business. Before the economic downturn, the retailer expanded into newly built open-air shopping centers. Executives said they hope to have 600 stores by 2014. The company now operates 473 stores in 42 states and Washington.

The company has seven outlet stores, including one near its headquarters in Hampstead, which are used mostly to sell items that aren't bought from its full-price stores. If it enters the outlet business more aggressively, Black said, the company would manufacture a separate line of clothing specifically for those stores.

Stifel Nicolaus analyst Richard Jaffe said the company should look at new ways to grow.

"They've got a lot of money, and they've got a great franchise in the men's clothing business," Jaffe said. "They've also been gaining market share in what has been a contracting market. How do you leverage your success after that? One of the ways is a bigger-size range, and the Internet makes it real possible because you can manage the inventory in a single place and have a lot more sizes."

While many of its customers are spending less, the company has been able to offset sales losses because of new customers it is bringing in, Black said. Some of those new customers are those who are trading down from more expensive designer labels.

Net income jumped 22 percent to $71.2 million, or $3.84 per share, for the fiscal year ended Jan. 30. That was compared with $58.4 million, or $3.17 per share, a year earlier. Annual revenue was $770 million, a nearly 11 percent increase from the $696 million posted a year ago.

For the fourth quarter, the company reported net income of $35.5 million, compared with $30.4 million in the period a year earlier. Net sales were $279 million, compared with $248 million for the previous year. Comparable-stores sales for the quarter grew 9.4 percent, while direct-marketing sales, which include the Internet and catalog, increased 20 percent. The company attributed stronger online sales to a makeover of its Web site last year.

Despite penny-pinching consumers, the retailer has managed to post sales gains through heavy discounting. It also aggressively renegotiated rents with landlords.

"It's been more than a year now of discounting, and although I don't think it's quite as intense as it was back in the beginning of the economic crisis, the customer is still requiring it," Black said. "We're sticking with it until they tell us it is no longer what they want. We're prepared to do it all year if we have to, but I hope we don't have to."

The discounting has come at the price of profit margins that had fallen every quarter since the third quarter of 2007 but increased in the fourth quarter. Black attributed the improved margins to lower prices on labor and cloth and other materials, which allowed the company to discount without hurting margins.

Jaffe pointed out that while margins increased, earnings growth has narrowed in the past few quarters. He said the trend could continue as the company spends more on advertising and expanding. Gains from the tuxedo and big-and-tall business aren't expected to be seen until next year, Black said.

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