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Men's Wearhouse Reports Fiscal 2010 Second Quarter Results

- Q2 2010 GAAP diluted EPS was $0.80 and adjusted diluted EPS was $0.83 compared with Q2 2009 GAAP diluted EPS of $0.75

- Company provides guidance for third quarter of fiscal 2010

- Conference call at 5:00 pm Eastern today

HOUSTON, Sept. 8 /PRNewswire-FirstCall/ -- The Men's Wearhouse (NYSE: MW) today announced its consolidated financial results for the second quarter ended July 31, 2010.




Second Quarter Sales Summary – Fiscal 2010


                                        Total Sales Comparable Store Sales
              U.S. dollars, in millions Change %    Change %

              Current Year Prior Year               Current Year Prior Year

Total Company $ 537.0(a)   $ 526.2(a)   2.0%

MW            $ 367.4(b)   $ 359.0(b)   2.3%        2.7% (c)     - 2.0% (c)

K&G           $ 87.6       $ 93.6       - 6.4%      - 4.6%       - 3.6%

United States $ 465.4      $ 461.0      1.0%        1.2%         - 2.4%

Moores        $ 71.6       $ 65.2       9.7%        0.6% (d)     - 3.4% (d)










Year-To-Date Sales Summary – Fiscal 2010


                                        Total Sales Comparable Store Sales
              U.S. dollars, in millions Change %    Change %

              Current Year Prior Year               Current Year Prior Year

Total Company $ 1,010.5(a) $ 990.3(a)   2.0%

MW            $ 685.7(b)   $ 670.0(b)   2.3%        2.6% (c)     - 4.4% (c)

K&G           $ 185.8      $ 198.1      - 6.2%      - 4.8%       - 0.6%

United States $ 891.5      $ 886.0      0.6%        0.9%         - 3.5%

Moores        $ 118.9      $ 104.3      14.0%       0.5% (d)     - 3.7% (d)



(a) Due to rounded numbers total company may not sum.

(b) Total sales from retail stores and ecommerce.

(c) Comparable store sales do not include ecommerce.

(d) Comparable store sales change is based on the Canadian dollar.







GAAP diluted earnings per share were $0.80 for the second quarter ended July 31, 2010.  Adjusted diluted earnings per share were $0.83 after excluding $2.7 million ($1.7 million after tax or $0.03 per diluted share outstanding) in acquisition costs related to the Company's acquisition of Dimensions Clothing Limited ("Dimensions") and certain assets of Alexandra plc ("Alexandra") on August 6, 2010.  This compares to diluted earnings per share guidance given June 9, 2010 of $0.75 to $0.78.  Prior year second quarter GAAP diluted earnings per share were $0.75.

SECOND Quarter REVIEW

Total Company sales increased 2.0% for the quarter.  

    --  Clothing product sales, representing 67.5% of fiscal second quarter 2010
        total net sales, decreased 0.6% due mainly to a decrease in store
        traffic levels at Men's Wearhouse and a decrease in the average
        transaction value at K&G.
    --  Tuxedo rental sales, representing 26.5% of fiscal second quarter 2010
        total net sales, increased 10.0% due mainly to an increase in units
        rented.


Gross margin before occupancy costs, as a percentage of total net sales, increased 226 basis points from 59.1% to 61.3%.  Clothing product margins, as a percentage of related sales, increased 224 basis points due primarily to different promotional offerings, as well as the mix of products on promotion, in 2010 compared to 2009 and lower product costs.  Tuxedo rental margins, as a percentage of related sales, increased 111 basis points due primarily to a decrease in rental product retirement costs in 2010.

Occupancy costs decreased, as a percentage of total net sales, by 89 basis points from 13.9% to 13.0%.  On an absolute dollar basis, occupancy costs decreased 4.5% from $73.1 million in the prior year to $69.8 million due primarily to lower depreciation costs.  

Selling, general and administrative expenses were $191.2 million.  The prior year quarter included a cumulative adjustment of $3.1 million for gift card breakage income.  Excluding this other income, SG&A expense was $177.0 million in the prior year quarter.   During the current quarter, the Company incurred $2.7 million in costs associated with the August 6, 2010 acquisition of Dimensions and certain assets of Alexandra.  Excluding these costs, second quarter SG&A expenses were $188.5 million or an increase of 6.5% to the adjusted prior year quarter.  The increase is primarily due to increased marketing costs and increased employee benefit costs.  As a percentage of total net sales, adjusted SG&A increased 146 basis points from 33.6% to 35.1%.  

Operating income was $68.4 million.  Excluding $2.7 million in costs associated with the acquisitions, operating income was $71.1 million or 13.2% of total net sales compared to operating income of $63.9 million or 12.1% of total net sales for the same period last year.

The effective tax rate for second quarter fiscal 2010 was 37.6%.

Cash and cash equivalent balances as of the end of the second quarter of 2010 were $281.5 million.

Total inventories of $416.4 million declined 3.3% from the prior year second quarter of $430.8 million.

Current maturities of long-term debt were $45.2 million as of the end of the second quarter of 2010.

THIRD QUARTER 2010 HIGHLIGHTS AND GUIDANCE

Dimensions and Alexandra Acquisitions

On August 6, 2010, the Company acquired Dimensions and certain assets of Alexandra, two leading providers of corporate clothing uniforms and workwear in the United Kingdom, for total cash consideration of approximately 61 million pounds Sterling (US$97.8 million).  The combined businesses are organized under a UK-based holding company of which Men's Wearhouse controls 86% and certain existing shareholders of Dimensions controls 14%.

The financial results of the combined operations, excluding integration and transaction costs, are expected to be neutral to $0.01 accretive to the Company's 3Q FY 2010 diluted earning per share.  Total sales of the combined operations are expected in a range of US$49 million to US$51 million.  Transaction costs and integration expenses for third quarter are expected to be $1.8 million ($1.1 million after tax and non-controlling interest or $0.02 per diluted share outstanding).

Tuxedo Distribution Closures

In late August 2010, a decision was made by the Company to cease tuxedo distribution operations in November 2010 at four of the eleven facilities that we currently use for tuxedo distribution.  The operations at these four facilities will be assumed by other tuxedo distribution facilities in our system allowing us to more effectively manage our tuxedo rental operations.

In the third quarter, we expect a charge of approximately $2.2 million ($1.5 million after tax or $0.03 per diluted share outstanding) consisting primarily of severance payments and fixed asset write-offs.  In the fourth quarter, we expect an additional charge of approximately $0.6 million consisting primarily of severance payments, fixed asset write-offs and facility remediation.  

The expected benefit to fiscal 2011 as a result of these closures would be a reduction in operating costs of approximately $4.0 million.

Third Quarter Financial Guidance Summary

For the third quarter of the fiscal year, GAAP diluted earnings per share are expected to be in a range of $0.35 to $0.42.  Adjusted diluted earnings per share are expected to be in a range of $0.40 to $0.47 excluding transaction costs and integration expenses of $1.8 million ($1.1 million after tax and non-controlling interest or $0.02 per diluted share outstanding) and $2.2 million in tuxedo distribution closure costs ($1.5 million after tax or $0.03 per diluted share outstanding).  




                                   Historical Actual Guidance

                                   3Q FY 2009        3Q FY 2010



Total Sales                        +0.5%             + low double digits (1)

Comparable Store Sales (2)

MW                                 -0.2%             + low to mid single digit

K&G                                -1.1%             - mid single digit

Moores                             +1.9%             Flat

Gross Profit Growth Rate           -0.0%             + low double digits (3)

S G & A Expense Growth Rate        -2.6% (4)         + low double digits (5)

Effective Tax Rate                 34.51%            31.30% (6)

Shares Outstanding (millions)      52.442            52.811

GAAP Diluted EPS                   $0.37             $0.35 to $0.42

Adjusted Diluted EPS                                 $0.40 to $0.47 (5)

Foreign Exchange Conversion (avg.)

US Dollar to GBP                   n/a               1.53

US Dollar to Canadian Dollar       0.93              0.96



  1. Includes US$49 million to US$51 million of sales from acquired operations
     of Dimensions and Alexandra in the 3Q of FY 2010.
  2. Includes an assumed increase in tuxedo rental revenues of + low double
     digits in the 3Q of FY 2010 compared to the prior year quarter increase
     of 2.1%.
  3. Occupancy costs are expected to decrease in the low single digit range in
     the 3Q of FY 2010 from the prior year quarter.
  4. Excludes $1.8 million in costs in the 3Q 2008 from the closing of Golden
     Brand.
  5. Excludes acquisition transaction and integration costs and costs
     associated with the closure of four tuxedo distribution centers in the 3Q
     of FY 2010.
  6. Includes a $1.4 million benefit in the 3Q 2010 from reduction of tax
     valuation reserves.






UPDATED CONFERENCE CALL AND WEBCAST INFORMATION

At 5:00 p.m. Eastern time on Wednesday, September 8, 2010, Company management will host a conference call and real time web cast to review the fiscal second quarter and its outlook for the third quarter of fiscal 2010.    

To access the conference call, dial 480-629-9770. To access the live webcast presentation, visit the Investor Relations section of the Company's website at www.menswearhouse.com.  A telephonic replay will be available through September 15, 2010 by calling 303-590-3030 and entering the access code of 4355146#, or a webcast archive will be available free on the website for approximately 90 days.


STORE INFORMATION

                         July 31, 2010     August 1, 2009    January 30, 2010

                         Number    Sq. Ft  Number    Sq. Ft. Number    Sq. Ft.
                         of Stores (000's) of Stores (000's) of Stores (000's)



Men's Wearhouse          584       3,307.0 580       3,274.1 581       3,284.4



Men's Wearhouse and Tux  434       596.4   473       644.4   454       623.4



Moores, Clothing for Men 117       735.7   117       732.7   117       734.6



K&G (a)                  104       2,426.7 108       2,488.4 107       2,475.6



Total                    1,239     7,065.8 1,278     7,139.6 1,259     7,118.0



(a) 95, 94 and 94 stores, respectively, offering women's apparel.





Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,239 stores.  The Men's Wearhouse, Moores and K&G stores carry a full selection of designer, brand name and private label suits, sport coats, furnishings and accessories and Men's Wearhouse and Tux stores carry a limited selection.  Tuxedo rentals are available in the Men's Wearhouse, Moores and Men's Wearhouse and Tux stores.  Additionally, Men's Wearhouse operates a global corporate apparel and workwear group consisting of TwinHill in the United States and Dimensions and Alexandra in the United Kingdom.  

This press release contains forward-looking information. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may be significantly impacted by various factors, including sensitivity to economic conditions and consumer confidence, possibility of limited ability to expand Men's Wearhouse stores, possibility that certain of our expansion strategies may present greater risks, changes in foreign currency rates and other factors described in the Company's annual report on Form 10-K for the fiscal year ended January 30, 2010, Form 10-Q for the quarter ended May 1, 2010 and Current Report on Form 8-K/A filed on August 16, 2010.

For additional information on Men's Wearhouse, please visit the Company's website at www.menswearhouse.com.


CONTACT: Neill Davis, EVP & CFO, Men's Wearhouse (281) 776-7000

         Ken Dennard, DRG&E (713) 529-6600






THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)



FOR THE THREE MONTHS ENDED
July 31, 2010 AND August 1, 2009
(In thousands, except per share data)



                 Three Months Ended                     Variance

                           % of               % of                       Basis
                 2010      Sales    2009      Sales     Dollar   %       Points

Net sales:

Clothing product $362,228  67.46%   $ 364,302 69.23%    $(2,074) (0.57%) (1.78)

Tuxedo rental
services         142,462   26.53%   129,567   24.62%    12,895   9.95%   1.91

Alteration and
other services   32,299    6.01%    32,339    6.15%     (40)     (0.12%) (0.13)

Total net sales  536,989   100.00%  526,208   100.00%   10,781   2.05%   0.00



Total cost of
sales            277,406   51.66%   288,420   54.81%    (11,014) (3.82%) (3.15)



Gross margin (a) 259,583   48.34%   237,788   45.19%    21,795   9.17%   3.15



Selling, general
and
administrative
expenses         191,168   35.60%   173,896   33.05%    17,272   9.93%   2.55



Operating income 68,415    12.74%   63,892    12.14%    4,523    7.08%   0.60



Net interest     (275)     (0.05%)  -         0.00%     (275)    100.00% 0.05



Earnings before
income taxes     68,140    12.69%   63,892    12.14%    4,248    6.65%   0.55



Provision for
income taxes     25,620    4.77%    24,407    4.64%     1,213    4.97%   0.13



Net earnings     $ 42,520  7.92%    $ 39,485  7.50%     $3,035   7.69%   0.41





Net earnings per
diluted common
share (b)        $ 0.80             $ 0.75



Weighted average
diluted common
shares
outstanding:     52,806             52,255





(a) Gross margin as a
percentage of related
sales:

                 Three Months Ended                     Variance

                           % of               % of
                           Related            Related                    Basis
                 2010      Sales    2009      Sales     Dollar   %       Points

Clothing margin  $ 201,107 55.52%   $ 194,115 53.28%    $ 6,992  3.60%   2.24

Tuxedo margin    120,426   84.53%   108,092   83.43%    12,334   11.41%  1.11

Alteration and
other services
margin           7,853     24.31%   8,649     26.74%    (796)    (9.20%) (2.43)

Occupancy costs  (69,803)  (13.00%) (73,068)  (13.89%)  3,265    4.47%   0.89

Gross margin     $ 259,583 48.34%   $ 237,788 45.19%    $ 21,795 9.17%   3.15



(b) Calculated based on net earnings less net
earnings allocated to participating
securities.








THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)



FOR THE SIX MONTHS ENDED
July 31, 2010 AND August 1, 2009
(In thousands, except per share data)



                 Six Months Ended                       Variance

                           % of               % of                       Basis
                 2010      Sales    2009      Sales     Dollar   %       Points

Net sales:

Clothing product $ 730,599 72.30%   $ 723,364 73.04%    $ 7,235  1.00%   (0.74)

Tuxedo rental
services         214,616   21.24%   200,986   20.29%    13,630   6.78%   0.94

Alteration and
other services   65,240    6.46%    65,992    6.66%     (752)    (1.14%) (0.21)

Total net sales  1,010,455 100.00%  990,342   100.00%   20,113   2.03%   0.00



Total cost of
sales            549,800   54.41%   564,565   57.01%    (14,765) (2.62%) (2.60)



Gross margin (a) 460,655   45.59%   425,777   42.99%    34,878   8.19%   2.60



Selling, general
and
administrative
expenses         370,818   36.70%   353,109   35.66%    17,709   5.02%   1.04



Operating income 89,837    8.89%    72,668    7.34%     17,169   23.63%  1.55



Net interest     (500)     (0.05%)  (160)     (0.02%)   (340)    212.50% 0.03



Earnings before
income taxes     89,337    8.84%    72,508    7.32%     16,829   23.21%  1.52



Provision for
income taxes     33,209    3.29%    27,767    2.80%     5,442    19.60%  0.48



Net earnings     $ 56,128  5.55%    $ 44,741  4.52%     $11,387  25.45%  1.04





Net earnings per
diluted common
share (b)        $ 1.05             $ 0.85



Weighted average
diluted common
shares
outstanding:     52,717             52,105





(a) Gross margin
as a percentage
of related
sales:

                 Six Months Ended                       Variance

                           % of               % of
                           Related            Related                    Basis
                 2010      Sales    2009      Sales     Dollar   %       Points

Clothing margin  $ 402,165 55.05%   $ 385,720 53.32%    $ 16,445 4.26%   1.72

Tuxedo margin    181,254   84.46%   167,479   83.33%    13,775   8.22%   1.13

Alteration and
other services
margin           16,730    25.64%   18,212    27.60%    (1,482)  (8.14%) (1.95)

Occupancy costs  (139,494) (13.81%) (145,634) (14.71%)  6,140    4.22%   0.90

Gross margin     $ 460,655 45.59%   $ 425,777 42.99%    $ 34,878 8.19%   2.60



(b) Calculated based on net earnings less net
earnings allocated to participating
securities.








THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)



                                                July 31,     August 1,
                                                2010         2009



ASSETS



Current assets:

 Cash and cash equivalents                      $ 281,500    $ 144,449

 Short-term investments                         -            19,490

 Accounts receivable, net                       19,066       17,129

 Inventories                                    416,377      430,777

 Other current assets                           61,762       51,876



 Total current assets                           778,705      663,721

Property and equipment, net                     333,133      375,595

Tuxedo rental product, net                      91,690       107,848

Goodwill                                        60,449       59,266

Other assets, net                               22,850       16,466



 Total assets                                   $ 1,286,827  $ 1,222,896



LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:

 Accounts payable                               $ 82,163     $ 78,918

 Accrued expenses and other current liabilities 129,971      115,488

 Income taxes payable                           7,589        19,276

 Current maturities of long-term debt           45,226       -



 Total current liabilities                      264,949      213,682

Long-term debt                                  -            43,161

Deferred taxes and other liabilities            64,402       63,289



 Total liabilities                              329,351      320,132



Shareholders' equity:

 Preferred stock                                -            -

 Common stock                                   708          703

 Capital in excess of par                       332,677      319,029

 Retained earnings                              1,000,553    961,670

 Accumulated other comprehensive income         36,308       33,988

 Treasury stock, at cost                        (412,770)    (412,626)



 Total shareholders' equity                     957,476      902,764



 Total liabilities and equity                   $ 1,286,827  $ 1,222,896








THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



FOR THE SIX MONTHS ENDED
July 31, 2010 AND August 1, 2009
(In thousands)

                                           Six Months Ended

                                           2010       2009



CASH FLOWS FROM OPERATING ACTIVITIES:

 Net earnings                              $ 56,128   $ 44,741

 Non-cash adjustments to net earnings:

 Depreciation and amortization             36,885     43,881

 Tuxedo rental product amortization        20,812     22,089

 Other                                     10,953     (376)

 Changes in assets and liabilities         5,510      (206)



 Net cash provided by operating activities 130,288    110,129



CASH FLOWS FROM INVESTING ACTIVITIES:

 Capital expenditures                      (25,865)   (28,757)

 Other investing activities                23         -



 Net cash used in investing activities     (25,842)   (28,757)



CASH FLOWS FROM FINANCING ACTIVITIES:

 Proceeds from issuance of common stock    1,321      1,051

 Payments on revolving credit facility     -          (25,000)

 Cash dividends paid                       (9,535)    (7,344)

 Other financing activities                (2,020)    (1,678)



 Net cash used in financing activities     (10,234)   (32,971)



 Effect of exchange rate changes           1,270      8,636



INCREASE IN CASH AND CASH EQUIVALENTS      95,482     57,037

 Balance at beginning of period            186,018    87,412

 Balance at end of period                  $ 281,500  $ 144,449







SOURCE Men's Wearhouse