Image source: Jos. A. Bank.
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What: Shares of menswear retailer Tailored Brands jumped on Thursday after the company reported its fourth-quarter results. While the numbers were mixed, a plan to close 250 stores amid tumbling sales at Jos. A. Bank stores seems to be resonating with investors. At 11 a.m. ET Thursday, the stock was up about 11.5%.
So what: Tailored Brands reported quarterly revenue of $825.7 million, down 11.1% year over year and about $10 million lower than the average analyst estimate. Comparable sales at Men's Wearhouse stores rose 4.3%, while Jos. A. Bank stores suffered a 31.9% comparable-sales decline. The company's decision to end the practice of aggressive buy-one-get-three promotions at Jos. A. Bank stores led customers to abandon the retailer.
Tailored Brands reported a GAAP loss of $21.86 per share thanks to a $1.15 billion goodwill and intangible asset impairment charge related to its Jos. A. Bank acquisition. On a non-GAAP basis, EPS of $0.30 beat analyst estimates by $0.07.
It announced some major new efforts to turn around the ailing Jos. A. Bank brand. A cost-cutting initiative has been started, with the goal of reducing annual expenses by $50 million this year, and it plans to close 250 stores. 80 to 90 full-line Jos. A. Bank stores will be closed, along with all Jos. A. Bank and Men's Wearhouse outlet stores and between 100 and 110 MW Tux locations. For 2016, Tailored Brands expects to post non-GAAP EPS between $1.55 and $1.85, compared to $1.80 during 2015.
The company's plan to cut costs and close a substantial number of stores seems to be the main driver of Thursday's gains. Tailored Brands' earnings guidance wasn't too bad given the circumstances, leaving the door open for earnings growth at the high end, although margins at Jos. A. Bank will need to improve to hit that guidance. While Tailored Brands has a long road ahead of it as it attempts to recover from a disastrous acquisition, investors appear to be behind its new strategy.
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Now what: Tailored Brands, formerly Men's Wearhouse, bit off more than it could chew with its acquisition of Jos. A. Bank. The struggling brand is dragging down otherwise-decent results at the rest of the company, and getting customers to return will be easier said than done.
The article Tailored Brands Soars on Plan to Close Stores originally appeared on Fool.com.
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