Men's Wearhouse Ramps Up

The 36 new stores will include 20 Men's Wearhouse locations and 16 of its K&G stores, which will produce a 9.3% increase in retail square footage for the company. Men's Wearhouse opened 10 new locations during the second quarter, five of them Men's Wearhouse stores and five K&Gs. The company expanded a total of four stores, two each of the Men's Wearhouse and K&G.

During the second quarter ended July 29, the company posted a comparable store sales increase of 3.7% at its US stores and 7.3% at its Canadian stores, while total sales grew to nearly $461 million, compared with $424 million in the second quarter of last year. Net income climbed to $35.6 million compared to $24.4 million last year, an increase to 65 cents a share in comparison with 50 cents a share in last year's second quarter.

"These results, on a per-share basis, were about 18% ahead of the high end of our expectations of 53 cents to 55 cents established at the beginning of the quarter," Davis said. He listed the "key elements of this better-than-planned performance" as continued improvement of company fundamentals and tuxedo rental revenues that exceeded expectations, pointing out that tuxedo rentals produce a higher gross margin than clothing sales. Among the other factors he cited were more sales of private label merchandise, direct sourcing and lower than planned selling, general and administrative expenses.

George Zimmer, founder and CEO of Men's Wearhouse, commented that "the types of numbers that we reported this quarter" are "not sustainable." However, he added, "We do believe that over the next five years we can increase our product margins much faster than expenses increase, and thus we will increase earnings per share accordingly." Among the reasons Zimmer cited for the good performance in the quarter and the good performance expected in the future was, "We clearly have a good strategy going, but what I'm not sure outsiders understand is that as good as our strategy is, the execution inside our stores is even better."

One part of the company's strategy is a new 300,000-sf distribution center that it plans to open in the Northeast for tuxedo rentals. The new facility will relieve the company's central warehouse of some of its burden and will also improve efficiencies in the handling of the tuxedo trade, Zimmer said. Other factors, cited by Davis and Zimmer included the company's efficient management of its inventory, reduced competition because of consolidations in the industry.