Rental Revenue Lifts Men's Wearhouse

George Zimmer, chairman and chief executive officer of Men's Wearhouse, also commented on the contribution of the tuxedo rental business to the firm's results and its outlook. "The tuxedo rental business is counter-seasonal," peaking in the second and third quarters of the year, while the apparel sales business of the Men's Wearhouse stores peaks in the fourth and first quarters, Zimmer pointed out. Five years ago, in fiscal 2002, tuxedo rental revenues accounted for only 2.5% of the Men's Weathouse consolidated revenues, but next year they are estimated to be 17% of consolidated sales. "This growth drives earnings more than sales," Zimmer observed.

For the quarter that ended Aug. 4, Men's Wearhouse posted a 1.1% increase in comparable store sales for its US locations and an increase of 8.4% for its Canadian stores. The second quarter's net income totaled $54.2 million, compared with $35.6 million in last year's second quarter, while earnings per share climbed to $1 from 65 cents.

Total sales increased 23.6% for the quarter to more than $560 million, with apparel sales representing nearly 71% of the total and tuxedo rental revenues representing 23.6%. The company noted that the increase in comparable store sales was primarily due to the growth of the its tuxedo rental business and increases in traffic levels that boosted clothing sales at the Men's Wearhouse.

Commenting on the overall environment in which Men's Wearhouse and other retailers are operating, Zimmer said, "Without a doubt, there are numerous head-winds of a macro-economic nature that are presenting challenges for the consumer in the US today. However, although we are not immune to these pressures, our dominant line of business, Men's Wearhouse stores, is driven mostly by employment and wage trends, and both of those remain generally healthy and constant."

Men's Wearhouse executives noted that the company has decided to expand its share repurchase program up to $100 million by authorizing $90.3 million to be added to the remaining $9.7 million of the current program. "The decision of an additional share repurchase program was based on the company's continuing financial success and reflects our confidence in our long-term growth outlook," Zimmer observed.

The Men's Wearhouse operates under that name as well as other formats including After Hours, Moores Clothing for Men and K&G. The total store count at the end of the second quarter included 553 Men's Wearhouse locations, 500 After Hours stores, 116 Moore's Clothing for Men and 100 K&G locations.