Tailored Brands Shares Might Be Reaching An Inflection Point

Shares of Tailored Brands Inc TLRD might be reaching an inflection point that will drive top- and bottom-line upside for the apparel retailer, according to a note from Wunderlich.

The "painful" acquisition of Jos. A. Bank in June 2014 shattered investor confidence on the company. But, Wunderlich believes Tailored Brands "is nearing a material turn."

"While investors have, somewhat rightly, focused on Jos. A. Bank's travails, we believe they have missed key positives, from increased focus on custom clothing, material cost-cutting gains, the expansion of the Joseph Abboud and owned branded lines, and increasing penetration of the tuxedo and rental business," analyst Eric Beder wrote in a note.

Beder believes the company would return to its days of top and bottom-line upside, driven by cost cutting efforts, market share gains, shift to higher margin segments, store closures and improving comps. The company expects to achieve long-term operating margins of 12 percent versus the estimated 7.6 percent in 2017.

"We believe Jos. A. Bank is making material progress, which will become more evident when the division anniversaries the ending of BOGO sales at the end of 3QFY17," Beder noted.

The analyst expects 2017 and 2018 EPS of $1.70 and $2.00, respectively, as it initiated coverage of Tailored Brands with a Buy rating and $20 target, implying a potential upside of 44 percent from the recent levels.

At time of writing, shares of Tailored Brands rose 0.22 percent to $13.95.