JoS A Bank Reports Record 2011 Sales, Profits Despite Tough Q4
JoS A Bank Clothiers (NASDAQ: JOSB) discussed record fiscal 2011 earnings and net sales in a conference call with investors on Thursday.
Net income for the year jumped to $97.5 million, up 13.6 percent from $85.8 million in 2010. EPS of $3.49 was up 13.3 percent compared to last year, expectations were for an EPS of $3.47. Sales of $979.9 million in 2011 represented a record high for the company, up 14.2 percent from $858.1 a year ago, but were still slightly less than the analyst estimate of $1.09 billion. Comparable store sales were up 7.6 percent for the year, whereas Direct Marketing sales increasing 14.7 percent.
Higher promotions were mainly responsible for the increased sales, aided as well by increased store traffic. The higher markdowns resulted in gross margins that were 50 basis points down compared to their previous yearly level. In 2010, that comparison was a positive 130 basis points. Cost price inflation continued in 2011, particularly due to raw materials such as cotton and wool.
The story was resilient despite a weak fourth quarter. EPS for the quarter was $1.58, up from $1.47 last year, but trailing estimates of $1.61. Revenue increased 9 percent to $346.3 million. Comparable sales for the fourth quarter were 3.6 percent, whereas direct sales were up only 2 percent. Both showed declines from expectations, the company noted, due to a milder winter than adversely impacted outerwear and cold weather merchandise sales in the fourth quarter. In the prior year's quarter, direct sales up nearly 52 percent. The company noted that, while the company depends on cold weather merchandise more than its peers, without them, comps would have more-than-doubled at 8 percent.
The lower sales during winter have adversely impacted inventory levels, which are in the mid-20 percent range. The company noted that, thankfully, most of the assortments are perennial in terms of style, thus will not require liquidation. As such, the company expects inventory level of 15 to 20 percent at the 2012 year end, counting on a normalization of winter merchandise sales. As cost inflation continues at an estimated 7 percent, the company expects higher inventories to contribute slightly to gross margins.
The flip side of the winter weather, the company's President and CEO E. Neal Black noted that spring clothing sales have picked up significantly, in contrast with weak spring sale trends last year. With Easter being closer this year, the company expected this period to be a test on how sales would turn out.
In addition to pursuing high growth and new products such as Tuxedo rentals, custom clothing for larger sizes and slimmer-cut suits and shirts, the company eyed future growth through store expansion as well as a strengthening e-commerce, which currently counts a database of 3.2 million active customers.
Similarly to its operations, the company's stock is highly cyclical. In a note to clients, Sterne Agee notes that Q1, particularly March and April, is when the stock exhibits the largest percentage changes at 16.1 and 17.6 each on average over the past years. Should investors set aside the adverse volatilities of the fourth quarter of 2011 and concentrate on the headline record, shares may be up for similar appreciation in the next month. They seem to be doing just that, as JOSB closed at $51.10 on Thursday, up 2.57 percent on the previous day's close.
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