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Tailored Brands Fitting Into A Better Business Model After Mixed Q1


Shares of Tailored Brands Inc (NYSE: TLRD), the parent company of Men's Wearhouse and other men's apparel brands, initially traded lower after the company reported its first quarter results. But by Thursday, the stock was trading higher more than 7 percent as some among the Street found the report encouraging.

Wunderlich's Eric Beder maintains a Buy rating on Tailored Brands with an unchanged $24 price target after the company delivered a "solid beat" in its report. Among the notable aspects was stronger than expected gross margins due to cost cutting initiatives.

The report also showed improving momentum as evidence by the second consecutive quarter of positive comps at Jos. A. Bank due to strong performance in dress shirts and regaining share of customers who don't respond well to massive promotions.

Also, overall inventories fell 8.6 percent in the quarter which was quicker than the 5.5 percent sales decline and management is calling for inventory levels to further decline by a mid-single digit in fiscal 2018.

On the negative front, revenue of $782.9 million was $10.1 million lower than expected and Men's Wearhouse reported a comp decline of 3.1 percent, although this was roughly in-line with the company's own guidance.

Improving Balance Sheet

Tailored Brands' bought back $9.2 million in debt during the quarter and bought back an additional $17.5 million in debt so far in the second quarter, the analyst noted. In fact, the company has now lowered its total debt load by nearly $100 million over the past 12 months.

Finally, Tailored Brands' retail locations hold a key advantage over online players as the company's business model focuses more on the fit, not the price.

Bottom line, Tailored Brands' stock is trading at 5.1x the analyst's fiscal 2019 earnings per share estimate and offers a dividend yield of nearly 7 percent, which offers investors a favorable risk to reward profile.

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Latest Ratings for TLRD

Mar 2020B. Riley FBRMaintainsNeutral
Mar 2020Deutsche BankMaintainsHold
Sep 2019B. RileyMaintainsNeutral

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Posted-In: Apparel Eric Beder Mens Apparel Tailored Brands WunderlichAnalyst Color Analyst Ratings

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