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Jos. A Bank Clothiers Releases Q1 Guidance, Expects Unfit Q1 Earnings

Jos. A Bank Clothiers Releases Q1 Guidance, Expects Unfit Q1 Earnings
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Jos. A Bank Clothiers (NASDAQ: JOSB) opens the week down after releasing woeful first-quarter earnings expectations and guidance.

The Hampstead, Maryland-based firm expects EPS to finish in the $0.27 to $0.30 range, around just half the $0.53 it posted in Q1 2012. This would place the apparel chain's earnings far short of the $0.46 per share analysts would like to see.

Commenting on the dim forecast, President and CEO R. Neal Black stated, “While we were able to control our expenses and improve our advertising efficiency in the quarter, our gross margin was down primarily due to higher inventory sourcing costs and lower average selling prices due mostly to increased percentage of sales of winter clearance products. In addition, our sales declined approximately 3%, primarily in April. Like many other retailers, we were also affected by the unseasonably cool weather. On the positive side, our Direct Marketing business, primarily on the Internet, continued to perform well, with double-digit sales growth…”

Buy One Company, Get Unlimited Suits Free

A March article in Forbes labeled Jos. A Bank as one of five “merger-bait retail stocks.” The author suggested that the stock received high marks using his Warren Buffett-based model for having an extremely long history of increasing annual operating income, having no debt and averaging a return on equity of over 18 percent over the past decade. The segment on the company concludes that its 2012 EPS dip is a buying opportunity instead of a long-term problem.

Banking on the Prom?

An April article in the Houston Chronicle mentioned that, after tightening during the recession, prom spending is on the rise. If the 2013 prom season truly turns out to be a hit, look for Jos. A Bank to see a boost in second-quarter sales from tuxedo rentals, which can generate several hundred dollars per student in some cases.

Martha Stewart Still Living at JC Penney

On April 30,the New York Daily News reported an appeals court ruled that JC Penney (NYSE: JCP) can continue to sell housewares designed by Martha Stewart Living Omnimedia (NYSE: MSO) pending the outcome of a legal battle with Jos. A Bank rival Macy's (NYSE: M). The companies have been in an ongoing battle over the issue, as Macy's signed an exclusivity deal with the domestic diva in 2007. Naturally, the decision will only help the struggling JC Penney at the expense of Macy's, which could be seen as an indirect benefit to Jos. A Bank.

Market Reaction

After closing at a five-month high of $46.21 on Friday, Jos. A Bank has fallen beneath $43.50 as of this writing. The stock is down around six percent on word of the weak earnings forecast.

Posted-In: R. Neal Black Warren BuffettNews Guidance M&A Best of Benzinga


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