Why Parting Ways With Macy's Just Gave Tailored Brands A Shot Of Credibility

With the recent announcement of leaving a partnership with Macy’s Inc M, Tailored Brands Inc TLRD may see a step forward in credibility, according to Wunderlich Securities.

The tuxedo rental company announced the parting of ways right in the middle of wedding season, although Wunderlich Securities praised the move.

Analyst's Take

“Not only are those efforts poised to materially improve the financial standing of Tailored Brands, but we believe this move is a key positive in the opportunity for management to place greater focus on indepedendent brand development, and cross-product opportunities within its own free-standing stores,” said Wunderlich Securities analysts Eric Beder and Bryan Caronia.

Tailored Brands entered the Tuxedo rental partnership with Macy’s in 2015, a deal that was meant to expand the brands presence to Macy’s considerable customer portfolio, but weak demand and Macy’s notable struggles weighed on the partnership.

Although Tailored Brands will have to pay $17 million to end the partnership, according to Wunderlich Securities, “The unwinding of the cost structure of this money-losing initiative will be a considerable tailwind to company results.” The firm reiterated its Buy rating on the company with a $24 price target.

Following the Macy’s departure announcement, management increased FY 2018 guidance. Analysts are upbeat that the company can now place a greater emphasis and expand penetration of the Men’s Wearhouse brand, as it can now distance itself from a struggling Macy’s.

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