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Tailored Brands, Inc. Reports Fiscal 2018 Second Quarter Results
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PR Newswire
FREMONT, Calif., Sept. 12, 2018
FREMONT, Calif., Sept. 12, 2018 /PRNewswire/ -- Tailored Brands, Inc. (NYSE: TLRD) today announced consolidated financial results for the fiscal second quarter ended August 4, 2018.
For the second quarter ended August 4, 2018, the Company reported GAAP diluted earnings per share of $0.97 and adjusted diluted earnings per share(1) of $1.07, compared to GAAP diluted earnings per share of $1.19 for the same period a year ago. There were no adjusted items in last year's second quarter.
"We are pleased to report positive comparable sales for all of our retail brands this quarter. We executed well on growing our custom business and on increasing transactions through brand marketing campaigns and enhanced omni-channel initiatives," said Tailored Brands CEO Doug Ewert. "I am also pleased with the progress we are making to move to a leaner, more efficient inventory model, which is particularly important as custom clothing becomes a larger percentage of our mix. With leaner inventories, we can improve the customer experience and free-up working capital."
Ewert added, "We continue to strengthen our balance sheet. During the quarter, we completed a $175 million partial redemption of our senior notes and our total debt is down $325 million versus a year ago."
Second quarter 2018 GAAP results include charges of $8.1 million related to the partial redemption of $175 million of the Company's senior notes, $4.4 million related to the closure of a rental product distribution center, and $0.2 million related to an unfavorable final working capital adjustment associated with the previously announced divestiture of the MW Cleaners business. Of the $12.7 million total charges, $6.3 million were non-cash.
| (1) | In the second quarter of fiscal 2018, adjusted items consist of a loss on extinguishment of debt related to the partial redemption of $175 million of the Company's senior notes, costs related to the closure of a rental product distribution center and an unfavorable final working capital adjustment related to the previously announced divestiture of the MW Cleaners business. There were no adjusted items in last year's second quarter. See Use of Non-GAAP Financial Measures for additional information on items excluded from adjusted EPS. |
Second Quarter Fiscal 2018 Results
Net Sales Summary(1)
| | Net Sales (U.S. dollars, in millions) | % Total Sales Change | Comparable Sales Change(2) | |
| | | | | |
| Retail | $767.9 | -3.2% | 1.7% | |
| Men's Wearhouse | $445.2 | -3.0% | 1.0% | |
| Jos. A. Bank | $172.4 | -1.1% | 2.0% | |
| K&G | $83.6 | -2.5% | 3.5% | |
| Moores(3) | $66.6 | 2.0% | 3.7% | |
| Corporate Apparel | $55.5 | -3.9% | | |
| | ||||
| | | | | |
| Total Company(4) | $823.4 | -3.2% | | |
| | |
| (1) | Amounts may not sum due to rounded numbers. |
| (2) | Comparable sales is defined as net sales from stores open at least 12 months at period end and includes e-commerce sales. Due to the 53-week to 52-week calendar shift, second quarter 2018 comparable sales are compared with the 13-week period ended August 5, 2017. |
| (3) | The Moores comparable sales change is based on the Canadian dollar. |
| (4) | On March 3, 2018, the Company sold its MW Cleaners business. |
Net Sales
Total net sales decreased 3.2% to $823.4 million. Retail net sales decreased 3.2% primarily due to a $26.9 million decrease in rental services revenue due to the 53-week to 52-week calendar shift, the earlier prom season and a shift in demand for weddings to the third quarter. This was partially offset by an increase in retail clothing sales, which drove positive 1.7% retail comparable sales.
Corporate apparel net sales decreased 3.9%, or $2.2 million, primarily due to lower sales in the UK partially offset by the impact of a stronger British pound this year. The Company now expects Corporate apparel net sales to decrease by a low-single-digit percentage in fiscal 2018 due to recent trends in the UK business.
Comparable Sales
Men's Wearhouse comparable sales increased 1.0%. Comparable sales for clothing increased primarily due to an increase in transactions and a slight increase in average unit retail, partially offset by a decrease in units per transaction. Comparable rental services revenue decreased 11.5%, primarily reflecting timing impacts of the 53-week to 52-week calendar shift, an earlier prom season, and a shift in demand for weddings to the third quarter. The Company expects to report roughly flat comparable rental services revenue in the third quarter.
Jos. A. Bank comparable sales increased 2.0% primarily due to an increase in transactions, partially offset by a slight decrease in units per transaction, while average unit retail was flat.
K&G comparable sales increased 3.5% primarily due to an increase in units per transaction and average unit retail partially offset by a slight decrease in transactions.
Moores comparable sales increased 3.7% primarily due to increases in both transactions and average unit retail, while units per transaction were flat.
Gross Margin
On a GAAP basis, consolidated gross margin was $368.9 million, a decrease of $27.8 million, primarily due to the decrease in net sales. As a percent of sales, consolidated gross margin decreased 180 basis points to 44.8%. On an adjusted basis, consolidated gross margin decreased 130 basis points, primarily due to a decrease in retail segment gross margin rate.
On a GAAP basis, retail segment gross margin was $354.0 million, a decrease of $28.0 million, which included the write-off of $4.0 million of rental product in conjunction with the closure of one of our rental product distribution centers. As a percent of sales, retail segment gross margin decreased 210 basis points to 46.1%.
On an adjusted basis, retail segment gross margin decreased $24.0 million, or 160 basis points, primarily due to the decrease in rental services revenue and deleveraging of occupancy costs as a percent of sales, both of which were associated with lower net sales as a result of the previously mentioned calendar shifts, as well as deeper discounts on seasonal merchandise in support of the Company's strategy to move to a more efficient inventory model.
Advertising Expense
Advertising expense decreased $1.2 million to $38.7 million and was flat as a percent of sales at 4.7%.
Selling, General and Administrative Expenses ("SG&A")
On a GAAP basis, SG&A decreased $6.1 million to $242.3 million but increased 20 basis points as a percent of sales. On an adjusted basis, SG&A decreased $6.6 million to $241.7 million primarily due to the MW Cleaners divestiture and the receipt of insurance proceeds related to last year's hurricanes, but increased 20 basis points as a percent of sales to 29.4%, due to deleveraging on lower sales associated with the calendar shift.
Operating Income
On a GAAP basis, operating income was $88.0 million compared to $108.5 million last year. On an adjusted basis, operating income was $92.5 million compared to $108.5 million last year. As a percent of sales, adjusted operating margin decreased 150 basis points to 11.2%.
Net Interest Expense and Net Loss on Extinguishment of Debt
Net interest expense was $20.7 million compared to $25.1 million last year. The decrease in interest expense resulted from the reduction of outstanding debt.
On a GAAP basis, net loss on extinguishment of debt was $8.1 million compared to a net gain on extinguishment of debt of $3.3 million last year. The net loss on extinguishment of debt consisted of the 3.5% premium on the $175 million partial redemption of the Company's senior notes as well as the write-off of related deferred financing costs. On an adjusted basis, there was no net loss on extinguishment of debt for the quarter compared to a net gain on extinguishment of debt of $3.3 million in the second quarter last year.
Effective Tax Rate
On a GAAP basis, the effective tax rate was 16.7% compared to 32.5% last year. On an adjusted basis, the effective tax rate was 23.9% compared to 32.5% last year. Both the GAAP and the adjusted effective tax rates reflect the impact of the Tax Cuts and Jobs Act of 2017.
Net Earnings and EPS
On a GAAP basis, net earnings were $49.2 million compared to $58.5 million last year. Diluted EPS was $0.97 compared to $1.19 last year.
On an adjusted basis, net earnings were $54.6 million compared to $58.5 million last year. Adjusted diluted EPS was $1.07 compared to $1.19 last year.
Balance Sheet Highlights
Cash and cash equivalents at the end of the second quarter of 2018 were $68.2 million, a decrease of $44.5 million compared to the end of the second quarter of 2017, primarily due to the use of cash on hand to fund a portion of the $175 million partial redemption of senior notes. At the end of the second quarter of 2018, there were $104.5 million of borrowings outstanding on our revolving credit facility, which was used to fund the remaining portion of the senior notes redemption.
Inventories decreased $158.3 million to $786.5 million at the end of the second quarter of 2018, compared to the end of the second quarter of 2017, primarily due to a 16.8% reduction in retail segment inventories.
In addition to the senior notes partial redemption, during the second quarter, the Company made its scheduled $2.3 million payment on its term loan. Total debt at the end of the second quarter of 2018 was approximately $1.2 billion, a decrease of $324.6 million compared to the end of the second quarter of 2017.
Cash flow from operating activities for the six months ended August 4, 2018, was $198.0 million compared to $140.5 million last year. The increase was driven by higher net earnings, after adjusting for certain items primarily related to extinguishment of debt, and a planned reduction in inventory purchases.
Capital expenditures for the six months ended August 4, 2018, were $24.6 million compared to $34.0 million last year.
FISCAL 2018 FULL YEAR OUTLOOK
The Company is increasing its outlook for comparable sales and reaffirming its guidance for other key fiscal 2018 metrics as follows:
- Earnings per Share: The Company continues to expect to achieve adjusted diluted EPS in the range of $2.35 to $2.50.
- Comparable Sales: The Company continues to expect comparable sales for Men's Wearhouse and Jos. A. Bank to be positive low-single-digits. The Company is increasing its outlook for Moores comparable sales to be positive low-single-digits, up from flat-to-up slightly, and raising its outlook for K&G comparable sales to be flat-to-up slightly, up from flat-to-down slightly.
- Effective Tax Rate: The Company continues to expect an effective tax rate of approximately 25%.
- Inventory: The Company continues to expect to reduce inventories by a high-single-digit percentage.
- Capital Expenditures: The Company continues to expect capital expenditures of approximately $100 million.
- Depreciation and Amortization: The Company continues to expect depreciation and amortization of approximately $100 million.
- Real Estate: The Company continues to expect approximately net 10 store closures in 2018 resulting from its continuous review of its real estate portfolio for opportunities to optimize its fleet as lease terms expire.
The Company noted that fiscal 2018 is a 52-week year versus the 53-week fiscal 2017.
STORE INFORMATION
| | August 4, 2018 | July 29, 2017 | February 3, 2018 | ||||||
| | Number of Stores | Sq. Ft. (000's) | Number of Stores | Sq. Ft. (000's) | Number of Stores | Sq. Ft. (000's) | |||
| | | | | | | | |||
| Men's Wearhouse (a) | 719 | 4,036.3 Werbung Mehr Nachrichten zur Tailored Brands Aktie kostenlos abonnieren
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