OREANDA-NEWS. December 11, 2015. The Men's Wearhouse (NYSE: MW) today announced consolidated financial results for the fiscal third quarter ended October 31, 2015.

GAAP loss per share for fiscal third quarter 2015 was \\$0.56.  During the quarter, due to the decrease in the Jos. A. Bank sales, the Company performed an interim valuation of the Jos. A. Bank tradename which resulted in a \\$90.1 million non-cash impairment charge. 

Fiscal third quarter 2015 adjusted EPS was \\$0.50 excluding non-operating items and non-cash impairment charges. 

As reported in the Company's preliminary results release on November 5, 2015, third quarter comparable sales increased 5.3% at Men's Wearhouse with clothing comps of 7.2% driven by higher transactions per store and rental comps of 0.7%.  K&G comparable sales for the quarter increased 3.7% driven by higher transactions per store.  Moores comparable sales decreased 5.4% primarily driven by weakening macro-economic conditions in Canada.  Comparable sales decreased 14.6% at Jos. A. Bank, far below our earlier expectations, primarily driven by a decline in traffic. 

Overall adjusted margin was down driven by the clearance of merchandise through the e-commerce channel, primarily at our Men's Wearhouse brand.  Excluding e-commerce product sales, Men's Wearhouse retail clothing margin was flat.  Jos. A. Bank clothing margin was up over last year.  Synergies remain on target with \\$13 million realized in the third quarter. 

Through the first week of December, the quarter-to-date comparable sales at Jos. A. Bank were down 35.1% while our other brands average comparable sales were up 5.5%.  If the Jos. A. Bank trend continues through the remainder of the quarter, the Company runs the risk of missing the lower end of the guidance given on November 5, 2015.  The Jos. A. Bank clothing margin before occupancy is still expected to be up approximately 500 basis points.  The Company will be providing an update on the quarter in early February.

While the Company has already made its scheduled fourth quarter principal payment of \\$1.75 million on its term loan, it does not anticipate making any additional debt principal payments during the period.

The Company will discuss future guidance including possible voluntary debt repayments when it reports fiscal 2015 results in March.  Management is currently updating its comprehensive long-term plan to embed additional strategic initiatives including revenue enhancement strategies, cost reduction initiatives, store rationalization and the Tuxedo Shops @ Macy's rollout.

Doug Ewert, Men's Wearhouse chief executive officer stated, "When we acquired Joseph Bank, we knew that we needed to correct the promotional model. However, we underestimated the impact to the near-term performance as we began to execute the difficult, but necessary, corrective steps.  We remain confident that these steps will restore a long-term, sustainable, profit model and reshape the business for a healthy and growing Jos. A. Bank.

"Beyond promotions, we have taken several other significant steps to grow revenue opportunities at Jos. A. Bank by re-engaging with current and lapsed customers while attracting new ones.  We have introduced a new loyalty program, we are recalibrating our marketing strategy and have introduced a new incentive program that aligns with the new selling techniques.  Additionally, we are enhancing the assortment to better service our core customers and to give new customers a compelling reason to discover Jos. A. Bank. 

"We are also taking additional steps to course correct.  We are currently performing a deep dive on data analysis using both our customer data and a third party to uncover actionable insights.  With the topline resetting to a lower level for the near-term, we are looking at every opportunity for cost reduction including store rationalization, labor, advertising and all relevant shared service costs and we are partnering with Alix Partners on specific elements of this work.  We are challenging all assumptions and are fully focused on accelerating the Jos. A. Bank recovery."

Ewert added, "We have built a portfolio of robust and compelling brands, each renowned for their own individual identity.  Next year, we will launch a holding company called Tailored Brands.  We believe that the holding company structure will allow us to further leverage our shared services platform and support, nurture and augment our family of brands."

Ewert concluded, "We are working hard to become an innovative and differentiated retailer in men's apparel, from our stores to our digital properties, from our customers' visits to our tailors and stylists, to their phones and their homes.  We look forward to sharing more with you in the near future about this and our other initiatives to create value for all our stakeholders."

THIRD QUARTER SALES REVIEW

The table that follows is a summary of net sales for the third quarter and year-to-date period ended October 31, 2015.  The dollars shown are U.S. dollars in millions and, due to rounded numbers, may not sum.  The Moores comparable sales change is based on the Canadian dollar.  The comparable year-to-date sales shown below for Jos. A. Bank are a comparison to the Jos. A. Bank year-to-date, a portion of which was prior to the acquisition on June 18, 2014. Comparable sales exclude the net sales of a store for any month of one period if the store was not owned or open throughout the same month of the prior period and include e-commerce net sales. 

Third Quarter Net Sales Summary – Fiscal 2015


Net Sales

Comparable Sales Change

Net Sales Change

Current

Quarter

% of Total Sales

Current Quarter

Prior Year

Quarter

Total Retail Segment

(2.2%)

(\\$17.8)

\\$801.4

93%

       Men's Wearhouse

6.7%

\\$29.3

\\$465.4

54%

5.3%

2.2%

       Jos. A. Bank

(14.7%)

(\\$34.4)

\\$198.9

23%

(14.6%)

(8.1%)

       K&G

(0.1%)

(\\$0.1)

\\$72.7

8%

3.7%

4.4%

       Moores

(18.7%)

(\\$12.9)

\\$55.9

7%

(5.4%)

8.8%

       MW Cleaners

3.4%

\\$0.3

\\$8.5

1%








Corporate Apparel Segment

(10.4%)

(\\$7.4)

\\$64.1

7%








Total Company

(2.8%)

(\\$25.2)

\\$865.4


Year-To-Date Net Sales Summary – Fiscal 2015


Net Sales

Comparable Sales Change

Net Sales Change

Current

Year

% of Total Sales

Current Year

Prior Year

Total Retail Segment

16.7%

\\$355.3

\\$2,484.6

93%

       Men's Wearhouse

6.5%

\\$84.4

\\$1,391.8

52%

5.0%

3.1%

       Jos. A. Bank

83.5%

\\$289.7

\\$636.7

24%

(8.6%)

(0.2%)

       K&G

2.4%

\\$6.0

\\$257.4

10%

6.0%

2.7%

       Moores

(13.1%)

(\\$26.0)

\\$173.3

6%

(1.4%)

8.6%

       MW Cleaners

5.5%

\\$1.3

\\$25.4

1%








Corporate Apparel Segment

(4.6%)

(\\$8.9)

\\$186.0

7%








Total Company

14.9%

\\$346.4

\\$2,670.6


Net sales at our largest brand, Men's Wearhouse, were up 6.7% and comparable sales increased 5.3% from last year's third quarter.  Comparable clothing sales increased 7.2% primarily due to an increase in average transactions per store. Comparable rental revenue increased 0.7% in the third quarter of 2015. 

Jos. A. Bank comparable sales for the third quarter decreased 14.6% due primarily to a decrease in average transactions per store as the Company began the transition away from the Buy-One-Get-Three Free promotional events.  K&G comparable sales increased 3.7% primarily due to an increase in average transactions per store.  Net sales for Moores, our Canadian retail brand, decreased 18.7% due to unfavorable currency fluctuations. Moores had a comparable sales decrease of 5.4% due to decreases in both average transactions per store and units sold per transaction driven by weakening macro-economic conditions in Canada.  The Corporate Apparel segment had an expected sales decrease of 10.4% primarily driven by an unfavorable change in the currency translation rate and lower sales from existing customer programs.

THIRD QUARTER GAAP RESULTS

Total net sales decreased 2.8%, or \\$25.2 million, to \\$865.4 million.  Retail segment net sales decreased by 2.2%, or \\$17.8 million.  Corporate apparel sales decreased by 10.4% or \\$7.4 million.

Total gross margin was \\$373.0 million, an increase of \\$3.8 million, or 1.0%.  As a percent of sales, total gross margin increased 164 basis points to 43.1% of net sales.

Advertising expense increased \\$5.9 million to \\$48.0 million.  This increase represented an 82 basis point increase in expense. 

Selling, general and administrative expenses ("SG&A") decreased \\$10.7 million to \\$271.3 million, a 31 basis point decrease.

During the quarter, we concluded a triggering event occurred that required an interim impairment test of the Jos. A. Bank tradename and goodwill.  Our interim tradename impairment test concluded that the tradename was impaired and a non-cash charge of \\$90.1 million was recorded.  Our interim goodwill impairment test concluded that our goodwill was not impaired as we have implemented several strategies expected to offset the decline in revenues and result in a stable profit and cash flow model over the long-term.  However, if we determine we are not likely to meet the projections used in our interim impairment tests or if our market capitalization remains at current levels, it is possible our annual impairment tests in the fourth quarter of 2015 could result in a material impairment of the Jos. A. Bank goodwill and/or tradename.  

Operating loss for the quarter was \\$36.4 million compared to operating income of \\$45.2 million last year.

Net interest expense for the third quarter was \\$26.4 million.

The effective tax rate for the third quarter was 56.8%. 

The net loss for the quarter was \\$27.2 million compared to net earnings of \\$6.8 million last year.  The diluted loss per share was \\$0.56 compared to diluted EPS of \\$0.14 in the prior year quarter.  

NINE MONTH GAAP RESULTS

Total net sales increased 14.9%, or \\$346.4 million, to \\$2,670.6 million.  Retail segment net sales increased by 16.7%, or \\$355.3 million.  Corporate apparel sales decreased by 4.6% or \\$8.9 million.

Total gross margin was \\$1,173.2 million, an increase of \\$162.1 million, or 16.0%.  As a percent of sales, total gross margin increased 43 basis points to 43.9% of net sales.

Advertising expense increased \\$34.6 million to \\$143.6 million.  This increase represented a 69 basis point increase in expense. 

SG&A increased \\$35.6 million to \\$822.5 million, a 306 basis point decrease.

Non-cash tradename impairment charge was \\$90.1 million.

Operating income increased \\$1.9 million to \\$117.0 million, representing 4.4% of net sales compared to 5.0% in the prior year.

Net interest expense for the nine months was \\$79.3 million.  Loss on extinguishment of debt was \\$12.7 million.  The loss was a result of the \\$400 million partial refinancing of our term loan to a fixed rate of 5.0%.

The effective tax rate for the nine months was (24.0%). 

Net earnings for the nine months were \\$31.0 million compared to \\$35.5 million last year.  Diluted EPS was \\$0.64 compared to \\$0.74 in the prior year nine months. 

THIRD QUARTER ADJUSTED RESULTS (1)

Below is a comparison table and discussion of the consolidated adjusted third quarter FY 2015 to adjusted third quarter FY 2014 operating results. 

Consolidated Adjusted Third Quarter FY 2015 Comparison to Adjusted Third Quarter FY 2014 Operating Results  (1)

Q3 FY15

Q3 FY15

Q3 FY14

Q3 FY14

Variance

\\$

% of Sales

\\$

% of Sales

Dollar

%

Basis Points

Net sales:










     Retail clothing product

\\$ 615,874

71.16%

\\$ 634,447

71.24%

\\$ (18,573)

-2.93%

(0.07)

     Rental services

132,443

15.30%

132,690

14.90%

(247)

-0.19%

0.41

     Alteration and other services

53,070

6.13%

52,025

5.84%

1,045

2.01%

0.29

Total retail sales

801,387

92.60%

819,162

91.97%

(17,775)

-2.17%

0.62

Corporate apparel clothing product

64,059

7.40%

71,475

8.03%

(7,416)

-10.38%

(0.62)

Total net sales

865,446

100.00%

890,637

100.00%

(25,191)

-2.83%

-












Gross margin: (2)










     Retail clothing product

341,575

55.46%

358,566

56.52%

(16,991)

-4.74%

(1.05)

     Rental services

111,012

83.82%

109,704

82.68%

1,308

1.19%

1.14

     Alteration and other services

16,810

31.68%

14,852

28.55%

1,958

13.18%

3.13

     Occupancy costs

(114,782)

-14.32%

(115,536)

-14.10%

754

-0.65%

(0.22)

Total retail gross margin

354,615

44.25%

367,586

44.87%

(12,971)

-3.53%

(0.62)

Corporate apparel clothing product

18,272

28.52%

22,388

31.32%

(4,116)

-18.38%

(2.80)

Total gross margin

372,887

43.09%

389,974

43.79%

(17,087)

-4.38%

(0.70)












Advertising expense

47,991

5.55%

42,075

4.72%

5,916

14.06%

0.82

Selling, general and administrative expenses

263,890

30.49%

262,214

29.44%

1,676

0.64%

1.05
























Operating income

\\$ 61,006

7.05%

\\$  85,685

9.62%

\\$ (24,679)

-28.80%

(2.57)












(1) See Use of Non-GAAP Financial Measures for reconciliation to GAAP.



(2) Gross margin percent of related sales.



Total net sales decreased 2.8%, or \\$25.2 million.  Retail segment net sales for the quarter decreased by 2.2% or \\$17.8 million due primarily to a decrease in clothing sales at Jos. A. Bank.  Corporate apparel sales decreased by 10.4%, or \\$7.4 million.

Total gross margin decreased \\$17.1 million or 70 basis points.  Retail gross margin decreased \\$13.0 million primarily due to lower sales and 62 basis points primarily due to a lower retail clothing margin rate and slight occupancy deleverage offset somewhat by higher rental and alteration margin rates.  As expected, corporate apparel gross margin decreased \\$4.1 million or 280 basis points primarily due to unfavorable currency impacts and customer mix.

On a stand-alone basis, Jos. A. Bank total retail gross margin increased 94 basis points from 36.9% to 37.9% primarily due to an increase in retail clothing margin somewhat offset by occupancy cost deleverage.  Retail clothing margin increased 211 basis points from 55.6% to 57.7% due mostly to an increase in the average unit retail and some cost synergies.  

Excluding Jos. A. Bank, total gross margin decreased by 158 basis points while retail gross margin decreased 168 basis points primarily driven by the clearance of merchandise through the e-commerce channel.  Excluding e-commerce product sales, retail clothing margin was flat. 

Advertising expense was \\$48.0 million.  This represents a planned increase of \\$5.9 million or 82 basis points, compared to the prior year. 

SG&A expenses increased \\$1.7 million primarily due to higher store salaries at Men's Wearhouse due to higher sales and higher payroll benefit costs somewhat offset by cost synergies and lower non-store incentive compensation.  Due to the decrease in sales, SG&A deleverage was 105 basis points.

Operating income decreased \\$24.7 million or 28.8%.

The effective tax rate was 30.2%. 

Net earnings were \\$24.1 million, or \\$0.50 adjusted EPS.

FISCAL NINE MONTHS ADJUSTED RESULTS (1)

In our 2014 fourth quarter earnings release we provided historical baselines of operating results for fiscal year 2014 in order to provide comparable results to fiscal year 2015.  These baselines include Jos. A. Bank operations for the 2014 full year and exclude items we believe are not indicative of our core operating results as well as certain items related to the acquisition of Jos. A. Bank.  Below is a comparison table and discussion of the consolidated nine months FY 2015 adjusted operating results to nine months FY 2014 baseline.

Consolidated Adjusted Fiscal Nine Months FY 2015 Comparison to Baseline Fiscal Nine Months FY 2014 Operating Results  (1)

YTD FY15

YTD FY15

YTD FY14

YTD FY14

Variance

\\$

% of Sales

\\$

% of Sales

Dollar

%

Basis Points

Net sales:










     Retail clothing product

\\$  1,931,926

72.34%

\\$  1,912,772

71.68%

\\$   19,154

1.00%

0.66

     Rental services

392,621

14.70%

403,967

15.14%

(11,346)

-2.81%

(0.44)

     Alteration and other services

160,024

5.99%

156,766

5.87%

3,258

2.08%

0.12

Total retail sales

2,484,571

93.03%

2,473,505

92.69%

11,066

0.45%

0.34

Corporate apparel clothing product

186,038

6.97%

194,956

7.31%

(8,918)

-4.57%

(0.34)

Total net sales

2,670,609

100.00%

2,668,461

100.00%

2,148

0.08%

-












Gross margin: (2)










     Retail clothing product

1,082,178

56.02%

1,075,218

56.21%

6,960

0.65%

(0.20)

     Rental services

329,755

83.99%

336,021

83.18%

(6,266)

-1.86%

0.81

     Alteration and other services

50,496

31.56%

45,608

29.09%

4,888

10.72%

2.46

     Occupancy costs

(340,996)

-13.72%

(337,592)

-13.65%

(3,404)

1.01%

(0.08)

Total retail gross margin

1,121,433

45.14%

1,119,255

45.25%

2,178

0.19%

(0.11)

Corporate apparel clothing product

53,809

28.92%

59,490

30.51%

(5,681)

-9.55%

(1.59)

Total gross margin

1,175,242

44.01%

1,178,745

44.17%

(3,503)

-0.30%

(0.17)












Advertising expense

143,628

5.38%

131,192

4.92%

12,436

9.48%

0.46

Selling, general and administrative expenses

796,980

29.84%

792,041

29.68%

4,939

0.62%

0.16
























Operating income

\\$     234,633

8.79%

\\$     255,512

9.58%

\\$ (20,879)

-8.17%

(0.79)












(1) See Use of Non-GAAP Financial Measures for reconciliation to GAAP.



(2) Gross margin percent of related sales.





Total net sales increased 0.1%, or \\$2.1 million.  Retail segment net sales for the nine months increased by 0.5%, or \\$11.1 million, due primarily to an increase in clothing sales at Men's Wearhouse.  Corporate apparel sales decreased by 4.6%, or \\$8.9 million.

Total gross margin decreased \\$3.5 million or 17 basis points.  Retail gross margin increased \\$2.2 million and decreased 11 basis points primarily due to a slightly lower retail clothing margin rate and slight occupancy deleverage offset somewhat by higher rental and alteration margin rates.  Corporate apparel gross margin decreased \\$5.7 million or 159 basis points.

On a stand-alone basis, Jos. A. Bank total retail gross margin increased 24 basis points from 38.3% to 38.6% primarily due to an increase in retail clothing margin somewhat offset by occupancy deleverage.  Jos. A. Bank retail clothing margin increased 98 basis points from 56.0% to 57.0%. 

Excluding Jos. A. Bank, total gross margin decreased 51 basis points while retail gross margin excluding Jos. A. Bank decreased 54 basis points.

Advertising expense was \\$143.6 million.  This represents an increase of \\$12.4 million, or 46 basis points, primarily due to increased advertising expense to support branding initiatives.

SG&A expenses increased \\$4.9 million or 16 basis points primarily due to higher payroll related costs. 

Operating income decreased \\$20.9 million or 8.2%.

The effective tax rate was 34.1%.

Net earnings were \\$102.3 million, or \\$2.11 adjusted EPS.

BALANCE SHEET

As a result of the acquisition of Jos. A. Bank, total debt at the end of the third quarter 2015 was approximately \\$1.7 billion.  The Company did not make any pre-payments on its debt during the quarter.

Inventories decreased \\$22.1 million to \\$1,060.2 million at the end of the third quarter 2015 from \\$1,082.4 million at prior year third quarter due primarily to purchase price accounting related adjustments at Jos. A. Bank in the prior year and lower inventory at K&G primarily due to fewer stores than in the prior year.

Capital expenditures through the third quarter of fiscal year 2015 were \\$86.4 million compared to \\$72.4 million in the prior year.

CALL AND WEBCAST INFORMATION

At 9:00 a.m. Eastern time on Thursday, December 10, 2015, management will host a conference call and real time webcast to discuss fiscal 2015 third quarter and nine month results.

To access the conference call, dial 412-902-0030.  To access the live webcast presentation, visit the Investor Relations section of the Company's website at http://ir.menswearhouse.com. A telephonic replay will be available through December 17, 2015 by calling 201-612-7415 and entering the access code of 13624878#, or a webcast archive will be available free on the website for approximately 90 days.

STORE INFORMATION

October 31, 2015

November 1, 2014

January 31, 2015

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)

709

3,998.7

686

3,903.9

698

3,955.7







Jos. A. Bank (b)

633

2,912.5

637

2,891.0

636

2,922.2







Men's Wearhouse and Tux

183

255.1

223

309.6

210

291.2







The Tuxedo Shop @ Macy's

12

6.6

-

-

-

-







K&G (c)

88

2,087.1

92

2,184.4

91

2,164.4







Moores, Clothing for Men

123

775.0

122

774.4

123

779.0














Total

1,748

10,035.0

1,760

10,063.3

1,758

10,112.5


(a)

Includes one Joseph Abboud store.

(b)

Excludes 14, 15 and 15 franchise stores, respectively.

(c)

81, 85 and 83 stores, respectively, offering women's apparel.

The Men's Wearhouse, Inc. is the largest specialty retailer of men's suits and the largest provider of rental product in the U.S. and Canada with 1,748 stores including tuxedo shops within Macy's stores.  The Men's Wearhouse, Jos. A. Bank, K&G and Moores stores carry a full selection of suits, sport coats, furnishings and accessories in exclusive and non-exclusive merchandise brands and Men's Wearhouse and Tux stores carry a limited selection.  Most K&G stores carry a full selection of women's apparel.  Tuxedo and suit rentals are available in the Men's Wearhouse, Jos. A. Bank, Moores, Men's Wearhouse and Tux stores as well as tuxedo shops within Macy's stores.  Additionally, Men's Wearhouse operates a global corporate apparel and workwear group consisting of Twin Hill in the United States and Dimensions, Alexandra and Yaffy in the United Kingdom.    

This press release contains forward-looking information.  The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are not guarantees of future performance and a variety of factors could cause actual results to differ materially from the anticipated or expected results expressed in or suggested by these forward-looking statements.  These forward-looking statements may be significantly impacted by various factors, including, but not limited to: actions by governmental entities, domestic and international economic activity and inflation, success, or lack thereof, in executing our internal operating plans and new store and new market expansion plans, as well as integration of acquisitions, including Jos. A. Bank; cost reduction initiatives; store rationalization plans; revenue enhancement strategies; the impact of opening tuxedo shops within Macy's stores; changes in demand for clothing, market trends in the retail business, customer confidence and spending patterns, changes in traffic trends in our stores, customer acceptance of our strategies, performance issues with key suppliers, disruptions in our supply chain, severe weather, foreign currency fluctuations, government export and import policies, advertising or marketing activities of competitors, and legal proceedings. Future results will also be dependent upon our ability to continue to identify and complete successful expansions and penetrations into existing and new markets and our ability to integrate such expansions with our existing operations.

The forward-looking statements in this press release speak only as of the date hereof. Except for the ongoing obligations of Men's Wearhouse to disclose material information under the federal securities laws, Men's Wearhouse undertakes no obligation to revise or update publicly any forward-looking statement, except as required by law.  Other factors that may impact the forward-looking statements are described in our latest annual report on Form 10-K and our filings on Form 10-Q.  For additional information on Men's Wearhouse, please visit the Company's websites at www.menswearhouse.com, www.josbank.com, www.josephabboud.com, www.mooresclothing.com, www.kgstores.com, www.twinhill.com, www.dimensions.co.uk and www.alexandra.co.uk.

Contact:
Investor Relations
(281) 776-7575
ir@tmw.com

Kelly Dilts
Men's Wearhouse, SVP, Finance & IR

Ken Dennard
Dennard - Lascar Associates

(1) See Use of Non-GAAP Financial Measures for additional information.  Non-GAAP adjusted earnings per share is referred to as "adjusted EPS" for simplicity.

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(Unaudited)

For the Three Months Ended October 31, 2015 and November 1, 2014

(In thousands, except per share data)


Three Months Ended

Variance


% of

% of


Basis

2015

Sales

2014

Sales

Dollar

%

Points









Net sales:







          Retail clothing product

\\$    615,874

71.16%

\\$634,447

71.24%

\\$(18,573)

(2.93%)

(0.07)

          Rental services

132,443

15.30%

132,690

14.90%

(247)

(0.19%)

0.41

          Alteration and other services   

53,070

6.13%

52,025

5.84%

1,045

2.01%

0.29

               Total retail sales

801,387

92.60%

819,162

91.97%

(17,775)

(2.17%)

0.62

               Corporate apparel clothing product

64,059

7.40%

71,475

8.03%

(7,416)

(10.38%)

(0.62)

                    Total net sales

865,446

100.00%

890,637

100.00%

(25,191)

(2.83%)

0.00









                   Total cost of sales

492,455

56.90%

521,432

58.55%

(28,977)

(5.56%)

(1.64)









Gross margin (a):







        Retail clothing product

341,526

55.45%

347,138

54.72%

(5,612)

(1.62%)

0.74

        Rental services

111,012

83.82%

99,152

74.72%

11,860

11.96%

9.09

        Alteration and other services

16,810

31.68%

14,852

28.55%

1,958

13.18%

3.13

        Occupancy costs

(114,629)

(14.30%)

(114,325)

(13.96%)

(304)

(0.27%)

(0.35)

               Total retail gross margin

354,719

44.26%

346,817

42.34%

7,902

2.28%

1.93

               Corporate apparel clothing product

18,272

28.52%

22,388

31.32%

(4,116)

(18.38%)

(2.80)

                   Total gross margin

372,991

43.10%

369,205

41.45%

3,786

1.03%

1.64









Advertising expense

47,991

5.55%

42,075

4.72%

5,916

14.06%

0.82

Selling, general and administrative expenses

271,301

31.35%

281,955

31.66%

(10,654)

(3.78%)

(0.31)

Tradename impairment charge

90,100

10.41%

-

-

90,100

           NM

10.41









Operating (loss) income

(36,401)

(4.21%)

45,175

5.07%

(81,576)

NM

(9.28)









Net interest

(26,407)

(3.05%)

(25,006)

(2.81%)

(1,401)

5.60%

(0.24)









(Loss) earnings before income taxes

(62,808)

(7.26%)

20,169

2.26%

(82,977)

NM

(9.52)









(Benefit) provision for income taxes

(35,654)

(4.12%)

13,168

1.48%

(48,822)

NM

(5.60)









Net (loss) earnings including non-controlling interest

(27,154)

(3.14%)

7,001

0.79%

(34,155)

NM

(3.92)









Net earnings attributable to non-controlling interest

-

-

(208)

(0.02%)

208

100.00%

0.02









Net (loss) earnings attributable to common shareholders

\\$   (27,154)

(3.14%)

\\$    6,793

0.76%

\\$(33,947)

NM

(3.90)









Net (loss) earnings per diluted common share allocated to common shareholders

\\$        (0.56)

\\$      0.14













Weighted-average diluted common shares outstanding:

48,339

48,254













(a)  Gross margin percent of sales is calculated as a percentage of related sales.



THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

For the Nine Months Ended October 31, 2015 and November 1, 2014

(In thousands, except per share data)


Nine Months Ended

Variance


% of

% of


Basis

2015

Sales

2014

Sales

Dollar

%

Points









Net sales:







          Retail clothing product

\\$1,931,926

72.34%

\\$1,598,199

68.76%

\\$333,727

20.88%

3.58

          Rental services

392,621

14.70%

395,449

17.01%

(2,828)

(0.72%)

(2.31)

          Alteration and other services   

160,024

5.99%

135,585

5.83%

24,439

18.02%

0.16

               Total retail sales

2,484,571

93.03%

2,129,233

91.61%

355,338

16.69%

1.42

               Corporate apparel clothing product

186,038

6.97%

194,956

8.39%

(8,918)

(4.57%)

(1.42)

                    Total net sales

2,670,609

100.00%

2,324,189

100.00%

346,420

14.90%

0.00









                    Total cost of sales

1,497,385

56.07%

1,313,078

56.50%

184,307

14.04%

(0.43)









Gross margin (a):







        Retail clothing product

1,081,144

55.96%

876,059

54.82%

205,085

23.41%

1.15

        Rental services

329,755

83.99%

320,366

81.01%

9,389

2.93%

2.97

        Alteration and other services

50,496

31.56%

37,791

27.87%

12,705

33.62%

3.68

        Occupancy costs

(341,980)

(13.76%)

(282,595)

(13.27%)

(59,385)

(21.01%)

(0.49)

               Total retail gross margin

1,119,415

45.05%

951,621

44.69%

167,794

17.63%

0.36

               Corporate apparel clothing product

53,809

28.92%

59,490

30.51%

(5,681)

(9.55%)

(1.59)

                   Total gross margin

1,173,224

43.93%

1,011,111

43.50%

162,113

16.03%

0.43









Advertising expense

143,628

5.38%

109,072

4.69%

34,556

31.68%

0.69

Selling, general and administrative expenses

822,485

30.80%

786,879

33.86%

35,606

4.52%

(3.06)

Tradename impairment charge

90,100

3.37%

-

-

90,100

           NM

3.37









Operating income

117,011

4.38%

115,160

4.95%

1,851

1.61%

(0.57)









Net interest

(79,335)

(2.97%)

(39,154)

(1.68%)

(40,181)

102.62%

(1.29)

Loss on extinguishment of debt

(12,675)

(0.47%)

(2,158)

(0.09%)

(10,517)

487.35%

(0.38)









Earnings before income taxes

25,001

0.94%

73,848

3.18%

(48,847)

(66.15%)

(2.24)









(Benefit) provision for income taxes

(5,993)

(0.22%)

38,021

1.64%

(44,014)

NM

(1.86)









Net earnings including non-controlling interest

30,994

1.16%

35,827

1.54%

(4,833)

(13.49%)

(0.38)









Net earnings attributable to non-controlling interest

-

-

(292)

(0.01%)

292

100.00%

0.01









Net earnings attributable to common shareholders

\\$     30,994

1.16%

\\$    35,535

1.53%

\\$(4,541)

(12.78%)

(0.37)


















Net earnings per diluted common share allocated to common shareholders

\\$         0.64

\\$        0.74













Weighted-average diluted common shares outstanding:

48,513

48,124













(a)  Gross margin percent of sales is calculated as a percentage of related sales.



THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



October 31,

November 1,


2015

2014





ASSETS







Current assets:



Cash and cash equivalents

\\$             53,654

\\$              64,716

Accounts receivable, net

66,902

84,054

Inventories

1,060,247

1,082,354

Other current assets

168,071

107,107






   Total current assets

1,348,874

1,338,231

Property and equipment, net

548,481

569,779

Rental product, net

147,344

129,579

Goodwill

890,991

892,766

Intangible assets, net

568,171

673,057

Other assets

8,518

10,032






   Total assets

\\$         3,512,379

\\$         3,613,444





LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:



Accounts payable

\\$           233,520

\\$            263,645

Accrued expenses and other current liabilities

264,978

283,271

Income taxes payable

14,233

13,590

Current maturities of long-term debt

7,000

11,000






   Total current liabilities

519,731

571,506





Long-term debt, net

1,649,206

1,638,606

Deferred taxes and other liabilities

358,059

367,612






   Total liabilities

2,526,996

2,577,724





Shareholders' equity:



Preferred stock

-

-

Common stock

485

481

Capital in excess of par

452,666

435,755

Retained earnings

541,672

581,956

Accumulated other comprehensive (loss) income

(6,356)

20,829

Treasury stock, at cost

(3,084)

(3,301)






   Total shareholders' equity

985,383

1,035,720






    Total liabilities and shareholders' equity

\\$         3,512,379

\\$         3,613,444

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended October 31, 2015 and November 1, 2014

(In thousands)



Nine Months Ended


2015

2014





CASH FLOWS FROM OPERATING ACTIVITIES:



Net earnings including non-controlling interest

\\$           30,994

\\$          35,827

Non-cash adjustments to net earnings:



   Depreciation and amortization

98,162

80,622

   Rental product amortization

30,496

30,038

Tradename impairment charge

90,100

-

Loss on extinguishment of debt

12,675

2,158

Amortization of deferred financing costs

5,151

3,014

Amortization of discount on long-term debt

848

589

(Gain) loss on disposition of assets

(833)

12,247

    Other

(44,762)

(14,029)

Changes in operating assets and liabilities

(110,595)

(91,449)






        Net cash provided by operating activities

112,236

59,017





CASH FLOWS FROM INVESTING ACTIVITIES:



Capital expenditures

(86,406)

(72,397)

Acquisition of business, net of cash

-

(1,491,393)

Proceeds from sales of property and equipment

2,613

160






        Net cash used in investing activities

(83,793)

(1,563,630)





CASH FLOWS FROM FINANCING ACTIVITIES:



Proceeds from new term loan

-

1,089,000

Payments on new term loan

(6,250)

-

Payments on previous term loan

-

(97,500)

Proceeds from asset-based revolving credit facility

5,500

340,000

Payments on asset-based revolving credit facility

(5,500)

(340,000)

Proceeds from issuance of senior notes

-

600,000

Deferred financing costs

(3,566)

(51,072)

Purchase of non-controlling interest

-

(6,651)

Cash dividends paid

(26,269)

(26,119)

Proceeds from issuance of common stock

2,454

7,115

Tax payments related to vested deferred stock units

(4,538)

(6,907)

Excess tax benefits from share-based plans

1,104

3,736

Repurchases of common stock

(277)

(251)






        Net cash (used in) provided by financing activities

(37,342)

1,511,351






Effect of exchange rate changes

292

(1,274)





(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(8,607)

5,464






Balance at beginning of period

62,261

59,252

Balance at end of period

\\$            53,654

\\$          64,716

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
UNAUDITED NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)

Use of Non-GAAP Financial Measures

In addition to providing financial results in accordance with GAAP, we have provided adjusted information for fiscal third quarter and nine months of 2015 and a historical consolidated baseline for fiscal third quarter and nine months of 2014 which includes Jos. A. Bank results.  This non-GAAP financial information is provided to enhance the user's overall understanding of the Company's financial performance.  Specifically, we believe the adjusted and baseline results provide useful information by excluding items we believe are not indicative of our core operating results as well as certain items related to the acquisition and integration of Jos. A. Bank. 

The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to financial information prepared in accordance with GAAP.  A reconciliation of this non-GAAP information to our actual results follows and may not sum due to rounded numbers.

GAAP to Adjusted Statements of Earnings Information

GAAP to Non-GAAP Adjusted - Three Months Ended October 31, 2015

GAAP

Acquisition

Purchase

Other (3)

Non-GAAP

Results

& Integration (1)

Acctg Allocation (2) 


Adjusted Results

Net sales

\\$ 865,446

\\$                            -

\\$                                      -

\\$              -

\\$                  865,446










Total retail gross margin

354,719

(196)

92

-

354,615

Corporate apparel clothing product

18,272

-

-

-

18,272

Total gross margin

372,991

(196)

92

-

372,887





-



Advertising expense

47,991

-

-

-

47,991

Selling, general and administrative expenses

271,301

(5,223)

(2,116)

(73)

263,890

Tradename impairment charge

90,100

-

-

(90,100)

-

Operating (loss) income

(36,401)

5,026

2,208

90,173

61,006





-



Net interest

(26,407)

-

-

-

(26,407)

Loss on extinguishment of debt

-

-

-

-

-

(Benefit) provision for income taxes

(35,654)

1,520

668

43,928

10,462










Net (loss) earnings including non-controlling interest

(27,154)

3,506

1,540

46,244

24,137










Net earnings attributable to non-controlling interest

-

-

-

-

-










Net (loss) earnings attributable to common shareholders

\\$ (27,154)

\\$                    3,506

\\$                              1,540

\\$    46,244

\\$                    24,137










Net (loss) earnings per diluted common share allocated to common shareholders

\\$     (0.56)

\\$                      0.07

\\$                                0.03

\\$        0.96

\\$                        0.50















(1) Acquisition & integration primarily relates to Jos. A. Bank.



(2) Includes depreciation step up amounts in cost of sales and amortization of intangibles and depreciation step up amounts in SG&A.

(3) Other primarily relates to non-cash tradename and store impairment charges and a gain on the sale of property.

GAAP to Non-GAAP Adjusted - Nine Months Ended October 31, 2015

GAAP

Acquisition

Purchase

Other (3)

Non-GAAP

Results

& Integration (1)

Acctg Allocation (2) 


Adjusted Results

Net sales

\\$ 2,670,609

\\$                         -

\\$                               -

\\$           -

\\$            2,670,609










Total retail gross margin

1,119,415

325

1,693

-

1,121,433

Corporate apparel clothing product

53,809

-

-

-

53,809

Total gross margin

1,173,224

325

1,693

-

1,175,242










Advertising expense

143,628

-

-

-

143,628

Selling, general and administrative expenses

822,485

(15,597)

(6,067)

(3,841)

796,980

Tradename impairment charge

90,100

-

-

(90,100)

-

Operating income

117,011

15,922

7,760

93,941

234,633










Net interest

(79,335)

-

-

-

(79,335)

Loss on extinguishment of debt

(12,675)

12,675

-

-

-

(Benefit) provision for income taxes

(5,993)

9,754

2,647

46,564

52,972










Net earnings including non-controlling interest

30,994

18,842

5,113

47,377

102,326










Net earnings attributable to non-controlling interest

-

-

-

-

-










Net earnings attributable to common shareholders

\\$      30,994

\\$               18,842

\\$                        5,113

\\$ 47,377

\\$               102,326










Net earnings per diluted common share allocated to common shareholders

\\$          0.64

\\$                   0.39

\\$                          0.11

\\$     0.98

\\$                     2.11











(1) Acquisition & integration primarily relates to Jos. A. Bank.

(2) Includes inventory and depreciation step up amounts in cost of sales and amortization of intangibles and depreciation step up amounts in SG&A.

(3) Other primarily relates to non-cash tradename and store impairment charges, separation costs with former executives and a gain on the sale of property.

GAAP to Non-GAAP Adjusted - Three Months Ended November 1, 2014

GAAP

Acquisition

Purchase

Other (3)

Non-GAAP

Results

& Integration (1)

Acctg Allocation (2) 


Adjusted Results










Net sales

\\$ 890,637

\\$                         -

\\$                               -

\\$           -

\\$               890,637










Total retail gross margin

346,817

10,552

10,217

-

367,586

Corporate apparel clothing product

22,388

-

-

-

22,388

Total gross margin

369,205

10,552

10,217

-

389,974










Advertising expense

42,075

-

-

-

42,075

Selling, general and administrative expenses

281,955

(18,646)

(2,733)

1,638

262,214

Operating income

45,175

29,198

12,950

(1,638)

85,685










Net interest

(25,006)

-

-

-

(25,006)

Loss on extinguishment of debt

-

-

-

-

-

Provision for income taxes

13,168

3,422

4,352

(550)

20,391










Net earnings including non-controlling interest

7,001

25,776

8,598

(1,088)

40,288










Net earnings attributable to non-controlling interest

(208)

-

-

-

(208)










Net earnings attributable to common shareholders

\\$     6,793

\\$               25,776

\\$                        8,598

\\$  (1,088)

\\$                 40,080










Net earnings per diluted common share allocated to common shareholders

\\$       0.14

\\$                   0.53

\\$                          0.18

\\$    (0.02)

\\$                     0.83











(1) Acquisition & integration primarily relates to Jos. A. Bank.

(2) Includes inventory and depreciation step up amounts in cost of sales and amortization of intangibles and depreciation step up amounts in SG&A.

(3) Other relates to adjustments to prior estimates of costs related to store closure and separation costs with executives offset by costs related to K&G strategic alternative review. 

GAAP to Non-GAAP Adjusted - Nine Months Ended November 1, 2014

GAAP

Acquisition

Purchase

Other (3)

Non-GAAP

Results

& Integration (1)

Acctg Allocation (2) 


Adjusted Results










Net sales

\\$ 2,324,189

\\$                         -

\\$                               -

\\$           -

\\$            2,324,189










Total retail gross margin

951,621

10,552

16,988

-

979,161

Corporate apparel clothing product

59,490

-

-

-

59,490

Total gross margin

1,011,111

10,552

16,988

-

1,038,651










Advertising expense

109,072

-

-

-

109,072

Selling, general and administrative expenses

786,879

(81,243)

(3,639)

(5,141)

696,856

Operating income

115,160

91,795

20,627

5,141

232,723










Net interest

(39,154)

-

-

-

(39,154)

Loss on extinguishment of debt

(2,158)

2,158

-

-

-

Provision for income taxes

38,021

20,206

7,157

1,784

67,168










Net earnings including non-controlling interest

35,827

73,747

13,469

3,357

126,401










Net earnings attributable to non-controlling interest

(292)

-

-

-

(292)










Net earnings attributable to common shareholders

\\$      35,535

\\$               73,747

\\$                      13,469

\\$   3,357

\\$               126,109










Net earnings per diluted common share allocated to common shareholders

\\$          0.74

\\$                   1.53

\\$                          0.28

\\$     0.07

\\$                     2.61











(1) Acquisition & integration primarily relates to Jos. A. Bank.

(2) Includes inventory and depreciation step up amounts in cost of sales and amortization of intangibles and depreciation step up amounts in SG&A.

(3) Other relates to K&G strategic alternative review and cost reduction initiatives partially offset by adjustments to prior estimates of costs related to store closure and separation costs with executives.

GAAP to Historical Baselines of Operating Results

 Historical Consolidated Baseline Year To Date FY 2014 - Nine Months Ended November 1, 2014 

 GAAP 

 JOSB Results 

Purchase

 Acquisition, 

 Non-GAAP 

 Results 

 2/2 - 6/17/14 (1) 

Accounting

 Integration & 

 Historical 

 Net sales: 



Allocation (2)

 Other (3) 

 Baseline 

      Retail clothing product 

\\$ 1,598,199

\\$            314,573

\\$                   -

\\$                     -

\\$  1,912,772

      Rental services 

395,449

8,518

-

-

403,967

      Alteration and other services 

135,585

21,181

-

-

156,766

 Total retail sales 

2,129,233

344,272

-

-

2,473,505

 Corporate apparel clothing product 

194,956

-

-

-

194,956

 Total net sales 

2,324,189

344,272

-

-

2,668,461










 Gross margin: 








      Retail clothing product 

876,059

180,173

18,986

-

1,075,218

      Rental services 

320,366

5,103

-

10,552

336,021

      Alteration and other services 

37,791

7,817

-

-

45,608

      Occupancy costs 

(282,595)

(51,924)

(3,073)

-

(337,592)

 Total retail gross margin 

951,621

141,169

15,913

10,552

1,119,255

 Corporate apparel clothing product 

59,490

-

-

-

59,490

 Total gross margin 

1,011,111

141,169

15,913

10,552

1,178,745










 Advertising expense 

109,072

22,120

-

-

131,192

 Selling, general and administrative expenses 

786,879

170,576

(3,639)

(161,775)

792,041




















 Operating income 

\\$    115,160

\\$             (51,527)

\\$         19,552

\\$          172,327

\\$     255,512











(1) Includes reclassifications to be consistent with Men's Wearhouse reporting. 

(2) Adjustments primarily related to inventory write-up elimination, change from FIFO to weighted average cost and elimination of tenant improvement allowance credits. 

(3) Other relates primarily to acquisition, integration, strategic alternative review and SG&A reduction program costs.