Tailored Brands Q3 sales increase to $812.7 million

Corporate apparel net sales decreased 3.6 per cent, or $2.3 million, primarily due to lower sales in the United Kingdom associated with uncertainty surrounding Brexit, as well as the impact of a weaker British pound this year. The company now expects corporate apparel net sales to decrease by a mid-single-digit percentage in fiscal 2018, primarily due to continued soft trends in the UK business, versus previous guidance of a low-single-digit percentage decrease.

On a Gaap basis, consolidated gross margin was $362.7 million, an increase of $4.0 million, primarily due to the increase in retail clothing product sales. As a percent of sales, consolidated gross margin increased 40 basis points to 44.6 per cent. On an adjusted basis, consolidated gross margin increased 40 basis points, primarily due to leveraging of occupancy costs.

"We reported 2.3% positive comparable sales in the third quarter, with all retail brands delivering positive comparable sales. Our sales growth was driven primarily by custom suiting, which we sold at an average rate of $5 million per week, up 150% versus last year,” said Tailored Brands Executive Chairman Dinesh Lathi. “I am pleased with the team’s execution on our custom growth strategy. During the quarter, we improved our custom offering’s speed, selection and service, making custom even more compelling to consumers.

"That said, as the third quarter progressed we saw a softening of comparable sales due to lower transactions at Men’s Wearhouse and that trend continued into November. As a result, we have taken a more cautious outlook on fourth quarter comparable sales for Men’s Wearhouse and now expect fiscal 2018 adjusted diluted EPS of $2.30 to $2.35.”

Lathi added, “We also executed our strategies to reduce inventories and debt to improve capital efficiency and strengthen our balance sheet. During the quarter, we reduced inventories 10% versus last year. We also successfully repriced our term loan, reducing the interest rate spread by 25 basis points, which lowers our annual cash interest expense by more than $2 million. Our total debt is down approximately $300 million versus a year ago.”

Cash and cash equivalents at the end of the third quarter of fiscal 2018 were $68.4 million, a decrease of $57.8 million compared to the end of the third quarter of fiscal 2017, resulting from the use of cash on hand in the second quarter of fiscal 2018 to fund a portion of the $175 million partial redemption of senior notes. At the end of the third quarter of fiscal 2018, there were $58.5 million of borrowings outstanding on our revolving credit facility.

For fiscal 2018, the company expects to achieve adjusted diluted EPS in the range of $2.30 to $2.35, versus its previous range of $2.35 to $2.50. The company now expects an effective tax rate of between 23 and 24 per cent versus previous guidance of approximately 25 per cent. It is likely that inventories may be reduced by a high-single-digit percentage. (RR)

ALCHEMPro News Desk – India