Specialty apparel retailer Tailored Brands (TLRD) reported a 62% dip in earnings for the third quarter due to goodwill impairment charge as well as higher operating expenses. The bottom line exceeded analysts’ expectations. The stock plunged over 22% in the after-market session following the company’s weak top-line and guidance.
Net income dropped 62% to $13.9 million and earnings plunged 64% to $0.27 per share. The results included goodwill impairment charges related to corporate apparel business, the repricing of the term loan, the retirement of former CEO, and closure of a rental product distribution center in the second quarter. Adjusted earnings grew 35% to $1.01 per share.
Total net sales inched up 0.2% to $812.7 million. Retail net sales rose 0.6% primarily due to an increase in retail clothing sales, which drove positive 2.3% retail comparable sales. This was partially offset by a $7.3 million decrease in alteration and other services primarily resulting from the MW Cleaners divestiture.
Corporate apparel net sales decreased 3.6% 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.
Looking ahead into the fourth quarter, the company expects a loss in the range of $0.29 to $0.24 per share. Corporate apparel net sales are predicted to be $55 million to $60 million. Comparable sales for Men’s Wearhouse is predicted to be down low-single-digits while that for Jos. A. Bank and Moores each is expected to be up low-single-digits. K&G comparable sales are projected to be flat-to-up slightly.
For the fiscal year 2018, Tailored Brands lowered its adjusted earnings guidance to the range of $2.30 to $2.35 per share from the prior range of $2.35 to $2.50 per share. Capital expenditures are now anticipated to be about $90 million, down from the prior estimate of about $100 million.
Comparable sales for Men’s Wearhouse is now predicted to be flat-to-up slightly while that for Jos. A. Bank and Moores is each expected to be up low-single-digits. K&G comparable sales are projected to be flat-to-up slightly for the full 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.
The company continues to expect about 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.
For the third quarter, Men’s Wearhouse comparable sales increased 1.7% helped by an increase in average unit retail for clothing. The company expects to report comparable rental services revenue in the fourth quarter of up low-single-digits versus last year and still expects to report a mid-single-digit decrease in rental services revenue for fiscal 2018.
Jos. A. Bank comparable sales grew 3.8% primarily due to an increase in both transactions and average unit retail. K&G comparable sales increased 4% due to rises in transactions, units per transaction and average unit retail. Moores comparable sales rose 1.2% on higher transactions.
Shares of Tailored Brands ended Wednesday’s regular session up 1.51% at $20.14 on the NYSE. The stock has fallen over 7% in the year so far and over 15% in the past three months.
Hain Celestial Group (HAIN) stock plunged to the new yearly low of $18.37 on Wednesday after the organic and natural products maker settled charges related to its revenue recognition practices with the Securities and Exchange Commission. The SEC stated Hain violated books and records as well as accounting control provisions of federal securities laws.
The agency believes that the company has been meeting its internal sales targets with the help of its end-of-quarter sales-incentives practices. This has led to internal control failures and poor documentation. Hain, which will adhere to the order, was ordered to cease and desist from further violations by the SEC.
The company’s extensive cooperation with the investigation has benefited Hain as the agency didn’t impose a monetary penalty. Hain has voluntarily made significant changes including hiring compliance staff and implementing revenue-recognition practices changes.
The agency believed that Hain offered incentives for its two largest distributors to buy inventory for meeting its sales targets during a period spanning 2014 and 2016. The incentives included up to $500,000 of cash, discounts, and extended payment terms as well as the right to return spoiled or expired products that were made before the sale to the retailers.
In early 2017, the company announced the investigation by the SEC on the correct record period of the revenue from certain US distributors. The company has the history of realizing revenue when shipped to distributors instead of products sold through its distributors to customers.
Shares of Hain opened higher on Wednesday but tumbled to the new 52-week low in the early trade. The shares have turned positive when it is nearing the market close. The stock has fallen over 55% in the year so far and over 32% in the past three months.
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