Earnings preview: Will Tailored Brands stitch fabric softness in Q1

Tailored Brands (TLRD) is scheduled to report its earnings results for the first quarter of 2019 on Wednesday after the market closes. The specialty apparel retailer will be hurt by the current softness backed by the macro-environment and the need to execute on core growth strategies.

The comp sales trends are expected to be disappointing and unacceptable relative to the company’s view of the potential of the business. The company experienced continued softness during the quarter including stock market volatility and the temporary government shutdown.

Tailored Brands has set a goal of creating a sustainable operating structure that enables continued funding of growth initiatives to address a rapidly changing retail environment. The company has got to revitalize its stores, ignite its e-commerce sites and evolve to a more modern marketing channel mix.

The company has been facing stiff competition from online retailers such as Amazon (AMZN) and Walmart (WMT) as most of what Tailored Brands sell could be easily ordered online. The stock had taken the beating as it hit a 24-year low of $5.13 on May 31, 2018.

Analysts expect the company’s earnings to plunge by 70% to $0.15 per share and revenue will fall by 5.10% to $776.22 million for the first quarter. In comparison, during the previous year quarter, Tailored Brands posted a profit of $0.50 per share on revenue of $817.96 million.

The company surprised investors by beating analysts’ expectations thrice in the past four quarters. It is expected that Tailored Brands will report upbeat results for the first quarter. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $11 per share in the next 52 weeks.

Also read: Earnings calendar for this week

For the fourth quarter, the company swung to a profit from a loss last year, which included a favorable non-cash adjustment to net sales reflecting a reduction of the deferred revenue liability as a result of changes made to its loyalty programs. Total net sales decreased by 8.6% year-over-year.

Retail net sales decreased 7.3% due to the impact of last year’s 53rd week, the 1.5% decline in retail comparable sales and a decline in alteration and other services revenue largely resulting from the MW Cleaners divestiture. Corporate apparel sales dropped by 23.3% on lower replenishment demand in both the United Kingdom and the US, the impact of last year’s 53rd week, and the impact of a weaker British pound this year.

For the first quarter, the company expects adjusted earnings in the range of $0.10 to $0.15 per share. Corporate apparel net sales are predicted to be down 10% to 12%. Comparable sales for Men’s Wearhouse and Jos. A. Bank each is predicted to be down 3% to 5% while that for K&G is expected to be flat to up 2%. Moores comparable sales are projected to be down 5% to 7%. The company expects to close three Jos. A. Bank stores in the first quarter of 2019.

Shares of Tailored Brands opened higher on Monday and is trading in the green territory on the NYSE. The stock has fallen over 82% in the past year and over 50% in the past three months.

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