Yesterday, after the market closed, The Men's Wearhouse, Inc. announced that it has entered into an agreement with JPMorgan Chase Bank, NA to repurchase its $100 million worth of common stock under an accelerated share repurchase program.
One of the largest specialty retailers of menswear in the United States and Canada will buy these shares under its ongoing $200 million share repurchase program announced on Mar 13 this year. Furthermore, Men’s Wearhouse expects to close the transaction by the end of fourth-quarter 2013.
Under the accelerated share repurchase program, a company buys back its shares from an investment bank. The investment bank sells these shares to the company after borrowing from clients or share lenders.
Thereafter, the bank returns the shares borrowed from clients or share lenders by purchasing shares from the open market over a certain time period. This type of share repurchase program allows companies to acquire shares at a faster pace and immediately reduce the shares outstanding.
Initially, the menswear retailer will get nearly 2,197,000 shares from JPMorgan, approximately 85% of the total number of shares projected to be repurchased. The price at which Men’s Wearhouse will acquire these shares will be calculated on the basis of volume-weighted average share price.
The company intends to fund this accelerated share repurchase program with cash in hand and/or by utilizing its existing credit facility. Men’s Wearhouse’s strong balance sheet and cash flows provide financial flexibility and facilitate shareholder friendly moves.
During fiscal 2012, the company shelled out $41.3 million on share repurchases and $37.1 million on cash dividends. Furthermore, last week, the company signed an agreement to acquire JA Holding, Inc. for a sum of $97.5 million in cash.
Men’s Wearhouse currently carries a Zacks Rank #4 (Sell). Other well-performing stocks in the apparel industry that are worth a look include The Gap, Inc. (GPS - Analyst Report), Citi Trends, inc. (CTRN - Analyst Report) and Express Inc. (EXPR - Snapshot Report). All of them have a Zacks Rank #2 (Buy).