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Bear of the Day: Tailored Brands (TLRD)

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Based in Houston, Texas, Tailored Brands, Inc. (TLRD - Free Report) is a specialty retailer of men’s suits and tuxedo rentals across the U.S. and Canada. The company used to be known as The Men’s Wearhouse, and provides customers with a wide range of suiting options including suit separates, sport coats, slacks, dress shirts, sportwear and outerwear, and shoes and accessories.

In the past six months, shares of Tailored Brands have fallen around 48%. Disappointing guidance in its third-quarter earnings report overshadowed an earnings beat and left investors scrambling.

Earnings of $1.01 beat the Zacks Consensus Estimate of 94 cents thanks to lower interest expenses and a lower tax rate; earnings also increased from 75 cents reported in the prior year quarter.

Revenues of $812.7 million missed our consensus but was up 0.2% year-over-year. Retail comparable sales jumped 2.3%, driven by a 1.7% increase at Men’s Wearhouse and a 3.8% increase at Jos. A. Bank.

Investors were most concerned about Tailored Brands’ big guidance cut. For the full year, the retailer now expects to earn between $2.30 and $2.35 per share on a non-GAAP basis, down from a previous guidance range of $2.35 to $2.50.

“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,” said Executive Chairman Dinesh Lathi. This “softening” led to the company’s full year guidance cut.

Estimates are Falling

It didn’t take long for analysts to lower their estimates for fiscal 2019, and two have cut their earnings outlook in the last 60 days; our consensus has fallen 20 cents, down from $2.50 to $2.30 per share, but earnings could see year-over-year growth of 4.5%.

The consensus estimate has fallen for next fiscal year, too, down 39 cents from $2.91 to $2.52 per share. Two analysts have also cut their estimates for this time period as well.

TLRD is now Zacks Rank #5 (Strong Sell).

In addition to slashing its outlook for the year, Tailored Brands cut its guidance for the upcoming fiscal fourth quarter recently. Due to weaker-than-expected performance at Jos. A. Bank, the company now expects comparable sales to be flat in Q4 and adjusted loss per share of $0.34 to $0.29, down from a previous range of $0.29 to $0.24.

If you’re an investor looking for a broad retail pick to add to your portfolio, you may want to consider G-III Apparel (GIII - Free Report) . This retail licenser and manufacturer is a #1 (Strong Buy) on the Zacks Rank, and currently expects almost 72% earnings growth for the year.

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