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Jos' FY12 Net Income to Decline

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Battered by increased input costs along with higher marketing expenses, Jos. A. Bank Clothiers Inc. anticipates that its net income for fiscal 2012 will decline 20% from the previous fiscal level of $97.5 million. However, this Zacks Rank #4 (Sell) company is still expecting to post positive income in the fourth quarter and fiscal 2012.

Per the company, total sales for the fiscal are higher than the fiscal 2011 level and have crossed the $1.0 billion sales landmark. This is the first time in the company’s history that it has touched this milestone.

Currently, the Zacks Consensus Estimate for fiscal 2012 revenue is pegged at $989.0 million, while earnings per share stand at $3.67.

Moreover, following the footsteps of its competitors, Citi Trends, Inc. , DSW Inc. (DSW - Free Report) and Express Inc. (EXPR - Free Report) , Jos has opened 46 new stores during fiscal 2012 and intends to add 45 to 50 more new stores in fiscal 2013. We believe that the company’s strong balance sheet and ability to generate solid cash flow facilitate it in expanding the store network.

Further, the company’s fourth-quarter sales have been negatively impacted by Superstorm Sandy along with a diversion generated from Presidential election and uncertainty over fiscal cliff. Moreover, the company’s one of the strongest holidays selling season was hit by unfavorable weather conditions despite the strong marketing and promotional strategies. However, the company’s direct marketing business is doing well and has registered year-over-year double-digit sales growth during the fourth-quarter-to-date period.

For the quarter, the current Zacks Consensus Estimate for revenue and earnings per share are pegged at $232.0 million and $1.76, respectively.

Jos has a unique business model of offering products initially at higher mark-ups and then provide discount on them. The company is famous for its ‘buy one get seven’ and ‘70% off’ deals, which have worked for years.

This is the first time that the company’s aggressive marketing and promotional steps didn’t pay off well. Therefore, we believe that the company needs to revive its marketing strategies according to the current market scenario and competition.

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