Men’s Warehouse Beats Estimates, Sells Off On Revenue Concerns

Shares of Men’s Warehouse (MW) are selling off after -hours as the retailer of discount formalwear reported lighter-than-expected revenues Wednesday after the bell.  The Houston, TX based company reported an EPS loss of $0.11 for the quarter, nearly doubling it’s loss from the same period last year, but nevertheless beating Street estimates of losses of $0.16/share.  Revenue fell 4% year-over-year, coming in light at $457.2 million vs. consensus estimates of $465.9 million, pressuring shares, and gross margins before occupancy costs were down 105 bps.

On a more positive note, guidance was strong, coming in at $0.12-$0.16/share vs. estimates of $0.09.  Furthermore, same store sales of MW’s namesake brand fell just 7.1% year-over-year, improving from a drop of 9.1% for the same quarter last year.  But the revenue numbers seem to be carrying the day, as investors have pushed shares down greater than 6% during after-hours trading.  Also not helping matters were net sales, which also came in light at $457.2 million, down 4% year-over year.

MW has struggled alongside many other clothing retailers throughout the economic downturn.  Along with many of it’s brethren, MW has lowered prices to keep customers only to watch margins wither away.  Though shares have certainly enjoyed a nice run since the panic-lows of just over a year ago, it’s questionable if MW still has legs.  After rallying from under $10 to over $27 during September ’09, shares dropped back under $20 until popping back up to $25 last week on positive retail sales data.

Tonight’s report seems to be bringing shares back down to earth, as well as putting much of MW’s recent run into question.  Until today, shares looked as though they were going to push through the aforementioned September highs, possibly offering a good trading opportunity.  It is highly unlikely they will do so now.

Last week’s positive retail sales report has many retailers, like True Religion (TRLG), which we recommended here at a couple of weeks ago, thriving.  In that kind of environment, there’s no reason to get behind companies that are under-performing their peers.  So, stay away from MW for the moment, unless you’re looking for a short.

Disclosure: No holdings in MW, TRLG.