Men's Wearhouse slips following downgrade

February 1, 2013

NEW YORK (AP) -- Shares of The Men's Wearhouse Inc. slipped Friday after a Cowen & Co. analyst downgraded the stock, saying he is concerned about the retailer's sales and its profit margins.

THE SPARK: Analyst John Kernan lowered his rating to "Neutral" from "Outperform." Kernan said sales of men's sportswear items are slowing down, which could hurt the company's margins and sales at stores open at least a year, an important measurement of retailer performance. He said competitors like Jos. A. Bank Clothiers Inc. are offering more discounts.

Kernan said he now expects Men's Wearhouse to earn $2.76 per share in the current fiscal year, down 8 cents from his previous estimate. According to FactSet, the analysts' consensus is net income of $2.62 per share.

THE BIG PICTURE: In December the Houston company reported disappointing third-quarter results and made a steep cut to its fiscal 2012 forecast. Men's Wearhouse said retail clothing sales in November were weaker than expected, as fewer people visited its stores due to events like Superstorm Sandy, the U.S. presidential election, and concerns about the fiscal cliff.

The company expects to earn $2.57 to $2.63 per share, down 17 cents per share from previous estimates.

In the third quarter revenue at stores open at least a year rose 9.5 percent. Kernan said he thinks those sales will grow about 1 percent in the first and second quarter. Sales at stores open at least a year is an important measurement of retail health because it leaves out results from stores that opened or closed in the last year.

SHARE ACTION: Men's Wearhouse shares fell $1.30, or 4.3 percent, to $29.05 in afternoon trading. The shares are down almost 20 percent since the company reported its second-quarter results on Sept. 5.