Shares of Tailored Brands, formerly known as Men's Wearhouse, jumped more than 11 percent in early trading Thursday, a day after the company announced plans to close roughly 250 stores this year. That includes shuttering 80 or 90 full-price Jos A. Bank stores.
The announcement followed worsening sales trends at that label in the fourth quarter, with the company adding that it expects weakness there to continue into 2016. Revenues at Jos. A. Bank have gotten whacked since the company ended its ubiquitous Buy One Get Three Free promotion in October.
"Over the past several months we completed a comprehensive operational review of the Tailored Brands businesses and are in the process of taking actions we believe will right-size our store base, optimize our cost structure, return Jos. A. Bank to profitability and improve other operating aspects of Tailored Brands," CEO Doug Ewert told investors.
After reiterating Wednesday that Jos. A. Bank's comparable sales dropped 31.9 percent during the fourth quarter (the company pre-announced its sales in February), management said it expects another mid-teens decline this year. That would follow the 14.6 percent slide the brand posted in the third quarter.
Ewert admitted that the transition from these promotions "has proven significantly more difficult and expensive than we expected."
"We do, however, remain confident that Jos. A. Bank offers a longer-term opportunity to profitably grow market share in the menswear business," he said.
Men's Wearhouse, which changed its name to Tailored Brands in January, acquired the Jos. A. Bank label for $1.8 billion in 2014. In a bid to bring the brand more upmarket, management last year put an end to the Buy One Get Three Free promotions that made the brand famous. Those same promotions had also made the brand a target of spoofs on "Saturday Night Live."
In one sketch on the NBC show, a mom says she buys the suits to clean up messes, because they're "effectively cheaper than paper towels."
Customers, however, have been unwilling to shell out more money on the label. As a result, the company's inventory levels were 9 percent higher at the end of the fourth quarter. Stifel Nicolaus analyst Richard Jaffe said that excess inventory is "cause for concern," and could result in increased markdowns.
On the plus side, Jaffe noted that clothing margins at the label improved during the quarter — a trend Ewert said should continue this year.
As part of its strategy to bring Jos. A. Bank back to profitability, Ewert said the brand will close 80 to 90 of its full-price stores this year. The company will also close all Jos. A. Bank and Men's Wearhouse outlet stores, which the CEO said were collectively not profitable. It will also close 100 to 110 tuxedo shops.
As of Jan. 30, there were 714 Men's Wearhouse stores, 625 Jos. A. Bank locations and 160 tux shops.
Tailored Brands stock, which is down more than 62 percent over the past year, closed more than 3 percent lower Wednesday.