Men's Wearhouse view lags Street, shares fall

By Nichola Groom

LOS ANGELES (Reuters) - Men's Wearhouse Inc (MW.N) warned on Wednesday that fourth-quarter and full-year earnings would be below Wall Street estimates in part due to weak consumer spending, sending shares down more than 11 percent after hours.

The men's apparel retailer also reported a 16 percent rise in third-quarter net income, helped by tuxedo rentals.

Houston-based Men's Wearhouse said third-quarter sales of outerwear were hurt by warm weather, but it expected the fourth-quarter to be challenging, despite a recent improvement in demand for cold weather clothing.

"Through the third quarter, our suit business was actually decent. Not good, but decent. And what was holding down the numbers was that outerwear and sweaters, cold weather items, were performing miserably," Men's Wearhouse Chief Executive George Zimmer said on a conference call with investors. "Now that the weather has started to turn in certain markets, we are starting to see some improved performance in those items. But there's no improvement whatsoever in tailored clothing."

Men's Wearhouse posted third-quarter net income of $37.1 million, or 69 cents per share, in line with Wall Street analysts' average estimate. In the same period last year, the company earned $31.8 million, or 58 cents per share.

Total sales rose 19.1 percent to $512.1 million, helped by the recent acquisition of its After Hours tuxedo business. Analysts were expecting sales of $509.6 million, on average.

Same-store sales fell 2.1 percent in the United States, below the company's forecast, as warm weather hampered sales of outerwear. In Canada, same-store sales rose 0.6 percent, also below expectations.

Performance was particularly weak at the company's discount chain, K&G. As a result, the company said it would cut back expansion of that chain next year.

For the fourth quarter, earnings are expected to be between 43 cents and 48 cents a share, lagging Wall Street analysts' average estimate of 55 cents a share, according to Reuters Estimates. Sales at stores open at least a year, a key retail measure known as same-store sales, are expected to be down in the low single digits in the United States, the company said.

"The fourth-quarter guidance appears a little bit more conservative, which is not a surprise because most retailers have been providing more conservative guidance for the holiday season given the macro environment," said Betty Chen, an analyst with Wedbush Morgan.

Chen has a "buy" rating on Men's Wearhouse shares and owns none.

Many retailers are worried that shoppers, squeezed by the slowing U.S. housing market, higher food and fuel costs and the credit market crunch, have cut holiday spending plans.

Men's Wearhouse also said fourth-quarter performance would be hurt because it is a slow time for tuxedo rentals.

For the full year, Men's Wearhouse forecast earnings of $2.87 per share to $2.92 per share. Analysts had been expecting earnings of $2.98 per share, on average.

Men's Wearhouse operates nearly 1,300 stores under the Men's Wearhouse, After Hours, Moores Clothing for Men and K&G brands. Its shares fell to $36.25 in after-hours trading after closing at $41.05 on the New York Stock Exchange.

(Reporting by Nichola Groom and Lisa Baertlein; editing by Gary Hill and Andre Grenon)