UPDATE 4-Tux downturn, suit slide hit Men's Wearhouse profit
(Updates stock move)
LOS ANGELES, May 28 (Reuters) - Would-be revelers worried by a weak U.S. economy rented fewer tuxedos last quarter, Men's Wearhouse Inc (MW.N) said on Wednesday, as it posted a sharp drop in profit and said fewer shoppers bought suits at its flagship chain.
Shares of the company fell nearly 7 percent as it also cut its earnings outlooks for the second quarter and year to below Wall Street targets.
"Our retail clothing business across all our retail concepts has declined and is the result of reduced store traffic as well as a more conservative buying pattern of our customers," said Chief Executive George Zimmer, citing in particular shoppers in California and Florida.
The retailer said net profit for its fiscal first quarter ended May 3 was $9.9 million, or 19 cents per share, compared with $40.9 million, or 75 cents per share, a year earlier.
Excluding costs associated with the closure of a Canadian factory, earnings were 20 cents per share, at the low end of the company's predicted range of 20 cents to 24 cents.
Wall Street, on average, had been expecting adjusted earnings of 22 cents a share, according to Reuters Estimates.
The company, which is increasing its marketing spending to combat the effect of an economic downturn on consumer spending, said sales in the quarter fell 6.7 percent. Apparel sales, the bulk of its business, fell 4.6 percent.
Zimmer cited recent industry research that he said showed the suit category had declined by 14 percent in dollar terms in the last year. But, he added, the company had increased market share at its Men's Wearhouse and K&G stores to 19 percent from 17 percent.
Sales took the worst hit at its K&G discount chain, where same-store sales fell 14 percent in the quarter. The company has hired a new merchandising officer at the chain.
The company also operates Moores Clothing for Men stores in Canada.
Sales from tuxedo rentals, which represent about 14 percent of total revenues, fell 18.6 percent in the quarter.
"While the tuxedo rental industry may be recession resistant, it is not recession proof," Zimmer said.
Looking to the second quarter, Men's Wearhouse said it sees net earnings in a range of 69 cents to 73 cents per share.
Excluding Canadian facility closure costs, adjusted earnings are expected to range between 75 cents and 79 cents per share, below the 82 cents expected by analysts, on average, according to Reuters Estimates. Continued...
