Jos. A. Bank’s Comeback Fuels Huge Rally for Tailored Brands

(Bloomberg) -
A Jos. A. Bank store, in New York. (AP Photo/Richard Drew)
A Jos. A. Bank store, in New York. (AP Photo/Richard Drew)

Jos. A. Bank, the suit retailer that saw sales plunge after abandoning its famous “buy-one-get-three-free” specials, is showing signs of a rebound far sooner than expected — setting off a major rally for its parent company.

Same-store sales at the chain are expected to grow by a percentage in the mid- to high-single digits during the fourth quarter, according to parent Tailored Brands Inc., which also owns Men’s Wearhouse. A brighter outlook led the retailer to boost the low end of its annual earnings forecast.

The recovery follows a rocky $1.5 billion merger between Men’s Wearhouse and Jos. A. Bank, which suffered a culture clash that centered on starkly different approaches to promotions. Jos. A. Bank had relied for years on deals — made famous by ubiquitous commercials — that coaxed customers into buying several suits at a time.

When Jos. A. Bank scaled back the promotions under Tailored Brands Chief Executive Officer Doug Ewert, sales plunged. But the chain now seems to be coming out of that tailspin, Ewert said Wednesday. Though Jos. A. Bank’s same-store sales fell 9.8 percent last quarter, that was a better result than expected, he said.

“While there is still work to be done, we are encouraged by the healthier trends we are seeing at Jos. A. Bank that reflect our investments in elevating the brand and customer experience through marketing, merchandising and a more engaging sales experience,” he said.

Shares of Tailored Brands soared Thursday, gaining $7.51, or 39.7 percent, to $26.44. That followed a 29-percent gain this year through Wednesday’s close.

A belt-tightening effort also has helped bolster earnings at Tailored Brands. The company posted profit of 68 cents a share in the third quarter, excluding some items. Analysts had estimated 55 cents.

The company now expects earnings of $1.70 to $1.85 a share this year. The range had previously started at $1.55.

Jos. A. Bank’s turnaround “gained momentum earlier than we expected,” Eric Beder, an analyst at Wunderlich Securities, said in a note to clients Thursday. “And the company’s continued restructuring is bearing fruit in terms of improving margins.”