Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
Men's Wearhouse (NYSE: MW) issued second-quarter results after the bell on Wednesday. In terms of bottom-line performance, the retailer passed with flying colors. Earnings per share increased to 75 cents per share from the adjusted 72 cents per share observed a year ago. Granted, that's only a three-penny difference, but when it comes to expectations, well, they were blown out the door. According to Reuters, Wall Street was only preparing for 60 cents per share.
Unfortunately, the top-line picture wasn't so pretty. Total sales fell 3.5%, and same-store sales for all of the company's brands declined. The flagship Men's Wearhouse concept saw a comps dip of 2%.
Gross margin was pressured in the quarter because of initiatives related to promotions. But here's something shareholders should be happy about: cash from operations for the six-month frame soared to $110 million from $86 million in the comparable period. Also, cash and cash equivalents increased, while long-term debt decreased. Not a bad relationship, right?
Even though sales were lousy, you would figure that the stock would rally on the great earnings beat. Not this time. Shares actually sold off over 4% during yesterday's after-hours session.
Sharp investors and/or traders probably suspected the following culprit: lackluster guidance. Indeed, the aforementioned Reuters piece confirms this suspicion. Wall Street was looking for a little more per-share profit from the company in Q3 than what most likely will be delivered.
Men's Wearhouse, like so many other equities this year, has been quite strong as the market gets increasingly comfortable with the theory of an improving economy. This after-hours drop might simply be a bump in the road. Still, if you do own a profitable position in the retailer, why not take some gains off the table to be safe? It could be a wise move. As for me, if I were looking in this sector, I'd probably focus on brands with higher profiles, such as Wal-Mart (NYSE: WMT) or Target (NYSE: TGT).
Disclosure: I don't own any company mentioned; positions can change without notice.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
