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Jos A. Bank (JOSB) Bids $2.3 Billion for Men's Wearhouse (MW)

Stocks in this article: MWJOSB

NEW YORK (TheStreet) -- Men's clothing retailer Jos A. Bank Clothiers (JOSB) has confirmed its $2.3 billion, all-cash bid for Men's Wearhouse (MW). The offer equates to $48 a share, a 36% premium on Men's Wearhouse's share price at Tuesday's close of $35.24.

The combined company will operate more than 1,700 stores nationwide, making it the leading men's apparel manufacturer and retailer in the U.S. Men's Wearhouse is currently evaluating the proposal.

"Our all-cash proposal would deliver a substantial premium to Men's Warehouse shareholders," said Jos A. Bank Chairman Robert Wildrick in a statement. "In addition to capturing significant synergies, we believe that a combination would bring together our complementary capabilities to better serve our customers."

Men's Wearhouse reported second-quarter net sales for the period ended August 3 fell 2.3% to $647.3 million, compared with $662.3 million for the same quarter a year earlier. Net earnings for the period fell to $42.9 million, or 85 cents a share, from $59.4 million in the year-ago quarter.

Jos A. Bank's bid comes on the heels of a turbulent year for Men's Wearhouse. In June, the company parted with its founder and chairman George Zimmer, the man who acted as spokesperson for the brand for more than 25 years. 

In pre-market trading Wednesday, Men's Wearhouse shares are 30% higher, while Jos A. Bank has increased 9.46%.

TheStreet Ratings team rates Jos A. Bank Clothiers Inc as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate Jos A. Bank Clothiers Inc (JOSB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JOSB has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, JOSB has a quick ratio of 2.34, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for JOS A BANK CLOTHIERS INC is rather high; currently it is at 62.16%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.12% trails the industry average.
  • The revenue fell significantly faster than the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 10.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of JOS A BANK CLOTHIERS INC has not done very well: it is down 10.68% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

TheStreet Ratings team rates Men's Wearhouse Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Men's Wearhouse Inc (MW) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had subpar growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for MENS WEARHOUSE INC is rather high; currently it is at 51.12%. Regardless of MW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.63% trails the industry average.
  • MW, with its decline in revenue, underperformed when compared the industry average of 19.9%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, MENS WEARHOUSE INC's return on equity is below that of both the industry average and the S&P 500.
  • MENS WEARHOUSE INC's earnings per share declined by 26.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MENS WEARHOUSE INC increased its bottom line by earning $2.55 a share vs. $2.31 a share in the prior year. For the next year, the market is expecting a contraction of 3.9% in earnings ($2.45 vs. $2.55).

Written by Keris Alison Lahiff.

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