Tailored Brands’ Gains Are No Match for Pandemic-induced Pressures

Tailored Brands continues to feel the pandemic pressure.

On Wednesday, the bankrupt men’s wear retailer reported that, while sales are increasing, they are running “at a slower pace than the business plan” originally set forth in July.

In a “cleansing material” report issued to the Securities and Exchange Commission, the company said that an initial uptick experienced in June after its fleet of stores had reopened has now moderated.

Although comparable-store sales have improved 3.6 percent from the second week of July to the fourth week of September, the outlook is still grim, with sales for The Men’s Wearhouse division expected to be down 57 percent this year and 21 percent in 2021; Jos. A. Bank down 58 percent in 2020 and 22 percent in 2021; Moores in Canada dropping 62 percent this year and 23 percent next year, and K&G declining 45 percent this year and 13 percent in 2021.

In a business plan laid out on July 1, Tailored Brands said initial expectations had pointed to a steep decline in U.S. apparel sales followed by an expected recovery to fiscal year 2019 levels as early as the first quarter of fiscal year ’21 or as late as the first quarter of fiscal year 2024.

In light of these possible scenarios, the outlook was “approached as ‘mid-line’ between bullish and bearish,” the company said.

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However, in an updated business plan dated Oct. 5, apparel performance actually fell in July and the U.S. outlook for that category “moderated significantly as COVID-19 surged, job losses mounted and work from home/social gathering restrictions were extended,” the company said.

As a result, “margin rate pressure has intensified due to competition, channel preferences and casualization.” And the expectation now, the company said, is for North American apparel sales to be down 20 to 30 percent in 2020 and 10 to 25 percent in 2021.

Tailored Brands cited data from ShopperTrak that showed a marked upswing in sales from March to mid-June, which flattened as COVID-19 case counts increased later in the summer. Similarly, data from MasterCard showed a decline in apparel sales in July following gains in May and June.

For the industry in general, apparel was “one of the hardest hit sectors,” with tailored clothing tied to return to work and the easing of social gathering restrictions. Add to that an accelerated shift among consumers to e-commerce, which continues to impact store traffic, and more than 1,000 non-Tailored Brands’ store closures that are putting “near-term pressure on revenue and selling margin but represent share gain opportunity post-closing.”

Tailored Brands is known for its dominance in tailored clothing. It also has a large rental business, another category that has been severely impacted by the pandemic.

On Wednesday, the company said wedding-related rentals are expected to be down this year from 49 percent at Jos. A. Bank and 61 percent at Men’s Wearhouse to 75 percent at Moores. However, the category is expected to increase 4.1 percent in fiscal year 2021 as weddings shift to next year. And with proms and other formal events being canceled, non-wedding rental sales are expected to drop some 70 to 75 percent this year as well.

One bright spot, however, is the company’s e-commerce business. The Men’s Wearhouse division is tracking ahead of plan with September comp sales up 38 percent, raising the overall percentage of sales made online to 13 percent. At Jos. A. Bank, comps are accelerating, rising 7 percent in September to reach 39 percent of total sales. Moores, however, does not have an e-commerce site and that launch has been postponed until August 2021, the company said.

Looking ahead, Tailored Brands continues to anticipate “future growth…driven by a healthier store fleet and cost-structure rationalization efforts,” it said. A financial performance chart provided on Wednesday shows a planned return to profitability in fiscal year 2021 — albeit a small one — followed by subsequent gains through fiscal year 2024. The projection for this fiscal year is an EBITDA loss of $328 million, followed by a profit of $84 million next year, $213 million in fiscal year 2022, $226 million in 2023 and $240 million in 2024.

Tailored Brands filed Chapter 11 bankruptcy in early August and lined up $500 million in debtor-in-possession financing from existing revolving credit facility lenders. It said this summer it would close up to 500 of its 1,400 stores in the U.S. and Canada and cut 20 percent of the workforce, moves expected to reduce debt by at least $630 million. No update was provided on the progress of this plan on Wednesday.

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