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Executives

Douglas Ewert - President and Chief Operating Officer

Neill Davis - Chief Financial Officer, Executive Vice President and Treasurer

George Zimmer - Co-Founder, Chairman and Chief Executive Officer

Ken Dennard - Founder and Managing Partner

Analysts

Richard Jaffe - Stifel, Nicolaus & Co., Inc.

Betty Chen - Wedbush Securities Inc.

John Kernan - Morgan Keegan

Brian Tunick - JP Morgan Chase & Co

Jill Caruthers - Johnson Rice & Company, L.L.C.

Janet Kloppenburg - JJK Research

The Men's Wearhouse (MW) Q4 2010 Earnings Call March 9, 2011 5:00 PM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to The Men's Wearhouse Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, March 9, 2011. And I would now like to turn the conference over to Ken Dennard of DRG&L. Please go ahead, sir.

Ken Dennard

Thank you, Britney, and good afternoon and welcome to The Men's Wearhouse Fourth Quarter 2010 earnings call. Today's call with management will cover a review of the fourth quarter results and the outlook for the first quarter and full year of fiscal 2011 followed by the Q&A session, as Britney noted.

Please note also, we will be making a number of forward-looking statements today, and all such statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today, and that would be due to a variety of factors that affect the company, including the risks specified in the most recently filed Form 10-K and Forms 10-Q. This call is copyrighted material of The Men's Wearhouse and cannot be rebroadcast without our written consent.

Now I'd like to turn the call over to George Zimmer, Chairman and Chief Executive Officer. George?

George Zimmer

Thank you, Ken. Well, good afternoon. As you know, we shared some significant changes with you a few weeks ago. We are in the midst of our planned executive succession strategy that is coming off without a hitch. In case you missed it last month, we announced a succession plan, whereby I anticipate stepping up from being Chief Executive Officer to become Executive Chairman of the Board of Directors, and Doug Ewert, whom you will from in a moment, will become CEO.

For me, this means I will remain focused on two elements of Men's Wearhouse: the store culture and marketing. Plus, of course, I'll remain involved in working with Doug on strategy. I know that sometimes investors, particularly institutional investors, are eager to get to the numbers. I'd like to make a strong case that Men's Wearhouse's culture is a key foundation for the numbers you're about to hear from Neill and the color commentary from Doug.

Our employees' dedication to making each customer's experience outstanding, what he or she wants to tell their friends about, is not just a warm and fuzzy feel-good part of our business, it's a critical part of our business. We have just had our annual store management meetings during which Doug and I addressed the top 2,700 store management personnel. That's approximately 250 store managers at each of 11 meetings. I wish I could capture and share with you the incredible energy and enthusiasm that we experienced there, and it's like that across all of our business units.

Since we last talked, we've also been voted one of the Fortune 100 Best Companies to Work For again, a significant accomplishment and an indication of our employees' enthusiasm and commitment to our enterprise. About 50% of our business is repeat business and the other half is new business that comes to us as referrals, or they're drawn in by our consistent marketing and advertising. We feel this is a very positive mix that gives us a solid base of customers who rely on us as we are constantly growing new ones.

This is a strong endorsement of the power of our brand, which all stakeholders care a lot about, and brand is where culture, marketing and strategy come together. This year's TV creative campaign embodies The Men's Wearhouse promise of quality combined with great value. This focus is producing solid results. Those of you who regularly join us for earnings calls know that adjusted EPS for 2010 was 30% better than the comparable 2009 level. And as Neill will report, 2011 is expected to grow at almost the same increase despite a challenging climate in our industry. Why? Because we've become better at promoting and our Tuxedo Rental program is nothing less than spectacular.

While it's difficult to predict promotional outcomes, I feel safe saying that we would expect significant earnings increases. I'm comfortable saying this because we've adapted to a changing, increasing, competitive environment. We've increased our market share in suits, and we have a good handle on the various segments of our customer base, like the baby boomers and the so-called millennials, our younger customers who, I'm happy to say, in addition to renting tuxedos from us, do care about looking professional, looking nice, and they care about fashion and style.

In summary, before I turn this over to Neill for a review of the specific numbers, I hope the message you're hearing is that we're confident and enthusiastic about our business and the future as evidenced in our recent financial results reported today and our outlook for fiscal 2011.

Thank you, and I'll turn it over to Neill.

Neill Davis

Thanks, George, and good afternoon. My summary comments today concerning results for the fourth quarter will be on an adjusted basis. I encourage you to review our press release for details on GAAP and adjusted results for this quarter and the prior year quarter.

The adjusted loss per share of $0.19 was in line with our guidance provided at the beginning of the quarter. However, that in-line performance was not uniform across our portfolio of businesses. Specifically, we realized a stronger level of accretion from our recent acquisitions in the U.K. due to currency gains and a higher mix of sales through the company's higher-margin catalog business. Those gains offset a weaker-than-projected performance at our K&G retail business stemming from lower merchandise margins.

We experienced strong comparable store sales results at our Men's Wearhouse stores in November and December, up in the high-single-digit range from increased units per transaction and store traffic. However, these gains were partially offset by mid-single-digit negative comp in January as we believe we pulled forward business during the quarter.

Tuxedo Rental comps increased 11.1% for the quarter, lifting comps by 96 basis points. I would also highlight our E-Commerce sales, which increased 155.9% from the prior year. K&G's comparable store sales increased 4.5%, which was stronger than planned, due to an increase in units per transaction and higher store traffic. However, the absolute dollar value of merchandise margins declined in a greater way than sales growth due to a higher level of markdowns.

Moores, our Canadian business, comparable store sales increased 2.3%. It was in line with plan and driven by increased units per transaction and higher net sales price per unit, which offset a decline in store traffic.

The company's Retail segment gross profit in absolute dollar terms increased 8.9% quarter-over-quarter. As a percentage of related sales, the Retail gross margin increased 114 basis points. This improvement is driven by an increase in Tuxedo Rental margins, which is a result of strong comparable store sales increase in the quarter, as I just mentioned, at the level of 11.1%, as well as leverage of store occupancy cost. However, these gains offset decreases in Retail merchandise margins due to our elevated promotional pricing strategies versus the prior year.

Gross margins from our Corporate Apparel segment in the quarter were 28.6%. When compared to our Retail segment margins of 38.4%, you'll notice that we are experiencing a material negative mix shift, and that is due to the acquisitions of Dimensions and Alexandra in the third quarter of fiscal 2010. That mix shift impact will continue until we anniversary the acquisitions.

Adjusted SG&A in absolute dollars increased 19% over the prior-year quarter. Adjusted SG&A related to the acquired U.K. operations resulted in a 7.5% increase. The remaining 11.5% increase is primarily due to increased payroll and marketing costs.

Total inventories of $486.5 million increased 11.9% from the prior-year fourth quarter of $434.9 million. However, excluding the inventory related to the acquisitions of Dimensions and Alexandra in the United Kingdom, inventories actually decreased 5.7%.

In the quarter, we renewed our $200 million bank credit facility and extended the maturity to January 2016. Concurrent with that renewal, we elected to prepay our existing bank term loan, thereby taking total outstanding debt down to zero.

That concludes the highlights we wanted to share for the quarter, so let's turn our attention now to the financial guidance. As you've seen in our press release earlier today, we have modified our forward earnings guidance practices by reinstating the full year outlook. Our outlook for both the first quarter and full year are provided on both a GAAP and adjusted basis, the details of which are more fully outlined in our press release. My comments to you today will track to our adjusted prior-year actual and current year expected results, and I will start with an overview of our expectations for the fiscal year.

We expect adjusted diluted earnings per share in the range of $1.75 to $1.85, which represents a 19% to 26% increase over $1.47 adjusted diluted earnings per share in fiscal 2010. This guidance is predicated on a consolidated sales growth rate of 8% to 9%. A comparable store sales growth rate of 2% to 4% at our Men's Wearhouse branded stores, a decrease of 1% to 2% at our K&G stores and a flat to an increase of 1% at our Moores stores in Canada. In addition, we also expect our Corporate Apparel business segment to contribute $240 million to $245 million in sales to consolidated total.

We expect gross profit margins to be in the range of 42.25% to 42.45%, which is a 28 to 48 basis point decline over the prior-year margin of 42.73%. We expect our retail gross margin to increase year-over-year as declines in merchandise margins from our continued promotional offering cadence would be offset by improvements in Tuxedo Rental margins and occupancy leverage.

It is from the increased mix of a lower-margin Corporate Apparel business as a result of our acquisitions last year of Dimensions and Alexandra that is driving the consolidated margin decline. We expect adjusted SG&A expenses to be 35.75% to 35.95% as a percentage of sales versus the prior year adjusted level of 37.16%. This represents 121 to 141 basis points of expense leverage.

The key drivers to this leverage, as we have discussed over the course of last year, stemmed from greater efficiencies in our marketing spend, rationalization of distribution capacity, rationalization of our mall-based Tuxedo Rental stores and the increased mix to total sales of our acquisitions in the U.K., which carry a lower expense rates than that of our Retail operations.

The remaining key elements of this earnings outlook include foreign exchange rates, which are assumed at parity with the Canadian dollar and $1.59 for the pound sterling; net interest expense is expected to decline year-over-year as we have reduced our debt levels to zero; an effective tax rate of 35.25%; and lastly, a weighted average share count of 52.6 million shares.

Capital expenditures are planned at $90 million to $100 million. This increase in spending is driven primarily by greater number of remodels at our Men's Wearhouse branded stores, up to 20 new stores under The Men's Wearhouse banner and an increased level of technology spending related to our online and E-Commerce initiatives. Depreciation and amortization charges are expected to approximate $75 million. That covers the full year, so let's now move on to the highlights for the first quarter outlook.

We expect adjusted diluted earnings per share to be in the range of $0.27 to $0.30, a 4% to 15% increase over last year's very strong $0.26 per share, which, in turn, represented a 160% increase over the prior year. I also want to highlight for you that the forward calendar shift this year of the Easter holiday is expected to drive a meaningful level of our tuxedo rentals derived during the prom season in the first quarter to the second quarter. We estimate the impact of this shift to negatively impact the first quarter by $0.03 per share and conversely benefit the second quarter. This guidance is predicated on the consolidated sales growth rate of 14% to 15% and comparable store sales growth rate of 4% to 5% at our Men's Wearhouse branded stores, a decrease of 1% to 2% at our K&G stores and a decrease of 2% to 3% at our Moores stores in Canada.

We also expect our Corporate Apparel business segment to contribute $58 million to $60 million in sales to the consolidated total. We expect gross profit margins to be in the range of 40.6% to 40.75%, which is a 170 to 185 basis point decline over the prior-year margin of 42.45%. The drivers of the lower quarter-over-quarter margin are similar to those as I mentioned for the full year, except that our promotional stance is greater in the first half of this year when compared to last year, as well as the lower level of Tuxedo Rental business expected in the first quarter due to the calendar shift.

We expect adjusted SG&A expenses to be 36.15% to 36.3% as a percentage of sales versus the prior-year adjusted level of 37.94%. This represents 164 to 179 basis points of expense leverage. Leverage points in the first quarter are substantially similar to those driving leverage for the full year that I have previously mentioned.

That covers the relevant details for the quarter and year, and I will now turn the call over to Doug Ewert.

Douglas Ewert

Thank you, Neill. As you just heard from George and Neill, we have a strong level of employee enthusiasm and engagement across all of our divisions, which leads to consistently excellent execution of the strategies determined by our senior management team. Thus, it is incumbent upon us to determine the correct strategies and priorities. In that context, I want to share those strategies and priorities across our various business divisions.

The assumed excellent execution of these plans by our employees, along with our understanding of market conditions, gives rise to the financial outlook that Neill just outlined. We anticipate that our strong value-oriented promotional cadence will continue to dominate our marketing messages to our retail customers in both the United States and Canada.

We've begun airing new commercials that better demonstrate our product quality while maintaining a powerful value message, including store-wide BOGO. These spots are generating positive results in the short term and will be healthier for our Men's Wearhouse and Moores brands in the long run than our previous promotional work.

Fiscal 2010 was an outstanding year in Tuxedo Rentals, and we expect another year of solid results from this very accretive flow-through margin category. Our estimates indicate that we rent in excess of one out of every three tuxedos in the United States, and we anticipate further growth this year.

Our optimism is the result of year-over-year refinements in our extensive marketing efforts and in-store execution by our workforce. The macro drive to our Tuxedo Rental business is directly tied to the number of weddings, as these events represent over 70% of our Rental revenue.

Our customers are the millennials, a demographic group the same size as the baby boomers. As George mentioned in his opening remarks, this younger demographic is a key element to our future growth, and the results we are seeing relative to attracting the millennials to our Retail business are extremely encouraging.

I want to address your heightened concerns about the increased costs of raw materials and labor that could affect our clothing margin. The bottom line is that we anticipate that we will maintain or improve product quality while maintaining initial mark-up levels and margin stability. We will achieve this through a diversification in manufacturing resources, by increasing our mix and our merchandise assortments that are private-label and by implementing very selective price increases.

Our focus is to grow our gross margin dollars year-after-year. Any changes to our maintained merchandise margin percentage will be based on planned declines that result from our promotional events that are designed to drive incremental margin dollars.

Business results at our K&G stores in fiscal 2010 were clearly a disappointment. Poor performance in categories such as our Designer Spotlight offering led to a worse-than-expected result in our Women's merchandising strategies. These offerings were ineffective and resulted in us having to clear unproductive merchandise at very low margin. Our Ladies' inventory is now in good shape, and our margins both in dollars and as a percentage of sales are meeting plan in 2011. We've modified our marketing plans and eliminated our costly campaign to build brand awareness and are now focusing on the tremendous value proposition at K&G. Because of the change in advertising focus, we will save in the area of production costs in 2011. We have corrected identifiable mistakes that contributed to K&G's underperformance in fiscal 2010.

A few words about our merchandise position in our three large Retail divisions. We have effectively cleared our fall assortments, and carryover inventory is lower than historical levels and very manageable. Further, our initiatives to distort assortments targeting millennial customers and big and tall sizes at both Men's Wearhouse and Moores, and Urban fashion customers at K&G are on track and showing positive results.

In 2010, we acquired Dimensions and Alexandra in the United Kingdom, significantly expanding our Corporate Uniform business. The team managing this business unit in both the United Kingdom and the United States are focused on three key strategies: One, customer acquisition; two, integration of acquired operations; and three, efficiently managing the bottom line.

We've spent a considerable amount of time with the operating management of this business unit. The management team plans on realizing cost efficiencies resulting from planned integration between Dimensions and Alexandra. They are also addressing price increases related to the increased cost for raw materials, transportation, and, in some cases, labor. They have adjusted sourcing strategies where possible, and they feel confident that between realization of price increases and implementing sourcing strategies to reduce cost, we will see overall margin improvement. I'm very confident that we will see consistent earnings growth. Though new uniform rollouts can sometimes cause profitability to shift from quarter-to-quarter, we believe we will achieve accretion approximating $0.10 per share in 2011.

We have a new, very experienced leader of our E-Commerce team, Susan Neal. 2010 saw explosive volume growth, albeit off a very low base. However, our new team must now focus on both volume growth and profitability. The initial focus has been on building the new E-Commerce team and better integration with our technology group. We're about to launch an E-Commerce site for K&G, which will be a unique offering within this apparel space. This year, the team will focus on further development of our Men's Wearhouse site, including a focus on big and tall, Tuxedo Rental, and of course, our new K&G website.

Neill mentioned during his presentation the strong levels of cash flows we are realizing from our portfolio of businesses. At the beginning of fiscal 2009, post the financial market meltdown and dramatic retreat of the U.S. consumer, we significantly curtailed our capital spending. We are now in a position to reinvest at more appropriate levels.

The increase in non-acquisition capital expenditures this year over last is related to an active remodeling program at our Men's Wearhouse stores, as well as an accelerated pace of new store openings. While it is difficult for me to verbalize the visual impacts we are attempting in terms of our remodel, I would suggest for those of you visiting New York to stop by our Chelsea store, 6th Avenue and 20th. Our feedback about the remodel is that it is trend-right.

I'm happy to be a part of an incredible group of leaders who are excited about our opportunities. I want to take this opportunity to thank George. I greatly admire his passion and love for this company, which, I believe, permeates the entire organization.

I'm now going to turn it back over to Ken to start the question-and-answer.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Brian Tunick with JP Morgan.

Brian Tunick - JP Morgan Chase & Co

I guess first question, a little more color, Neill, on the occupancy guidance. How should we be thinking about after our store closings as we move through the year, and is that being offset by new or renovated MW stores? And then the second question, I guess, is on the SG&A guidance for the year. What kind of marketing dollar decline is embedded in your guidance?

Neill Davis

Sure. As it concerns the mall-based Tuxedo Rental stores, we anticipate closing approximately 30 this year. Most of those will occur in the first and fourth quarter, given the seasonality of the business. And yes, you're correct that the increased pace of store openings at Men's Warehouse, as well as the remodels, will inflate our occupancy cost more so than what we've had in the last couple of years. As it concerns the level of marketing spend in our SG&A guidance, we still -- at this juncture today, which is always subject to change based on market conditions as we see them develop, but a full year expectation of the reduction in marketing spend across the total business is roughly $10 million.

Operator

Our next question comes from the line of Janet Kloppenburg with JJK Research.

Janet Kloppenburg - JJK Research

I wanted to ask about the new ads that you're running. How long have you been running these ads, and how are they significantly different? I think they're still talking a lot about price, but apparently, there's some emphasis on quality as well. And I'd like to just know more about the attributes of this marketing campaign and if there'll be any changes to it as we move forward. I'd also like to learn a little bit more about what happened at K&G and if those problems are corrected now, and if you expect the Women's business to grow there, or is that -- will it start to moderate? And lastly, if you could just discuss your E-Commerce business, how big it is, and if you're investing in that business in fiscal '11.

George Zimmer

Janet, let me just take that first part on the new advertisement. What really is going on is that we brought back a Creative Director that we had used almost 15 years ago, who used to be the Creative Director at Hal Riney. He's quite good, and he made commercials for us for our Washington's Birthday event that went on in February. And he's making commercials, including myself, for the next several months. Without getting into the details of what these commercials are, they are extremely promotional, much like our Washington's Birthday ad. But because of the way they are filmed and edited, they have a much more quality impression. That, I think, is what we mean by quality and great value.

Douglas Ewert

And Janet, as far as K&G goes, I would tell you that we've learned a lot in the last year and a half about our ability to expand our customer demographic. And our objective now is to focus on our core customer, which is an African-American man. We have a nice Women's business. We expect that to continue to grow modestly, though we're not aggressively trying to grow that business anymore. The impact of the liquidation of the Designer Spotlight inventory is essentially behind us, so we're looking forward to focusing on that core customer in the coming year. As far as our E-Commerce business, it's somewhere in the neighborhood of about 2% of The Men's Wearhouse retail volume. We anticipate that to continue to grow in 2011 at a similar rate that it grew last year. And the K&G side is new, and we'll be going live in the coming few weeks.

Operator

Our next question is from the line of John Kernan with Cowen and Company.

John Kernan - Morgan Keegan

As I play with my model and given your guidance, full year guidance for gross margin, it seems to imply merchandise margin increasing year-over-year in the back half of this year. Is that just -- is that, I mean, more than mix shift from the Tuxedo business and stabilization in clothing margin from the Suit business? Can you talk about that a little bit?

George Zimmer

I think I know Neill wants to talk about that, but I think, isn't that simply the increased promotional activity for the year?

Douglas Ewert

From last year. It's just the easy comparison from last year.

Neill Davis

Yes, George is correct. We anniversary the more aggressive posture or approach to cadence in the third quarter, which is why you're seeing -- would see a better retail margin in the back half of the year than the first half.

John Kernan - Morgan Keegan

Okay. And then can you quantify the K&G hit to merged margin in terms of basis points in Q4?

Neill Davis

No, we can't. Our numbers is not -- we don't give that level of detail.

Operator

[Operator Instructions] Our next question comes from the line of Richard Jaffe with Stifel, Nicolaus.

Richard Jaffe - Stifel, Nicolaus & Co., Inc.

A couple of follow-ups. It came to me as you're suffering from some significant economic pressure, and I'm wondering, given the Dimensions exposure to the U.K. government, if there might be some pressure there or anticipated pressure on some of the government business they have. And then a second question just on Tuxedo visibility into the, I guess, would be the second quarter, and has that visibility improved year-over-year?

Neill Davis

Richard, this is Neill. I'll take the first question and pass the second one to Doug. As it concerns the United Kingdom and its macroeconomic issues, we have taken, we believe, a fairly conservative view as to the implications of that dynamic on Dimensions business. Keep in mind that Dimensions is one of the premier operators in the United Kingdom in the corporate apparel space and has a very solid foundation of customer relationships that we think will help and benefit through this environment. But nonetheless, we do expect some weakness, and that is reflected in our outlook.

Douglas Ewert

As far as Tuxedo Rental, we have forward visibility to a certain degree, forward reservations are looking up over last year, forward wedding parties booked are looking up over last year. I will point out, though, that we are looking at the latest Easter that we've seen since 1945, and that's going to dramatically impact the prom business because it's going to be compressed more tightly than it's ever been compressed.

Richard Jaffe - Stifel, Nicolaus & Co., Inc.

And just a question on -- you guys got some great footage on a TV special called the NASCAR Wedding, and I don't know if you had to pay for that spot, but it was a great, great footage. Kyle Busch was outfitted for his first wedding and looked terrific.

George Zimmer

To the best of our knowledge, we didn't pay for it.

Richard Jaffe - Stifel, Nicolaus & Co., Inc.

It was good stuff. A portion of it was filmed obviously inside your store and he and his groomsmen were horsing around in different outfits, and finally, the bride approved of what he ends up with.

Operator

Our next question is from the line of Betty Chen with Wedbush Securities.

Betty Chen - Wedbush Securities Inc.

I was wondering if one of you can address, I think, the strategy regarding promotions for the first half versus second half? I think, Neill, in your prepared remarks, you may have mentioned that the gross margin guidance may assume some heavier promotions in the first half of this year, and I was kind of curious on why. And then also, secondly, related to price increases, I think you also mentioned there'll be some selective increases. I was wondering if any of that have been implemented and where and in which categories, any color around that would be helpful.

Douglas Ewert

All right, Betty. I'll tell you we started with aggressive store-wide promotional events in September of last year. And we've had great success with the strategy since then, so we look forward in the part of this year to continue to realize that. And then as far as price increases, we have not yet taken any price increases. We don't really start feeling retail apparel inflation pressure until the back half of this year. So we're monitoring things closely, and we have some plans, but I'm not prepared to articulate those at this time.

Betty Chen - Wedbush Securities Inc.

And then as a follow-up, in terms of the guidance for Moores in Canada, sequentially, it looks like you may be slowing down a little bit. Is there something you're seeing in that market, or are you just building in quite a bit of conservatism?

Douglas Ewert

Well, I think what you're seeing in those numbers is that the Ladies' turned its impact on the Tuxedo business.

Operator

Our next question is from the line of Jill Caruthers with Johnson Rice & Company.

Jill Caruthers - Johnson Rice & Company, L.L.C.

And you won't quantify the margin impact from K&G markdowns in the fourth quarter, but could you talk about possibly, broadly if it experienced operating loss for the year and kind of what your targeted outlook is for 2011?

Douglas Ewert

We did suffer operating losses at K&G in 2010, and we are anticipating being in the black this year.

Jill Caruthers - Johnson Rice & Company, L.L.C.

Any way to quantify that or...

Neill Davis

Well, Jill, this is Neill Davis. What I would suggest for you is back in fiscal 2005, K&G produced a mid- to high-single-digit operating margins, and clearly, macro conditions have pressured that business more significantly than our other businesses because of our demographic concentration -- customer demographic concentration at K&G. So while we move out of an operating loss position over the next several years, we would hope to get back into the low- to mid-single-digit operating margins, but it's a multiyear process.

Operator

And our next question is a follow-up question from the line of Brian Tunick with JPMorgan.

Brian Tunick - JP Morgan Chase & Co

Yes, two quick follow-ons. Neill, is there any share repurchase assumed in the $1.75 to $1.85? And then also, can you guys talk about the recapturing of the Tuxedo Rental business when you closed in the After Hours into the core Men's Wearhouse? Anything you saw of change of that recapture rate as you move throughout the year or would anticipate changing in 2011?

Neill Davis

Sure. I'll take the first question and pass it again over to Doug. We have been active in the share repurchase since the board made the authorization a month or so ago. Embedded in our outlook is about $5 million in value of purchases. No other activity has been guided.

Douglas Ewert

And then as far as recapture, we're still experiencing and comfortable with the recapture rate of roughly 65% when we close one of these freestanding Tuxedo stores.

Brian Tunick - JP Morgan Chase & Co

And then just finally on the number of K&G closings for the year, can you just update us on those plans?

Douglas Ewert

We don't have a specific number to report. We evaluate this as each lease period comes up, and so we'll be updating you throughout the year if there are any.

Operator

And I'm showing no further questions in the queue. I'd like to turn the call back to management at this time for any closing remarks.

Ken Dennard

Well, we'd like to thank you very much for your interest in our company, and have a good day, everybody.

Operator

Thank you. Ladies and gentlemen, this concludes The Men's Wearhouse Fourth Quarter 2010 Earnings Conference Call. If you would like to listen to a replay of today's conference, please dial (303) 590-3030 and enter the access code of 4418605 followed by the pound sign. We thank you for your participation. You may now disconnect.

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