The Men's Wearhouse (MW) is the specialty retailer focusing on men's suits and the business of tuxedo rental in both US and Canada. It is operating more than 1,100 retail stores under different brand names of Men's Wearhouse, Men's Wearhouse and Tux, K&G, and Moores Clothing for Men.
Today the stock has been shot down from $35.5 to around $29, the plunge of more than 18%.
The current negative share performance for the day is right after the company reported quarterly results below analysts' estimates and after it guided weak second-quarter profit resulting from the decline in the uniform business in its UK operations. Earnings for the first quarter were $26.6 million or $0.52 per share, compared to $27.43 million or $0.52 per share last year. In the retail segment, Men's Wearhouse and Moores all experienced an increase in sales. However, K&G and especially the Corporate apparel segment observed the opposite trend. Corporate apparel segment sales decreased 16.4% due to the delay in customer new uniform programs in fiscal 2012 as compared to 2011. For the fiscal 2012, the company expected the sales growth in the range of 4%-5%, with the EPS of $2.7 to $2.78.
The company has no significant interest bearing debt, with total liabilities of around $440 million. Whereas the total equity is much higher, of $1.46 billion, even after taking into account of more than $550 million in treasury stocks.
At the current price of $29 at this time of writing, the market is valuing the company at 15.5x earnings, 1.8x book and 11.3x cash flow.
Even with the significant daily drop, I think it's a reasonable valuation for the company now, not too cheap, not too expensive. However, I would rather wait for the cheaper price before establishing a long position.