Jos. A. Bank Clothiers: An Attractive Retail Pick

| About: Jos. A. (JOSB)
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I picked up some Jos. A. Bank Clothiers, Inc. (NASDAQ:JOSB) yesterday ahead of Abercrombie & Fitch (NYSE:ANF) earnings today. It's tough to recommend a retail stock with all the worries surrounding the consumer, but the current valuations are extremely attractive.

JOSB closed the day at 9.6X 2008 earnings (2 qtrs of which are in the books), putting its PEG at about 0.5 and its price/sales at 0.8. It's nearly 45% off it's 52 week high set on June 12th of this year. It has nearly a 50% short interest. The analyst 5-yr expected growth rate is 18.0 and the company's 5-yr historical growth rate is ~40%.

Maybe I'm the only one, but I fully expect a rally or short squeeze in this sector in the next month or two, and hope that ANF today will be the catalyst that we need. Most of the concerns about the consumer, which I think are way over-heated in general, are already baked into this one.

Compared to its competitors, it looks even better. The closest competitor, Men's Wearhouse (MW), closed the day at 13.5X earnings. However, they're projected to grow at only 15X earnings with 31% 5-yr historical growth.

All this aside, I also like the company and their long-term growth prospects, and my personal opinion having shopped at both stores is that JOSB provides a better overall experience for the customer. I'm still in this one for a relatively short time horizon (probably 3-6 months), looking to profit off of any rally. My long-term price target would be $36, reflecting a 13.5X multiple of 2008 earnings, and 41% upside potential. I will probably be selling on any spike above $30. Another interesting trade would be to try to arb these two companies, by shorting MW and buying JOSB; that's not really my style, but you may be able to turn a profit with reduced risk.

Disclosure: Author holds a position in JOSB