JoS. A Bank Warns

At the end of last year, I decided to take JoS. A Bank Clothiers ($JOSB) off our Buy List. It wasn’t too much of a surprise for long-term readers of our humble blog. The company had not one, but two awful, terrible earnings reports last year.

As I often point out, business problems aren’t like a sports team in a slump. You can’t just shake them off. If there’s a problem, there’s usually something important driving it and the problem will most likely get worse before its resolved.

This past Friday evening at 8 pm, JOSB issued a press release. Without knowing too much about PR, you can be pretty sure that anything in a press release going out at that time isn’t going to be good news. And in this case, you would be correct.

Joey Banks said that net income for FY 2012 would be “approximately 20%” lower than the year before. The silk tie has hit the fan. Neal Black, the CEO, said:

The fourth quarter started out slowly, as the first two weeks of fiscal November were negatively impacted by the aftermath of Hurricane Sandy, the distractions created by the presidential election and the uncertainty of the fiscal cliff. Going into the critical holiday selling season, starting on Black Friday, we believed we had a strong marketing and promotional strategy for the period. However, many of the promotional items and a large part of our holiday assortment were items that sell best in cold weather and the weather was unseasonably warm.

Oh dear lord. This is a cartoonish example of someone refusing to take responsibility; Hurricane Sandy, the fiscal cliff, the election and unseasonably warm weather. You gotta be kidding me. I hate to inform Mr. Black that presidential elections aren’t what we call unforeseen events.

Let’s run some math. Last year, JOSB earned $3.49 per share, so a 20% decline would be earnings to $2.79 per share. For the first three quarters of this fiscal year (which ends at the end of the month), JOSB earned $1.83 per share. So that translates to Q4 earnings of 96 cents per share. How bad is that? Wall Street had been expecting $1.76 per share. In other words, this is a massive shortfall.

I’m glad we got this dog off the Buy List. Monday’s opening trade will not be pretty.

Posted by on January 28th, 2013 at 7:14 am

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