Difficulties continued in the second quarter for Jos. A. Bank Clothiers Inc., but shareholders reacted well to steps the men's retailer took to address their concerns.
Jos. A. Bank announced Thursday that its profits slumped 38 percent in the quarter that ended Aug. 3 after a promotional campaign failed to lure shoppers.
The Hampstead-based chain earned $14.2 million, or 51 cents a share, in the second quarter, down from $23.2 million, or 83 cents a share, a year earlier.
Sales fell nearly 11 percent, to $232.5 million from $260.3 million. Sales at stores open at least a year, a key measure for retailers, fell 16 percent. Jos. A. Bank has 617 stores in 44 states and the District of Columbia.
"Customers did not respond as well to some of our highly promotional marketing campaigns as they did in the prior year, causing the disappointing sales decline in the quarter," said CEO R. Neal Black in the announcement. "At the same time, day to day sales on the nonpromotional portion of our business in stores increased during the quarter and have the potential to represent a larger portion of our business going forward."
Jos. A Bank's earnings missed the consensus estimate of analysts by a penny but the company's shares rose 5.6 percent, ending the day up $2.25 each at $42.27 a share.
The rise may reflect the company's optimism about the third quarter and recent steps it's taken to address shareholder discontent.
"We are aware we have not maintained a level of dialogue with the investment community you would have liked," Black said during a conference call with investors.
The company plans to reinstitute regular question-and-answer sessions on conference calls, schedule meetings with major shareholders and hire an investor relations firm, he said. On Wednesday, Jos. A. Bank announced that it was increasing the size of its board with the appointment of a former department store executive.
The company will continue a strategy of pursuing acquisitions as opposed to returning cash reserves to owners of stock, Black said during the call. He said the company has reviewed a large number of candidates that are "mostly within the retail sector and have potential for strong growth well into the future."
BeaconLight Capital LLC, a New York-based investment manager that owns more than 1 percent of Jos. A. Bank, objected to that acquisition strategy among other things in an open letter last month to the retailer's board.
Ed Bosek, BeaconLight's founder, managing partner and portfolio manager, welcomed the shifts announced this week by Jos. A. Bank.
"Operationally, we believe they went through a tough period and are turning the corner, and the company today seemed to verify that," Bosek said Thursday. "From our perspective, the communication is moving very much in the right direction and the governance is moving in the right direction. There is still an issue around the capital, but as they engage more with shareholders, they're likely to get ... responses from shareholders and investors about the proper way to analyze" potential candidates.
In addition to seeking acquisitions, Jos. A. Bank continues to expand. During the conference call, Black said the chain is on track to meet a goal of running 800 stores nationwide. It expects to open eight more factory stores and 22 to 27 full-line stores during fiscal year 2013 in new and existing markets, bringing its store count to 630 by the end of the year.
Suggesting a turnaround in the third quarter, Black said sales overall and sales at stores open at least a year have been up in August.
"The third quarter is off to a good start," he said. "Our declines may have bottomed out."Copyright © 2014, The Baltimore Sun