Jos. A. Bank Clothiers Inc., likely a few weeks away from finalizing a $1.8 billion deal to be acquired by Men's Wearhouse, posted a $37.1 million first-quarter loss stemming from merger-related expenses.
In what is probably its last earnings report as an independent company, the Hampstead-based men's apparel chain reported Friday a loss of $1.33 per share for the three-month period that ended May 3.
Bank reported earnings after the close of the market. Its stock closed up 4 cents at $64.97 per share.
Bank accepted its Houston-based rival's takeover offer March 11. The deal is paying Bank's stockholders $65 a share in cash, with a tender offer that was extended Thursday to June 19.
Expenses related to the merger reached $75.4 million, the company said Friday. Costs included a $48.5 million breakup fee paid to the owner of outdoor apparel retailer Eddie Bauer, owed after the merger with Men's Wearhouse forced Bank to pull out of an agreement to purchase Bauer for $825 million in cash and stock. Other expenses included legal and professional fees related to Bank exploring merger possibilities and compensation packages for executives.
Excluding those costs, Bank's profits rose 10 percent to $9 million, or 32 cents per share, from $8.1 million, or 29 cents per share in the first quarter of 2013. Those adjusted earnings fell short of analysts' expectations of 40 cents per share.
But sales rose 11 percent to $217.4 million, surpassing Wall Street expectations of $215.6 million.
The retailer has seen increases in adjusted earnings since the second half of last year, said R. Neal Black, Bank's president and CEO. Sales at stores open at least a year increased by double digits in the first two months of the quarter but slowed after Easter, resulting in a more than 8 percent sales gain for the quarter.
Though May started out strong, with a 7.7 percent same-store sales gain, "our gross profit margin rate declined in May as we aggressively sold clearance goods left over from spring 2013 and our sales and marketing expenses increased," Black said in the company's announcement. "We are therefore cautious as we approach the critical Father's Day selling period as we attempt to balance strong sales with the appropriate amount of clearance markdowns and advertising expenses."
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In a conference call Thursday, Men's Wearhouse executives said the deal with the 639-store Bank chain is expected to close in the next few weeks, and the company will update investors on merger strategy this summer. The chain also is in discussions to sell its underperforming K&G division, which could happen soon, according to Richard E. Jaffe, an analyst with Stifel Nicolaus & Co.
Last month, the Federal Trade Commission ruled that the merger would not violate antitrust laws and can move forward.
It is expected to save the combined companies from $100 million to $150 million a year over three years through greater efficiencies in buying, marketing and customer service, and by streamlining corporate functions. It will likely mean job losses in Maryland, where Bank was founded in 1905. It is Carroll County's fourth-largest employer, with about 780 workers between its headquarters and distribution facilities.
"We are intrigued by the tremendous earnings leverage of the [Men's Wearhouse/Jos. Bank] businesses, the market share the combined entity will possess and by the potential synergies to be achieved," Jaffe said in an analysis of Men's Wearhouse earnings released Friday.
The merger came with a price tag that's $10 a share higher than Men's Wearhouse first bid last fall, which came as a countermove after Bank made a surprise $2.3 billion offer to buy its competitor in September. The events kicked off an acrimonious takeover battle between the nation's two biggest men's apparel specialty chains.
Analysts expect the combined $3.5 billion company with 1,700 stores — under distinct banners — to be able to more easily compete with department stores and online retailers.