Through The Fly's Eyes: Men's Wearhouse

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Men's Wearhouse: Quality And Tradition In Men's Fashions

No matter which way fashion winds may be blowing at the moment, traditional quality is always in style. There is a Houston-based outfit that works to maintain sartorial reliability, at shops throughout North America.

Men's Wearhouse (MW) is a specialty retailer of men's clothing and accessories in the United States and Canada. The chain consists of 1,267 stores, operating under the names Men's Wearhouse, K&G, After Hours and Moores. The stores offer a broad selection of designer, brand name and private label men's businesswear, including a consistent stock of core offerings. The K&G subsidiary caters to more price sensitive customers and sells ladies' career apparel in about half the stores.

The firm pleased shareholders last week, when it said that it expected Q2 EPS to meet or exceed the high end of the company's initial guidance range of 88-92 cents. Analysts had been looking for 90 cents. Management cited stronger retail sales at the company's traditional Men's Wearhouse stores for the improved outlook.

The stock popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys," three "buys" and one "hold." Analysts see a 15% average annual growth rate through the next five years. The stock's P/E ratio (18.67), PEG ratio (1.24), Price to Sales ratio (1.52), Price to Book ratio (3.77), Price to Cash Flow ratio (13.10), Price to Free Cash Flow ratio (27.51), EPS Growth rate (26.42%) Return on Assets (13.55%), Return on Investment (17.38%) and Return on Equity (22.20%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $29.82 and $56.64. A stop-loss of $47.90 looks good here. Note that the firm is expected to report Q2 results on August 22.