Tuesday, July 13, 2010

Jos. A. Bank Ready for a Mark-Down

By Eric Jackson
RealMoney Contributor

7/12/2010 5:30 PM EDT
Click here for more stories by Eric Jackson

You probably know the endless TV ads that run for Jos. A. Bank Clothiers (JOSB - commentary - Trade Now) on various TV networks. The menswear company stands out thanks to its seemingly never-ending sale. From 2007 through today, I cannot recall a time when the company wasn't offering two suits for the price of one, an offer touted to end after this coming weekend.

In all seriousness, though, the laugh has been on you if you missed the move in this unsexy clothier over the past year. It is a great example of an overlooked, boring business in the consumer discretionary sector, which came to life after the March 2009 lows, when the Fed's full quantitative easing actions began to take effect in economic terms on Main Street and on stock prices.

Jos. A. Bank's stock hit $17.36 in late November after the initial sell-off that followed the collapse of Lehman Brothers and the AIG(AIG - commentary - Trade Now) bailout. After a bounce back, the stock slumped in tandem with the market to $20 in March 2009.

The fear among investors was that there would be a sharp drop-off in Jos. A. Bank's sales. But it never happened. Despite the slowdown in the broader economy, Bank's revenues have kept growing, from $600 million in 2008 to $695 million in 2009 to $770 million this year. The company did see a slowdown in its October 2009 quarter, but it quickly rebounded in the January 2010 quarter.

The company has no debt, unlike its primary competitor, Men's Warehouse (MW - commentary - Trade Now). It is run conservatively. It was never in danger of closing down back in 2009. Investors just got carried away with themselves.

However, the great run the stock has been on since those lows is equally excessive. JOSB has outperformed MW by about 19% over the past year (up 61% versus a rise of 42%, respectively). Since the boom times of 2007, the outperformance is even more dramatic. From May 4, 2007 to today, Jos. A. Bank's stock is up more than 63%, while Men's Warehouse is down 40% and the Dow has shed 15%.


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