Men's Wearhouse, which sells discounted suits and tailored clothing , was on the ropes in the 1990s when blue jeans, polo shirts and casual Fridays ruled the office. But the Texas company spent its time in the wilderness gaining market share from other menswear retailers. Now, corporate attire is dressier again, so Men's Wearhouse stock (symbol MW) looks spiffy, says Stifel Nicolaus analyst Richard Jaffe.
Men's Wearhouse is best known for its commercials starring bearded CEO George Zimmer and his pitch line, "You're going to like the way you look. I guarantee it." But it was the stock, not the wardrobe, that turned heads when Men's Wearhouse beat average analysts' estimates handily for the quarter ending January 28, according to Thomson First Call. The strong performance -- 60 cents a share against forecasts of 53 cents -- prompted Jaffe to raise his estimate by 28 cents for the year ending January 2007, to $2.34 per share. He also bumped up his target price by $4, to $42. Jaffe rates the stock "buy."
There's more here than suits. Jaffe cites improved profit margins from its private-label business, growth in the number of stores and a robust marketing and loyalty program. And, on prom night, Men's Wearhouse hopes to be king. Tuxedo rentals, a very high-margin business, will be a boost during the upcoming spring quarter, Jaffe says.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Clothes aren't the only thing discounted at Men's Wearhouse. The stock, recently $36, trades for 16 times Thomson First Call's average 2006 earnings estimate of $2.25 per share. Jaffe expects profits to grow 13% to 15% annually over the next several years, so the stock is reasonably priced.
--Thomas M. Anderson
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
