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How Men’s Wearhouse stands against its competitors

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Eminence Capital and Men’s Wearhouse

In December 2014, Eminence Capital raised its position in Men’s Wearhouse (MW) in its 13G filing. The fund holds a 11.9% stake in MW. Previously, we explored the Men’s Wearhouse company overview  and its fourth quarter of 2014 results. Let’s have a look at how MW stands against its competitors in the industry.

We compared MW with its peers:

  • American Eagle Outfitters (AEO): an American clothing and accessories retailer
  • Chico’s FAS (CHS): provides clothing for fashion-savvy women
  • Cintas Clothing (CTAS): an American provider of work clothing
  • Macy’s (M): American company covering the Macy’s and Bloomingdale’s brands

Men’s Wearhouse’s EV/EBITDA multiple (enterprise value to earnings before interest, tax, depreciation, and amortization) is the highest among its peers. Its price multiple is also the highest among its peers. However, the forward price multiple is lower than the majority of its peers. MW has a dividend yield of 1.42%. On January 27, the company declared a quarterly cash dividend of $0.18 per share.

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MW’s decision not to sell K&G

Men’s Wearhouse was working to find a suitable buyer for its K&G business due to its low profitability, however, it decided against selling K&G. In its 3Q14 earnings call, Men’s Wearhouse CFO Jon Kimmins noted, “We were showing great progress in driving top line, improving gross margins, closing underperforming locations, and improving the overall profitability of K&G.”

The acquisition offers that K&G received were much lower than Men’s Wearhouse’s estimates, so the company decided to improve the profitability of K&G. Kimmins added, “We believe shareholder value is optimized by keeping K&G in our portfolio and continuing to improve its profitability.” Men’s Wearhouse expects to achieve mid–single-digit operating result at K&G.

Analyst rating of Men’s Wearhouse

Analysts at Jefferies initiated coverage on Men’s Wearhouse on October 9, 2014, with a “buy” rating and setting a target price of $60. For last 12-month period, MW shares rose 2.36% compared to an S&P index gain of 16.33% for the same period.

Eminence Capital’s 13G positions

The fund initiated a position in Darling Ingredients (DAR). It increased positions in Men’s Wearhouse (MW) and XOOM Corp (XOOM). It reduced its positions in TIBCO Software  (TIBX) and Fidelity National Financial (FNF).

In the next part of this series, we’ll discuss the XOOM position of Eminence Capital.

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