Exhibit 99.1
Final Transcript
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JOS A. BANK CLOTHIERS INC: 2007 Annual Earnings Call
April 15, 2008/11:00 a.m. EDT
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SPEAKERS
David Ullman - Chief Financial Officer
Robert Wildrick - Chief Executive Officer
PRESENTATION
Moderator Ladies and gentlemen, thank you for standing by. Welcome to
the Jos A. Bank Clothiers conference call. At this time all
participants are in a listen-only mode. As a reminder, this
call is being recorded today, Tuesday, April 15, 2008. I
would now like to turn our conference over to our host, Mr.
David Ullman, Chief Financial Officer. Please go ahead, sir.
D. Ullman Thank you and good morning, everybody, and welcome to the
fiscal year 2007 conference call for Jos A. Bank Clothiers.
I'm joined here this morning by Robert Wildrick, our CEO. I
will give some comments on the performance of '07 and then
Mr. Wildrick will make some comments thereafter. Before we
get started I need to read this information regarding
forward-looking statements.
The Company's statements concerning future operations
contained on this call are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act
of 1995. Actual results may differ materially from those
forecast due to a variety of factors outside the Company's
control that can affect the Company's operating results,
liquidity, and financial condition. Such factors include
risks associated with economic, weather, public health, and
other factors affecting consumer spending; higher energy and
security costs; the successful implementation of the
Company's growth strategy, including the ability of the
Company to finance its expansion plans; the mix in pricing
of goods sold; the effectiveness and profitability of new
concepts; the market price of key raw materials such as wool
and cotton; seasonality; merchandise trends; and changing
consumer preferences; the effectiveness of the Company's
marketing programs; the availability of lease sites for new
stores; the ability to source product from its global
supplier base; litigations; and other competitive factors.
Other factors and risks that may affect the Company's
business or future financial results are detailed in the
Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form
10-K for the year ended February 2, 2008. These cautionary
statements qualify all of the forward-looking statements the
Company makes herein. The Company cannot assure you that the
results or developments anticipated by the Company will be
realized or even if substantially realized that those
results or developments will result in the expected
consequences for the Company or affect the Company, its
business, or its operations in the way the Company expects.
The Company cautions you not to place undue reliance on
these forward-looking statements which speak only as of the
respective dates. The Company does not undertake an
obligation to update or revise any forward-looking
statements to reflect actual results or changes in the
Company's assumptions, estimates, or projections. These
risks should be carefully reviewed before making any
investment decision.
I will now go through a recap of the performance for 2007.
Net income in 2007 was $50.2 million compared with $43.2
million in 2006. Earnings per share were $2.72 per share
compared with $2.36 per share in 2006, resulting in a 15%
gain in EPS. These results represent the seventh consecutive
year of record earnings for Jos A. Bank Clothiers. The
profit gain for the year was led by a 10.5% sales increase,
an 80 basis point gain in gross profit margin, an 80 basis
point improvement in leverage in G&A, and a 120 basis point
deleveraging in sales and marketing expenses.
The most recent fourth quarter EPS increased $0.09 per share
or 7%.
In 2007 the net sales increased 10.5% to $604 million.
Comparable store sales increased 3.8%, and direct marketing
sales increased 13.1%. The 3.8% comp store sales increase
was driven almost exclusively by an increase in traffic,
which offset decreases in IPT's and dollars per transaction.
The sales increases were also attributable to the net
increase of 46 new stores opened since last year. We passed
the 400 store count in the third quarter and ended the year
at 422 stores. The direct marketing sales gain was driven by
an increase in Internet sales, while catalog sales declined.
All major product categories generated net sales increases
in 2007. Of special note, our sales gains were led by the
sales of suits. As noted previously, gross profit margins
increased 80 basis points in 2007. The increased margins in
2007 were driven by gross profit gains in all major
categories of merchandise except sportswear. The gross
profit gains were also led by lower costs from sourcing.
Overall, SG&A costs rose 40 basis points as a percent of
sales in '07; again, specifically G&A costs were down 80
basis points, and sales and marketing costs were up 120
basis points. The leverage in the G&A costs is a
continuation of the trend of the sales gains exceeding the
G&A increases. Specific benefits included lower healthcare
claims costs and lower professional fees. The rise in
selling and marketing costs as a percent of sales occurred
in store occupancy, store payroll, and advertising costs for
the total company.
Our net interest income improved approximately $2.5 million
in '07, as we did not borrow any money from the bank all
year, and we had invested cash throughout the year.
As you can see on the balance sheet, cash increased to $82
million at the end of 2007 compared with $43 million last
year. Almost $80 million of the cash at year-end was
invested in short-term T-bills as our strategy has been to
minimize the current market risk for investments. We believe
our cash and borrowing capacity is a strength of the Company
to be able to help us to gain further market share and
enhance our dominant position in menswear in 2008 and
beyond. We will continue to evaluate the many potential uses
of excess cash with our board of directors, always with an
eye towards the protection and benefit of the Company and
its shareholders.
The Company's tax rate in 2007 was 40.5% compared with 40.1%
last year. You may recall that in 2006 the tax rate was
reduced in the third quarter as we lowered certain income
tax contingencies as several tax audits were finalized. As
such the reductions in 2006 more than offset the benefit we
experienced this year as we gained better leverage against
certain nondeductible expenses.
Total inventories were approximately $207 million at the end
of 2007, which is about $23 million higher than at this time
last year. This represents an increase of 12.7% in total
inventory compared with last year, which is relatively
consistent with a 10.5% sales increase in '07. The trend of
increase is consistent with our discussions in prior
quarters, whereby we stated that we expected year-over-year
total inventories to increase in the single digits or in the
teens in '07. The inventory growth has been to support new
stores and to build inventory in certain core categories. In
addition, if you review the past two years our sales have
increased approximately 30% from 2005 to 2007, while our
inventories have grown 17% in the same period.
Looking forward to 2008, we expect to open 38 to 48 stores
in 2008 depending on site availability for deals that meet
our criteria. Our capital expenditures are projected to be
approximately $30 million to $35 million in '08 depending on
the number of stores and other capital investments we make.
In addition to capital expenditures for new stores, we
expect to make investments in the renovation and relocation
of several stores, for the purchase and renovation of a
retail location, the potential expansion of our distribution
center capacity, and the implementation of several systems
initiatives. Please refer to our most recently filed 10-K
for the detail of the timing of capital expenditures as well
as collections of landlord contributions, which serve to
offset a portion of the cash outlay for new stores.
I will now turn the call over to Robert Wildrick, our CEO.
R. Wildrick Thank you, Dave. We were pleased with our results last year
in a consumer economy which was very difficult and which is
showing no signs of getting any better. However, we're used
to adversity and we have developed a culture of winning, and
while we know this will be a tougher year we plan to
maintain that attitude.
Let me take a minute to point out some of what has happened
in this company since 1999. Sales have nearly tripled since
1999, from $194 million to $604 million. Net profit has gone
up every year from about $1 million in '99 to over $50
million in '07. We now have over 400 stores from less than
100 company owned stores. Our operating income has gone from
1.8% to 13.7%, one of the best in our business. Our return
on equity has gone from about 3% in '99 to over 20% for the
last five years. And while we have opened over 300 stores
and one new service center, expanded our computer capacity,
and developed our Internet, we've eliminated debt and we've
added nearly 3,000 American jobs.
While we remain cautious about a less than robust retail
economy, we feel that we have some advantages that others
may not have. We plan to spend at least the same amount of
advertising dollars as last year; others seem to be cutting
back. This should help us make our voice louder to the
consumer. Our innovative products like our Stays Cool line
of tailored clothing, shirts, and sport shirts are among the
most extensive and best in the business. Our Traveler
Wrinkle-Free products in dress shirts, sport shirts, and
casual pants continue to perform, and we will be expanding
our exclusive wrinkle and stain resistant cashmere sweater
product.
We offer some of the highest quality product in the market
at some of the best prices. This we feel should be a big
advantage to us in difficult times. While others are cutting
inventory we will continue to have a strong inventory
position. In other words, we will have product when others
may be out of stock. We're also noticing that prices are
going up in the Far East significantly. We have a
significant amount of inventory which we purchased at the
lower price, so this should help us as the pipeline price
points continue to go up.
As has been mentioned earlier, we will continue to open
stores; already over 40 have been approved by the real
estate committee. Our longer term plans call for continuing
investment in technology, especially our Internet business,
which we plan to grow to over $100 million over the next few
years.
While no one really knows if our positive trends will
continue we feel these advantages will at least give us the
best shot at winning in what is clearly a difficult economy.
For February and March the comp stores sales increase was
3.6%, with March being somewhat better than February.
However, we still have about two and a half weeks left in
the quarter and do not want to give you the impression that
the quarter will be up or down. We simply have to see how
April numbers come out. This will be a year of uncertainty
for most businesses, but we feel that those who can react
the fastest to the consumer and offer them the best quality
for the best price will have the best chance for a
successful year.
Finally, we've been asked why we don't have a Q&A session on
our conference calls. The answer is that we try to be as
complete as possible in our filings and are concerned that
answers in Q&A sessions can too easily be misconstrued. Also
the question has been asked why we don't make earnings
projections. Simply put that in the current economic market
conditions are changing very rapidly, as has been evidenced
recently by a major company missing its earnings
projections. We would rather focus on reacting to the
business trend to move the Company forward. We will
continue, however, to make non-earnings, forward-looking
statements as we have in the past.
With that I'd like to turn the meeting back over to David.
We want to thank you very much for your continued support,
and we'll try very hard to make this another great year.
Thank you.
D. Ullman Thanks, Bob, and thank you, everyone for joining us this
morning. We do believe we have customers as well as
investors on the call, and we certainly thank them for their
business. Take care and have a great day.
Moderator Thank you. Ladies and gentlemen, this conference will be
available for replay after 1:00 p.m. eastern time today
through April 15, 2008 at midnight eastern time. You may
access the AT&T Executive Replay System at any time by
dialing 1-800-475-6701 and entering the access code 918768.
International participants may dial 320-365-3844.
That does conclude our conference for today. Thank you for
your participation and for using AT&T Executive
Teleconference. You may now disconnect.