The Men’s Wearhouse, Inc. (MW) is Dressed For Success

Page 1 of 2

One of the simplest ways to get an overview of a company’s operations is through a SWOT analysis.  Here, the main strengths, weaknesses, opportunities, and threats of the company are laid out for all to see. The Men’s Wearhouse, Inc. (NYSE:MW) has faced a 25% drop in its share price due to a trio of guidance cuts, a downgrade from Cowen, and the impact of its most direct competitor, Jos. A. Bank (NASDAQ:JOSB) Clothiers.  Posting short-notice guidance of a 20% decrease in 2012 profits, Jos. A. Bank was slammed with a 17% drop in share price.

With The Men’s Wearhouse, Inc. (NYSE:MW) also expecting a 20% plunge in yearly profits, I have decided to take an inside look at the company’s operations to see if its current price offers a long-term investment opportunity for Fools everywhere.

The Men's Wearhouse, Inc. (NYSE:MW)Strengths

Men’s Wearhouse and Tux stores- Making up 20% of the company’s sales, tuxedo rental services has become one of Men’s Wearhouse’s most profitable operations.  Commanding an 86.8% gross margin, the tux rental business is more that 40% higher than the company’s overall gross margin.

Strong Financials- Holding $138 million cash on hand versus no debt, while generating a positive free cash flow every year for the last decade, Men’s Wearhouse is built upon a solid foundation.  Growing its Book Value per share 10% yearly for the last decade, the company has lowered its P/B to only 1.3.

Slow and Steady Wins the Race- Growth has not been impressive, but it has been very steady, with EPS improving 14% yearly over the last 10 years and 18% since 2008.  As for revenue, the company has seen an 8% yearly climb over the last decade, and a 4% bump up per year in the last 5 years.

Great Work Environment- Coming in 50th out of the Forbes100 Best Companies to Work For, Men’s Wearhouse shows that it truly cares about its employees.  With compensation and benefits well above the norm for retail, the company has attracted top talent and spurred cost savings initiatives throughout its company.  As the Motley Fool’s own Jeremy Bowman explains, looking for happy employees can be a huge help when try to find successful stocks.

Weaknesses

Slowing Growth Runways- Aiming for a target of 125 Moores stores in Canada, the company doesn’t have much room for growth as they currently have 117 now.  Furthermore, the company has 625 Men’s Wearhouse stores and sees the overall count in America growing to 750 in the intermediate future.  While that represents a 20% jump, it is not a wild growth runway by any means.

Struggling Metrics- In the trailing 12 months, Men’s Wearhouse has seen its Days Sales of Inventory jump from 145 to 167 and its Inventory Turnover drop from 2.52 to 2.18.  Long story short, this is largely due to the company’s increase in inventory, as it now makes up 41% of total assets.  With Days Inventory historically closer to 150 and Inventory Turnover around 2.5 on average, it will be pivotal for the company to continue clearing its excess inventory.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!