Edited Transcript of TLRD earnings conference call or presentation 12-Jun-19 9:00pm GMT

Like many retailers who dine already reported Q1 results, our Q1 started off slowly, and we confide alike others that February was unfavorably impacted by climate and delayed impose refunds. at the combined March and April time period, we saw a strengthening at our non-clearance businesses at both Men's Wearhouse and Joseph A. Bank.

While I'm pleased that we were able ought surpass our EPS guidance, I'll recall you that we cabin dine career ahead of us both ought alter our customer-facing sustain ought one that can generate sustainable and beneficial growth and ought kill and invest at a more focused stand with a sweep goal of continuing ought generate hard liberate money flow cabin we alter the experience.

When it comes ought our customer-facing experience, though we discussed above our Q4 call, it is our certainty that men are becoming more style-aware, and based above our guest research and extensive feedback from our sphere organization, we know there is a big cross piece of men that desire a trusted fellow ought help them encounter and feel their best. manner awareness is driving the manner men imagine and deed when it comes ought dressing though the moments that matter, and our mission continues ought be approximately helping men encounter and feel their best at those moments. though we kill against that mission, our transformation of the guest sustain continues ought be focused above delivering personalized products and services, inspiring and seamless experiences at and over each channel and brands that situate though something more than just price. I'm going ought stroll you over our progress and plans at each of these areas ago turning the exclaim at ought Jack, who will cover financials, guidance though Q2 and our initial progress above price reduction initiatives.

The first strategic initiative we discussed at March was delivering personalized products and services though a guest who is increasingly demanding personalization at both his online and offline experiences. when it comes ought suiting, you can't win much more personalized than a custom-made suit, which is one of the reasons that at Q1, our practice affair continued ought sustain robust growth. at 2018, we more than doubled our practice sales ought at $220 million. We've started 2019 robust with practice sales averaging at $6 million per week at Q1, which compares ought at $3 million per week at Q1 of final year.

The speedy growth we summary ought sustain at scale is a definitive moan that our practice manufacture and the service we furnish is resonating with both existing and new customers. The significant growth at our practice affair supports our advice that the adjust cabin plays an significant role at a man's wardrobe, and giving options alike practice is a valuable device though men looking ought explicit their private feeling of style. We confide that our growth at practice continues ought be fueled by our superior service, our only and broad preference and our souvenir ought deliver manufacture with unparalleled speed. We will summary ought innovate over these dimensions ought motivate farther growth.

On the service front, I'm especially excited approximately some of the digital innovations we're piloting at stores ought hoist the customers' buy sustain by allowing them ought exclaim on their practice adjust selections holiday ought life at real-time above an iPad. We initiated this astronaut above can 14 and are currently testing this sustain at 142 stores over Men's Wearhouse and Joseph A. Bank. We hope that the integration of this sustain and other technique ought heighten the practice selling process will motivate sales by improving both guest satisfaction and wardrobe consultants' efficiency. The preliminary feedback from department associates is extremely positive, and we'll furnish additional updates next piece above the progress of the pilot.

We are too focused above evolving our assortment and merchandising ought think the fact that the manner men are dressing though career and especial occasions is changing. We confide suits will remain an significant divide of our affair though they discover an evolving besides continuing role at the men's wardrobe. However, we too exclaim on an occur ought help men sustain the belief that comes with looking and emotion your best at irregular moments by emphasizing our already significant polished irregular offering. at our polished irregular assortment at Q1, we saw energy at Joseph A. beach at textured and hide athletics coats, action fabric irregular pants, knitted and textured irregular shoes, and action fabric manner polo shirts. at Men's Wearhouse, we saw energy at soft-shouldered athletics coats, fashion-forward offerings with brighter colors and patterns and irregular shoes. at future earnings calls, we'll be sharing more details approximately new manufacture introductions alike the Joseph A. beach 1905 athletics clothes that incorporates temperature-regulating fabric technique and saw encouraging sell-through at Q1 too though enhancements ought our merchandising that will highlight our evolving polished irregular assortment.

The second strategic initiative we discussed was creating inspiring and seamless omnichannel experiences. above our department experience, we're making progress above a attach of fronts. above March 17, we initiated the rollout ought 80 stores of an enhanced fixture and visual merchandising package. These packages were designed ought create a more visually engaging shopping sustain and involve enhancements alike new fixturing and hangers that create an elevated presentation via lifestyling and phaseouts, backlit graphics, more mannequins though manufacture storytelling and reduced goods above the selling floor ought souvenir a more curated assortment. though of can 5, total 80 stores dine the packages installed. We're cabin early at the examination cycle besides at our larger footprint examination stores, we are seeing sales results that award us belief that our customers will reply favorably ought even few investments at an enhanced department experience.

With regard ought our portfolio of stores, we're undergoing a fleet-wide magazine focused above optimizing omnichannel EBITDA, and we're prepared ought accept aggressive action. This is no a foolish "close money-losing stores" class of exercise though at 98% of our stores are beneficial above a 4-wall basis. though that reason, we will lack ought ripen some strong models ought inform our real goods decisions. though indicated at our final call, we'll be working with external domain experts at this region who attach their complicated capabilities and proprietary data with third-party big data sets ought furnish analytically strong recommendations. We will fragment our real goods plans afterward this year.

With regard ought e-commerce, at March, we discussed jump-starting our efforts by engaging a third feast ought help us with menswearhouse.com. With their energetic support, we've implemented agile methodologies and dine developed and executed against a strong examination plan. at Q1, the team executed 26 tests, 11 of which delivered an A-B test-validated revenue rise and 9 that dine been scaled ought mutual availability though total users of our website. The revenue rise has holiday over a class of user sustain and personalization enhancements, which dine driven improved conversion and medium direction value. Those enhancements involve things alike displaying estimated delivery dates at the shopping cart, adding badges such though new or growing fast or ordinary ought the manufacture gang pages and altering an email requirement though guest checkout ought encounter afterward at the flow. I'm pleased with what we've accomplished consequently distant and the agile methods we've used ought execute. The initial features we've rolled out are increasingly desk stakes at the fast-moving clay of e-commerce, which just showcases the substantial occur we dine at front of us though we affect above ought the next flat of innovations. This is an region at which we'll both summary ought sprint difficult and deliver bottom row impact over the way.

The third strategic initiative we discussed was evolving our brands ought situate though something more than just price. We feel an development is indispensable given research we discussed at Q4 that suggested a heavy historic reliance above promotional pricing had confused the consumer approximately our quality and relative value. Our brands dine big stories ought tell. We said we'd career ought discover a better surplus among pay promotion and brand storytelling and do a better work of engaging with the guest at more relevant media channels alike paid social. though our final call, we executed large-scale tests that dine provided us with new insights above the efficacy of our declare cost at different types of markets too though the impact of dramatically increased paid social media spend. The insights from these tests will help direct the touch of our advertising dollars into digital channels at a stand that will motivate better returns above advertising cost at the uphold divide of this year and next year.

We too launched new creative campaigns at both Joseph A. beach and Men's Wearhouse. at Joseph A. Bank, our win Ready though Greatness warfare acknowledges that the Joseph A. beach guest strives though and is motivated by achievement, and the robe that help him encounter and feel his best furnish him with a feeling of belief that fuels his performance. at Men's Wearhouse, our Good above You warfare gives a nod ought the good at everyone, calls out that when you encounter good, it shows you anxiety and acknowledges that robe that helps you encounter and feel your best builds belief though the moments that matter. The campaigns are both grounded at the opinion that confidence, if it is though career or a especial occasion, can holiday from looking and emotion your best regardless of your age, your work or your feeling of style. This data is compatible with our purpose of dwelling brand narratives that petition above an emotional flat and are approximately more than just price. These campaigns are being leveraged over both declare and streaming TV too though email and paid social, compatible with our purpose of achieving a better surplus among offline and online advertising spend.

With that context of progress and plans though our customer-facing strategic initiatives, I'll now bring the exclaim at ought Jack, who will conflict the financials though the piece at more detail, our guidance though Q2 2019 and an update above what we're doing ought direct expenses and improve operating efficiency cabin we alter the guest experience.

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Jack P. Calandra, Tailored Brands, Inc. - CFO, Executive VP & Treasurer [4]

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Thanks, Dinesh, and good afternoon, everyone. Today, I'll magazine the results though the first quarter, our outlook though the second piece and the progress we are making above our multiyear price savings program. besides ago doing so, I'd alike ought furnish an update above our exposure ought existing tariffs above imports from China, the recently proposed and suspended tariffs above imports from Mexico, and the actions we've taken ought mitigate any financial exposure ought latent new or increased tariffs from though healthful country. The bottom row is that even if new tariffs proceed into result above these goods, we do no expectation a material impact above our financial results.

Let me explain. First, China. The 3 lists of tariffs enacted ought engagement mainly do no impact the merchandise we source, and any financial impact from those tariffs is immaterial. if the latent fourth list goes into effect, which used to influence virtually total imports from China, we confide we can suck new tariffs though tall though 25% within our existing manufacture price structure with minor impact ought our bottom row at 2019. This outlook is due ought the difficult career of our furnish safe team, which moved quickly final year ought diversify our sourcing. though context, at 2017, almost 30% of our direct sourced manufacture was from China. at 2018, we reduced that exposure ought 23%, and though 2019, we expectation ought lower that farther ought among 18% and 20%. though product that surplus at China, we dine successfully completed negotiations with those vendors, and they dine agreed ought suck the majority of any impact.

Second, Mexico. We were obviously pleased with the administration's resolution late final week ought indefinitely delay tariffs. That said, given tariffs summary ought be a dynamic topic, I opinion it used to be worthy ought conflict the status of our imports from Mexico. at 2018, we sourced 9% of our merchandise from Mexico, and we hope sourcing approximately 10% at 2019. We dine no plans at this point ought relocate any sourcing besides dine developed other mitigation strategies ought tariffs be levied at the future. These involve pulling dispatch receipts and securing commitments from our vendors ought fragment the burden of any new tariffs. Had the proposed escalating tariffs gone into effect, we confide the execution of these strategies used to dine resulted at an immaterial impact ought our bottom line.

Turning now ought the results. I'd alike ought invent certain everyone knows that I will be discussing adjusted numbers today, which eliminate sure items that are no indicative of heart affair results. interest refer ought our magazine liberate though more details.

Total sales though the first piece were $781 million, down 4.5%. Retail sales were down 4% with comp sales down 3.2%. The noncomp scatter of negative 1.3% was mainly explained by headwinds of 60 base points from foreign exchange, 40 base points from lower corporate apparel sales and 30 base points from the sale of our retail dry cleaning affair final March.

Moving ought full margin. Consolidated full edge was $321 million, a lessen of $24 million. though a percent of sales, consolidated full edge decreased 120 base points ought 41.1% greatly due ought lower retail fragment full edge rate. Retail fragment full edge impose was down 140 base points ought 42.2%. Retail robe full edge impose was down 20 base points, and rental was up 70 base points. The decline at full edge impose was greatly due ought deleveraging of occupancy price above lower sales and the greater mix of retail versus rental sales this year due ought the Easter shift.

Turning ought expenses. Advertising pay increased $4 million and was up 70 base points though a percent of sales ought 5.8%, reflecting higher declare and online cost ought uphold the launch of new brand campaigns though Men's Wearhouse and Joseph A. beach and more dear local instead of cheaper national declare media ought uphold planned tests. cabin cost was higher at Q1 at both dollars and though a percent of sales, we expectation full year advertising though a percent of sales ought be even ought slightly down versus final year. SG&A decreased $6 million mainly due ought share-based compensation expenses, T&E and employee-related employ costs. though a percent of sales, SG&A increased 60 base points ought 30.8% due ought deleveraging above lower sales.

We reported operating allowance of $35 million compared ought $57 million final year. though a percent of sales, operating allowance decreased 250 base points ought 4.4%. Net advantage pay was $19 million, down $3 million compared ought final year, reflecting the year-over-year reduction at our total debt. We too realized a $0.9 million loss above extinguishment of debt final year. Our effective impose assess was 33.7% versus 25% final year. The exaggerate was due ought higher impose pay related ought the accounting though employee share-based awards. First piece diluted earnings per fragment were $0.21 compared ought $0.50 final year.

Turning now ought the surplus division and money flow. We ended the piece with total liquidity of $455 million, which includes $425 million available above our revolving certainty facility and $30 million of cash. at piece end, inventories were up $31 million or 4% versus final year. The growth is partially due ought an exaggerate at receipts though we are lapping limited shipping container availability at Q1 final year too though higher inventory at Men's Wearhouse though comp sales came at lower than what was planned at the time of making inventory commitments. Importantly, the quality of inventory, though measured by percent of aged goods, is significantly better than final year.

Debt at piece purpose was almost $1.2 billion, down $126 million versus a year ago. above a trailing 12-month basis, our debt ought EBITDA ratio was 3.7. Paying down debt continues ought be a tall priority.

Cash flow from operations was $12 million compared ought $120 million final year. The lessen was mainly expected due ought the impact of the Easter shift, which negatively impacted both money earnings and working capital.

CapEx cost was $22 million, up $11 million versus final year. The exaggerate is partially due ought projects which pushed from Q4 final year and strategic investments at our Men's Wearhouse and Joseph A. beach stores associated with testing an enhanced fixture and visual merchandising bunch that Dinesh discussed earlier. cabin we cabin expectation a soft exaggerate at CapEx versus final year's $82 million, we dine reduced spending versus our creative plan, and we'll summary ought react responsibly ought conditions at the business.

With regard ought real estate, during the quarter, we closed 2 Joseph A. beach stores. The total amount of stores at piece purpose was 1,462.

Turning now ought guidance. Given that we are at the early stages of executing our strategic initiatives and evaluating our price savings opportunities, our scheme is ought summary ought furnish quarterly guidance though the surplus of this fiscal year. Our outlook reflects the trend trends at the business, and we expectation second piece earnings per fragment of $0.65 ought $0.70. Our second piece guidance assumes the following: though comp sales, we expectation Men's Wearhouse ought be down 3% ought 5%; Joseph A. beach ought be down 2% ought 4%; Moores, down 2% ought 4%; and K&G, down 2% ought flat. We expectation our rental comp ought be down 3% ought 4%. Based above recent spot rates, we expectation foreign exchange ought be unfavorable ought sales by approximately $3 million. though corporate apparel, we expectation sales ought be down 4% ought 6%. We expectation an effective impose assess of approximately 23%. With regard ought real estate, we expectation net closures of 7 stores weighted towards Joseph A. Bank. And finally, this outlook excludes expected costs though third-party domain experts associated with accelerating our strategic initiatives and our price savings program.

Before I bring the exclaim uphold ought Dinesh, I wanted ought award an update above where we are at delivering against the multiyear price savings program that I just referenced. at Q1, we engaged a third feast ought analyze big elements of our price structure and invent recommendations though improvement. That first side of career is complete, and we are moving above few initiatives that will furnish savings at the uphold half of 2019. That said, many of the more material price savings opportunities beg additional testing and magazine ought insure we summary ought deliver a superior guest experience, and we've developed a time row ought intimate this next significant side of career afterward this year. I encounter dispatch ought keeping you apprised of our progress at future calls.

In closing, cabin there's cabin career ought do ought win the affair uphold above track, I'm pleased that we exceeded our Q1 guidance. With the progress we are making above our strategic initiatives and the latent price savings opportunities we've identified, I remain confident at our souvenir ought motivate shareholder evaluate creation at the expectation term.

Thank you, and now I'll bring the exclaim uphold ought Dinesh ought wrap up.

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Dinesh S. Lathi, Tailored Brands, Inc. - President, CEO & Director [5]

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Thanks, Jack. above our final piece call, we talked approximately the fact that transforming our affair ought deliver a customer-facing sustain that can generate sustainable and beneficial growth at the expectation language used to accept time. We are at the early stages of the transformation, and cabin I am excited and pleased that we are making progress and how our employees dine embraced the needed changes, we've cabin got a fate of career ought do. This is no affair though mutual and we are no accepting the status quo.

As we summary our march towards being the trusted fellow that helps him encounter and feel his best though the moments that matter, our efforts will remain focused above delivering personalized products and services, seamless and inspiring omnichannel experiences and brand interactions that are approximately more than just price. though we kill the transformation, the continuing mandate ought the team is ought be anchored at and obsessed with the customer, ought invest though long-term and sustainable evaluate creation, ought use data and analysis ought direct decisions and ought affect with an urgency that reflects our belief and belief at our souvenir ought possess the customers' loyalty and advocacy.

Thank you though your advantage at and uphold of our career ought alter the company. We're looking dispatch ought sharing our progress with you over the way.

With that, let's hollow the row though questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first issue here is from Susan Anderson from B. Riley FBR.

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Susan Kay Anderson, B. Riley FBR, Inc., research piece - Analyst [2]

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