Suit Time at the Men’s Warehouse (MW)

Making a Christmas List – Part III

“You’re going to like the way you look” and “We guarantee it” – the trade mark quotes voiced by the Men’s Warehouse (MW) Founder and CEO, George Zimmer.

Who hasn’t watched one of those commercials?

Well, they worked on me because I own several suits from the Men’s Warehouse and will go back based on the quality service of their staff. I never feel pressured and always walk out with more than I anticipated (that’s a good store). I recently purchased two high quality brand name suits and a brand name overcoat for $1,000. I don’t think I could have found a better deal anywhere else. I (possibly) could have spent less at a SYMS store but not any of the major retailers (even with sales), never with an actual tailor or the local mom and pop shops. Forget about Manhattan!

You walk in, select the styles you like, try them on, get them measured by an in-house tailor and you will have your suits in no time (a couple days at most). I’m sold. However, the company and the stock are usually two different stories.

So, what does the stock look like?

I’ll start by saying that I made the same mistake with the Men’s Warehouse as I did with Toyota (TM) (my Lexus). I should have bought several thousand dollars worth of the Men’s Warehouse back in 2003 when it was trading as low as $7.77 (below $10 for the sake of this post).

It went on to gain 628% over the past five years with a 33-fold gain from base to peak since the IPO in the early 1990’s.

Now is not the time to buy the stock as it is currently trading below the 50-day average and the 200-day moving average. The 10-week moving average has also crossed below the 30-week moving average which signals a sell (not a buy in this case).

MW has violated the above mentioned moving averages in the past and has recovered after building a base for several months. The correction in late 2005 and early 2006 took more than a year before new highs were reached. This is a stock that needs to be treated with patience as we don’t need to jump the gun and enter prematurely. The stock reaped the rewards of the bull run from 2003 to 2007 so now will be the test to see if the Men’s Warehouse can and will remain a consistent money maker heading into 2008 and beyond.

Let’s look at the earnings, valuations and institutional numbers.

Earnings Watch:
FY 2005: $1.31
FY 2006: $2.04
FY 2007: $2.62
FY 2008: $2.98E (a 13.74% increase over 2007)
FY 2009: $3.41E

ROE: 23.79%
ROA: 15.28%
P/E Ratio: 11.85x
PEG Ratio: 0.79

Institutional Analysis:
Total Institutions: 700
Money Market: 233
Mutual Fund: 448
Other: 19

Shares Held: 78.88 mil
Shares Held Previous Period: 73.39 mil

Shares Bought: 16.41 mil
Shares Sold: 10.93 mil
Value of Shares Bought: $835 Mil
Value of Shares Sold: $556 Mil

Christmas List Series:

• Part I: My Lexus by Toyota Motor Corp (TM)
• Part II: A Garmin (GRMN) for my Lexus

Next up in this 5-part Series:

• Part IV: A Video iPod from Apple (AAPL)

Future Wish List Items:

• Part V: A Blackberry Pearl from Research in Motion (RIMM), using the Verizon Wireless (VZ) Network