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What: Shares of apparel retailer Men's Wearhouse (NYS: MW) rallied 13% Wednesday after its quarterly results and guidance topped Wall Street expectations.
So what: The shares have slumped over the past several months on worries about the weak economy, but the convincing third-quarter earnings beat -- EPS of $0.77 versus the consensus of $0.65 -- suggests that things aren't as bad as Wall Street had thought. The company's gross margins even increased 315 basis points, to 14.1%, giving investors plenty of good feelings about the profit trend, as well.
Now what: Looking ahead, management now sees full-year adjusted EPS of $2.28 to $2.31, while analysts were expecting EPS of just $2.19. "If I am correct, then we are once again entering a golden age for purveyors of tailored clothing," Chairman George Zimmer said on a conference call. "I have patiently waited for this time to arrive and I'm grateful that the youngest generation [to come] of age understands that dressing up feels good and looks good." With the stock still trading at a clear price-to-cash flow discount to main rival Jos. A Bank Clothiers (NAS: JOSB) , Men's Wearhouse seems like the sharpest way to play that trend.
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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.