Not So Hot Earnings

Casual Male has the dubious distinction of topping both the Not-So-Hot Earnings Growth and the Not-So-Hot Profit Ratio charts. Part of the reason is that the big-and-tall menswear retailer has been transforming itself over the past couple of years, including opening the first Rochester stores since acquiring the brand in 2004 and also dropping “big and tall” from its name. The company added “XL” to the logo of its flagship brand, denoting “extra large.” This comes as plus-size menswear continues to grow from its current level of about $6 billion a year.

Unfortunately for Casual Male, this growth in large-size clothing has also attracted the attention of mainstream retailers ranging from JCPenney to Macy’s to Walmart, all of which have added some larger menswear to the ends of their clothing racks. Being a single source for a broad selection of clothing and accessories provides a well-defined niche for Casual Male, but there is also the challenge of finding those customers and letting them know about the stores. “We are catering to a small percentage of the adult male population and it is very hard to discriminate who is who by size,” says Casual Male CEO David Levin. “It’s always been an expensive proposition for us to prospect new customers.”

Casual Male is responding to the challenge by making efforts to attract men at the smaller end of the tape measure — those with 42-inch to 46-inch waists — who currently account for only about 25 percent of total sales. “It’s a stigma issue,” says Levin, in explaining why men in that size range might prefer shopping at department stores or mass merchants rather than at Casual Male.

Contributing to the precipitous decline in earnings last year were losses from discontinued operations (primarily stores that were closed) and increased promotional activity in the final quarter of the year. The company’s earnings per share dropped to a penny, in contrast to $1.21 per share the year before. Even while forecasting same-store sales to be flat or perhaps up as much as 2 percent this year, Casual Male says it is comfortable with analysts’ forecasts of earnings in the area of 28 cents a share.