Men's Warehouse Soars 14% on K&G Sale Plans, Buyback

Shares of Men’s Warehouse (NYSE:MW) surged 14% Thursday morning after the company revealed plans to explore a sale of its struggling K&G business and unveiled a $200 million share buyback program.

The decision to evaluate strategic alternatives for K&G and the repurchase plan overshadowed weaker-than-expected fourth-quarter results.

In a statement released after Wednesday’s close, Men’s Warehouse said its board of directors has approved a new share buyback program of $200 million. The company had $45 million remaining on its prior repurchase plan.

Men’s Warehouse also said it has hired midsize investment bank Jefferies to help the company weigh options for its K&G operations.

"We believe that our core strength lies primarily in our MW and Moores men's specialty apparel retailing,” said Men’s Warehouse CEO Doug Ewert.

The company said its K&G operations suffered a 5.7% slump in same-store sales last quarter, missing expectations. The business accounted for 16% of its total quarterly sales.

“Sales at K&G were disappointing as customers did not respond to our promotions and new marketing campaign as well as expected,” Ewert said.

At the same time, Men’s Warehouse said it is “in the process” of amending and restating its credit facility by mid-April. The amended facility will boost the company’s revolving credit to $300 million, allow for potential increases to $450 million and extend the maturity date to 2018.

“We believe these strategic and deliberate actions will better position the company for growth and will unlock value for our shareholders,” Ewert said.

Shares of Houston-based Men’s Warehouse soared 14.00% to $33.14 Thursday morning, leaving them up 6.7% on the year and down 18% over the past 12 months.

Men’s Warehouse said it lost $3.4 million, or 7 cents a share, last quarter, compared with a loss of $3.8 million, or 7 cents a share the year before.  Revenue rose 8.2% to $608.4 million.

Analysts had been calling for a loss of 5 cents a share on revenue of $610 million.