Tailored Brands’ Stock Down Despite Good Earnings

Tailored Brands (Ticker Symbol: TLRD) reported solid earnings and revenue on Tuesday after the closing bell, but it wasn’t good enough for Wall Street and the stock traded lower on the open Wednesday.  The apparel retail chain announced an earnings per share beat of .21 cents per share vs. Wall Street analysts’ estimates of .15 cents per share.   In addition, Tailored Brands’ net revenue beat Wall Street’s expectations, reporting a revenue of $781.39 million vs. analysts’ estimates of $776 million.

Above is a chart of the past two and a half years of Tailored Brands’ stock.  The stock had a negative start to the year in 2017. A very poor earnings release in the first quarter of 2017 sent the stock gapping over 25% lower.  It continued to move down, eventually finding price support around the $10.00 price level.  The stock spent the next six months forming a rounded bottom basing pattern. Tailored Brand’s stock then broke through its downtrend and began trading above both its 100 and 200-day Moving Averages.  The stock proceeded to rally 50% over the next year.

Tailored Brands’ stock spent all four quarters of 2018 forming a Head and Shoulders topping formation. Traders and investors sometimes look at Head and Shoulders patterns for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Tailored Brands’ case. Some traders use what’s called a “measured move”, to try and project where the stock might go in the future based on breakouts from technical formations.  In Tailored Brands’ case, one would take the top price from the head of the pattern (roughly $36) and the price of the neckline from the pattern (roughly $20) then subtract them to get the difference. ($16) The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move.  Neckline – Difference = Measured Move. In Tailored Brands’ case, the projected price target from the Head and Shoulders pattern was roughly $6.00, which it achieved in the second quarter of this year.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 2 analysts offering 12-month price targets, the average price target for Tailored Brands’ stock is $13.00. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $5.42.

Tailored Brands, which was then known as Men’s Warehouse, got into a bidding war with Jos. A Bank, a fellow men’s apparel competitor, in 2013.  In the second quarter of 2014, a deal was struck and Mens Warehouse purchased Jos. A Bank for $1.8 billion.   In the first quarter of 2016, Men’s Warehouse changed its name to Tailored Brands and decided to officially change the company structure to a holding company.   Unfortunately for shareholders, the stock has been under pressure for the past five years and has not been performing well.  Investors in the company will have to wait until Tailored Brands’ next earnings call in September for fresh news on the company.