E Research Report: Tailored Brands (TLRD)

Company: Tailored Brands, Inc.
Symbol: TLRD
Analysis Date: 6/13/19
Analysis Price: $5.41
Price Target (PT): $9.90
Upside: 83%
Dividend: $0.72 (13.3%)
Recommendation: Buy                                                                                 

TLRD: 1-Year Chart

 

INVESTMENT THESIS:

The flagship brands of TLRD (Men’s Wearhouse and Jos. A Bank) are battling two very disruptive trends in men’s fashion: the growing acceptance of more casual dress in the office setting, and the growing popularity of custom suits. Management is aware that their traditional business model, which consisted of large stockpiles of off-the-rack suits, is losing ground. While it’s too early to tell if the changes they are making can stabilize or reverse the negative trend in comps, the severe punishment the stock has received this year seems to already price in a dividend cut (or elimination). Further downside seems unlikely given the already low forward P/E of under 6x, and any improvement in the top-line in the coming quarters could offer a nice boost to the stock price.

LIQUIDITY POSITION: Good

As of 1Q fiscal year (FY) 2019, TLRD had $30M of cash and $425M of available credit. The long-term debt load of $1.2B is large, but there are no balloon payments due until 2022.

TLRD: Principal Payments Due (By Fiscal Year) ($M)

Sources: Elle Investments, 2018 10-K, 1QFY19 10-Q

They are still earning healthy profits, so covering the interest payments is not a concern. The liquidity worry at this point is that the $0.72/share dividend (currently yielding 13.3%) will be cut or eliminated in order to reallocate capital towards paying down debt. Management was asked specifically about what gives them confidence to continue paying it in light of the weaker results, and they said that returning cash to shareholders is an important part of their value proposition, and that they remain committed to it at this point.

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Disclaimer: The Elle Investments portfolio is managed utilizing a “quantamental” approach where each position, while based on Fundamental Analysis, is sized as part of a larger ...

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Jack F. Dawson 1 year ago Member's comment

What's your view on $TLRD now?