Bear Of The Day: Tailored Brands (TLRD)

Tailored Brands (TLRD) has had a rocky last few years with its shareholders being devastated by the retail apocalypse. TLRD has lost over 88% of its value in the last 5 years, and 2019 alone wiped out 63% of the shares worth. Analysts continue to be pessimistic about this stock dropping their estimates and sinking TLRD into a Zacks Rank #5 (Strong Sell).

The Business

Tailored Brands include Men’s Wearhouse, Jos. A. Bank, K&G, and Moores. These stores can be found across the US & Canada at over 1,400 locations. Unfortunately, store count has been declining fast, with total stores falling 17% in the end of 2014. Consumers just aren’t buying the suits and tuxedos that they used to.

Since 2016 Tailored Brands has been experiencing a declining topline since 2016, represented by brand below. Sell-side analysts are estimating that TLRD will experience its largest annual sales decline since the company’s inception in 2019. This decline is expected to continue into the foreseeable future.

I am concerned about the liquidity of Tailored Brands with its cash on hand covering not even 10% of its current debt. Free-cash-flows just barely staying above water, it wouldn’t take much for this company to default especially when their credit rating is already considered speculative grade.

I predict a dividend cut in the near future as cash-flows remain an issue. This adds additional downside potential for TLRD.

In today’s corporate world, execs are wearing fewer suits and leaning towards more progressive clothing as they adapt to the progressiveness of the up and coming generations. You are seeing a decline in suits and an increase in athleisure attire in the office, a trend that would have Don Draper fuming.

Take Away

The inclination toward casual work attire combined with Tailored Brands inability to adapt to the evolving consumer has sent this company to the brink of bankruptcy. This stock has been toxic for some time now, and unless significant systemic changes are made its toxicity will continue. Stay away from shares of TLRD.

 

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