(Bloomberg) -- Tailored Brands Inc., the owner of Men’s Wearhouse and Jos. A. Bank, plunged Thursday morning as Wall Street looked past rising sales to focus on shrinking profitability.
The shares dropped as much as 24 percent -- the most intraday in more than a year. While profit and sales outpaced analysts’ estimates in the quarter ended May 5, gross margin declined as a percentage of revenue. Comparable-store sales at the Jos. A. Bank men’s suit chain also were lower than anticipated, Randal Konik, an analyst at Jefferies, said in a research note.
“Expectations were somewhat elevated into the print and shares are pulling back,” said Konik, who recommends buying the shares.
Tailored Brands posted its second straight quarter of revenue growth, although the percentage gain was smaller than the previous quarter. The retailer had posted more than two years of declines prior to that as it grappled with a failed partnership with Macy’s Inc. and the challenging integration of its two men’s suits chains.
Gross margin -- a measure of profitability -- decreased 30 basis points to 42.2 percent in the fiscal first quarter, the company said in a statement after the close of markets on Wednesday. Sales rose 4.4 percent to $818 million in the period, above analysts’ estimate of $794 million.
Through Wednesday’s close, the stock had almost tripled in 12 months, outpacing peers in S&P 600 consumer discretionary index, which rose about 24 percent in the period.
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