UPDATE 2-Casual Male’s profit beats on better margins; shares up

* Q1 EPS $0.09 vs est $0.06

* Q1 sales fall 3 pct, but surpass analysts’ expectations

* Merchandise margins improve 280 basis points

* Raises FY10 EPS view by 3 cents to $0.26-$0.29 * Shares
rise 8 pct
(Adds CEO comments, details, share movement)

By Viraj Nair

BANGALORE, May 20 (BestGrowthStock) – Casual Male Retail Group Inc
(CMRG.O: ) reported a quarterly profit that beat expectations on
improved margins and the men’s apparel retailer raised its
earnings view for the year, sending its shares up 8 percent.

After a prolonged sales slump for over two years as many
cash-strapped Americans males scaled back spending on new
clothes, the company has been seeing sales flatten out, with
same-store sales down only 0.7 percent in the latest quarter.

“When the economy goes through a downturn, the male shopper
is the first one who is going to cut back in the family
environment,” CEO David Levin told Reuters in a telephonic
interview.

But most of the lost sales were just deferred shopping,
which are going to eventually come back, he said.

Levin, however, warned a sales recovery might be a slow,
long draw-out process, with sales growth really picking 2011
and beyond.

“We were the first one’s in, and we’re probably going to be
the last one’s out.”

First-quarter sales fell 3 percent to $95 million but
surpassed estimates of $94.2 million.

The company remains focused on expanding margins and
weeding out unnecessary costs, with first-quarter gross margins
improving 330 basis points to 45.9 percent.

Better inventory management and cost custs boosted margins,
resulting in a 9-fold jump in first-quarter earnings to 9 cents
a share, beating analysts’ estimates of 6 cents a share.
[ID:nASA00E04]

The company said it does not see any improvement in
second-quarter earnings, as it cycles most of last year’s cost
cuts, but expects profit to be higher over the back half of the
year.

For the current financial year, Casual Male now expects to
earn 26 cents to 29 cents a share. It had earlier forecast a
profit of 23 cents to 26 cents a share.

Analysts on average had forecast a profit of 26 cents a
share, according to Thomson Reuters I/B/E/S.

“We’re also going to debt free this year, which we haven’t
been since we acquired the company — I sleep well at night,”
Levin said.

DESTINATION XL

The retailer, which has been cutting costs and tightly
managing inventories to counter sales declines and boost
margins, is betting on a new superstore concept that it
successfully tested last year to drive sales recovery.

The company will open four new “Destination XL” superstores
that combine lower priced Casual Male XL and higher-end
Rochester Clothing stores.

“Total inventory in the market will be reduced, but our
customers will see three times the number of styles and twice
as many brands to choose from,” CEO Levin said.

The company plans to watch the performance of the DXL
stores over next several months, with a goal to roll out at
least five more new locations, starting in the back half of
2011.

The company, which operates 457 Casual Male XL and 19
Rochester Clothing stores, expects to open four Destination XL
stores during the second and third quarters.

Shares of the Canton, Massachusetts-based retailer rose 8
percent to touch a high $3.81, before paring some gains to
trade at $3.61, Wednesday afternoon on Nasdaq.

Investing News

(Reporting by Viraj Nair in Bangalore; Editing by Jarshad
Kakkrakandy) (([email protected]; within U.S. +1
646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging:
[email protected]))

UPDATE 2-Casual Male’s profit beats on better margins; shares up