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Tickers in this Article: MW, M, JWN, JOSB
The Men's Wearhouse (NYSE:MW) third-quarter results were mixed, and it might be tempting to assume that this means the company's prospects are steady, if a little bland.

However, when you look ahead to the fourth quarter, it appears that the well-known retailer of men's suits may be headed for a tough time. The company is forecasting that its Q4 bottom line could come in substantially below analyst estimates.

The Skinny on Q3
In the third quarter ended November 3, Men's Wearhouse reported net income of $37.1 million (69 cents per share). That's a solid improvement over the $31.8 million (58 cents per share) it earned in the comparable period last year. Meanwhile on the top line, its revenue increased from $430.1 million last year to $512.1 million this year. This was good news as the results were precisely in line with analyst expectations. (To learn more, check out Everything You Need To Know About Earnings.)

However, there were some things about the quarter that worried me. Its comps decreased 2.1% at its U.S. locations. That's well below the flat to positive 1% that the company had forecast. In addition, its Canadian comps were up just 0.6%, well below the 2-4% that the company estimated.

To explain the problem, management points to "weaker traffic trends" and a lower average sales at its K&G stores, desinged for its "price-sensitive consumers".

More to the Story
If you look at the competitive environment in the clothing and apparel business right now, major retailers that sell men's suits such as Macy's (NYSE:M) and Nordstrom (NYSE:JWN) are struggling as are a number of other players that sell casual and formal dress attire. More advertising fliers are being sent out and we are seeing more markdowns as heavy hitters like these try to compete.

By extension, this means that smaller players like Men's Wearhouse and JoS A. Bank Clothiers (Nasdaq:JOSB) may have to fight much harder to win business going forward.

Another thing that worries me is the price of Men's Wearhouse clothing. Its suits aren't expensive, but they aren't the bargain that some may think. And in these difficult times, I think that this could make a difference and push business toward lower-end players.

Finally, the company has enjoyed decent growth in large part because it continues to add new stores. What if the U.S. economy really slows and it can't keep opening new locations? At that point, it would likely be forced to depend on existing locations for growth, and, as mentioned above, comparable-store-sales numbers haven't been trending too well.

Fourth Quarter Outlook
As far as the fourth quarter is concerned, management is pegging earnings at 43-48 cents a share. That is well shy of the 55 cents a share that analysts had been expecting. In addition, the company indicated that U.S. same-store-sales will likely be in the negative, low-single-digit range, and that comps in Canada will be flat to up 2%.

Hardly inspiring.

My Take
I've been a bear on the stock for quite a while, in fact since I last wrote about the company in May when it was trading roughly 30% higher. Frankly, little seems to have changed since that time. Its same-store-sales continue to drag. The competitive environment has become more fierce, and I see nothing that is going to pull the company out of its current funk anytime soon.

In short, I think it makes sense to continue to steer clear of the stock as I could see it coming down even further on tax loss selling.

Bottom Line
Men's Wearhouse's Q3 results were mixed, but its fourth quarter looks like it will be wretched. Due to lackluster same-store-sales, stiff competition, and my belief that the company's wares don't appeal to price-sensitive shoppers, I will continue to avoid the stock.

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