On December 11, 2019 Tailored Brands (TLRD), which owns Men’s Wearhouse Inc., reported third quarter 2019 results. To listen to the company’s CEO on the ensuing Conference Call – as we did – is to believe that the famous retailer with several well known brands is making progress. On the other hand, the Motley Fool’s take on reviewing the latest results was the opposite: Tailored Brand’s continues to face multiple challenges in the retail space and is “running out of time”.
The BDC Credit Reporter added Men’s Wearhouse – a subsidiary of TLRD – to the under-performing list in the IIQ 2019 and wrote our first post on September 13, 2019, rating the company CCR 3 (Watch List), shortly after the dividend was suspended. We had a look at all the results – including the 10-Q – for the latest quarter and came away confirmed in our initial skepticism and that of Motley Fool. The highlights of our concerns; sales dropping at all brands; the departure of a senior manager; huge losses to the bottom line; a declining stock price and still very high debt (given as 4.4x debt to EBITDA by management but much higher when mandatory capex is included).
The good news is that the company has plenty of liquidity thanks to undrawn secured revolver debt and some cash and no debt maturities in the short term. We are maintaining our CCR 3 rating in that there is still a decent chance the business can be turned around without a restructuring or bankruptcy. We do note, though, that since the last time we wrote the only BDC with exposure – Barings BDC (BBDC) – discounted its $10mn investment in the 2025 Term Loan by (17%), lower than in June 2019.