4. COMPANY OVERVIEW
Brand Value History and Overview
•“High quality tailored and casual clothing 1905: Jos. A. Bank's grandfather Charles Bank
and accessories” formally establishes his clothing business
•Produces all of its own merchandise except 1945: Joseph and Howard Bank buy out
for shoes Hartz's interest, company renamed Joseph A.
Bank
1950s:Company enters retailing at its
Store Breakdown Baltimore factory then at a Washington, D.C.
•473 Retail Stores, including seven outlets 1981: Bank family sells company to Quaker
and 13 franchises Oat Co
• 42 States and Distinct of Columbia 1986: Leveraged buyout by McKinley
Investments and others
1994: Company goes public
6. Historical Performance
INDUSTRY OVERVIEW
% Change Men’s Clothing
in Rev 30 Stores in U.S.
25
20
15
10
5 Industry
0 JOSB
-5
-10
-15
1998
2005
1999
2000
2001
2002
2003
2004
2006
2007
2008
2009
• JOSB has shown strong sales growth even during the recession
• Most retail companies are closing stores while JOSB is opening
new stores and expanding the Tuxedo Rental business
• Men’s Clothing Stores industry expected revenue growth of
2.1% per year through 2014. This makes JOSB goals for growth
possible
9. INVESTMENT THESIS: TOP LINE GROWTH
Strong Top Line Growth
Industry Revenue Growth Rate
•Doubled revenue
$299.7 (2004) to $739.5 (2009)
•Store growth
California
•Comparable Sales
8.9% up from low of 3.8%
(2007)
•Website
10. INVESTMENT THESIS: STRONG CASH FLOW
EBITDA & CAPEX
$160
$140
$120
$100
$80
$60
$40 EBITDA
$20 CAPEX
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
JOSB has strong, stable cash flows
• Strong EBITDA margin
• Capital Efficiency
- Only $877,000 for a new store
- Strong cash flow during recession
11. HIGH MARGIN BUSINESS
High Margin Business
20%
15%
JOSB
10%
MW
5% Macy's
0%
2004 2005 2006 2007 2008 2009
EBITDA Margin %
JOSB has an excellent EBITDA Margin of 17.8%, 10.0% higher than the industry avg.
Accomplished by:
•Renegotiation of rent
•Lower freight cost than competitors
•Lower product cost than competitors
Gross Margin increased from 57.5% in Jan 04 to 61.2% in Oct 09
12. INVESTMENT THESIS: OUR TEAM
Management Team
The management team was overhauled in the Total Sales Growth
beginning of 2000 and since then has posted 900
Total Revenue (in millions)
mid- to high- single digit or better comp 800
700
growth in every year except 2001, consistently 600
outpacing the comp sales in retail, and gross 500
400
margins have grown by over 1400 basis points 300
200
100
0
1999 2001 2003 2005 2007 2009 2011
Comp Store Sales
12 “Our mission was to do something
10 with this kind of sleepy, mid-
Atlantic company. We wanted to
8 become the leading growth
6 company in menswear because we
4 didn’t see one out there” –Neal
Black, CEO
2
0
2002 2003 2004 2005 2006 2007 2008
13. OUR TEAM CONT’D
Store Projections Internet and Catalog Growth
In 2000, when new management
took the helm, Jos A Bank
had108 operating stores.
Today they have473. By
approximately 2012, they hope
to have600.
Catalog and Internet Stores
45
40
35
30
25
20
15
10
5
0
2004
2005
2006
2007
2008
14. Four Pillars of Success
OUR TEAM CONT’D
Quality
• Key to Brand Identity
• “Three Levels of Luxury”
• Executive
• Signature
• Signature Gold
Inventory In-Stock
• Consistent availability for customers
Design Innovation
• Eliminating middlemen and streamlining design process
• Introducing pieces that are “wrinkle-free,” “stain resistant”
Service
• Sales Associates develop meaningful business relations with customers
15. Growth Going Forward
INVESTMENT THESIS: GROWTH GOING FORWARD
•With the exception of 2009, JoSB has built 40-60 new stores in the
past four years while maintaining a strong EBITDA CapEx margin
•Lean growth structure – Growth CapEx has been 2.7% of sales
•43% of its stores are less than five years old. In a 5-year
period, younger store sales growth is typically ~ 55% ( JPMorgan)
•Expanding the Tuxedo Rental business, which represents 16.7% of
sales for competitors (MW 10-K)
•Direct Marketing segment is continually growing with an increase of
21.2% last year
16. Growth Going Forward
INVESTMENT THESIS CONT’D
• In the process of renegotiating rent contracts, which will
reduce maintenance CapEx
• Increase Inventory turnover from 1.51 to ~2.30 in 3 years
• The increase in revenues from Tuxedo Rental sales will
increase our EBITDA margin by ~2.2% because of decrease in
COGS
18. RISKS: RISKS AND MITIGATING FACTORS
Risks Mitigating Factors
• Consumer demand • Consumer demand
- Company does not have a track record of quickly - Trends in high quality men’s apparel have
responding to changes in customer taste historically proceeded at one of the slowest
- Largest relative inventory in the sector increases rates in the apparel industry
the company’s exposure to obsolete inventory
• Real estate risk
• Real estate risk - Management has a solid track record of
- The market is mature and already penetrated identifying high performing locations
with competitive offerings - Management will be retained through an equity
- Continuing to find excellent real estate locations incentive program
is a significant challenge
• Pricing risk
• Pricing risk - Conservative assumptions in the base case
- Company has engaged in heavy discounting project that there is some permanent
during the recession to maintain sales volume
- Customers may be conditioned to lower prices • Margin risk
and reduce spend levels if prices increase again - Growth in the higher margin tuxedo business
can significantly offset decreased margins from
•Margin risk apparel sales
- If continued use of discounts are required to
maintain sales volume, gross margin will be • Supply risk
impaired relative to the historical average - This risk can be addressed post closing through a
disciplined supply chain diversification effort
•Supply risk
- Company has an unusually high supplier
concentration
- Supply chain disruption could cause significant
business interruption
20. Three Options
EXIT STRATEGIES
1. Initial Public Offering - This option would help us realize a
growth on our investment
2. Sponsor-to-sponsor Sale - We anticipate that this strategy
would bring in multiple offers as we would have more than
doubled EBITDA
3. Strategic Buyer Sale - Selling to another company that is
looking to expand
21. COMPETITIVE ADVANTAGES
Jos. A. Bank’s 4 Forces
•Website
-For customer use and sales associates
•Branding
-High level of quality in all aspects of business
-Three Levels of Luxury
•Innovative clothing line
-Separate Collection
-Wrinkle resistant and stain resistant shirts
•Focus
23. VALUATION
Jos. A. Bank is undervalued relative to its competitors
•JOSB is trading at an EV/EBITDA multiple of 5.2x compared to
the industry average of 6.41x and a peer comparison ranging
from 7.0x - 9.7x
• Based on historical years, similar companies sold for 8.0x-
10.0x EBITDA
Trading Comparables
Company EV/EBITDA
Jos. A. Bank 5.20x
Men’s Warehouse 6.41x
Nordstrom Inc 9.447x
24. Jos. A. Bank is undervalued relative to its competitors
VALUATION
•We are offering a 12-20% premium to the current stock price which
is on the high end of the average valuation methods
Valuation Summary
Method Implied EV Range Implied Premium
52 week high/low $26.98 $55.33 (51.24)% 0.00%
Trading Comps $32.90 $87.45 (40.54)% 58.05%
Transaction Comps $42.06 $69.16 (23.98)% 25.00%
DCF $42.20 $70.53 (23.73)% 27.47%
LBO $61.97 $66.40 12.00% 20.00%
Average $41.22 $69.77 (25.50)% 26.10%
25. ACQUISITION SOURCES AND USES
Sources and Uses
We plan to use approximately 40% equity contribution to purchase the company
Acquisition Sources and Uses
Sources % Total Uses
Cash $191.6 15.9% Purchase Equity $1176.3
Revolver $0.0 0.0% Repay Existing Debt $0.00
Term Loan $350.0 29.1% Financing Fees $13.4
Sr. Notes $250.0 16.6% Other Fees &Expenses $15
Equity Contrib. $463.1 38.4%
Total $1204.7 100.0% Total $1204.7
26. SOURCES AND USES
Dividend Recapitalization-No More
•Interest rates in the future
•Stress on the company, prior to exit strategy
•Higher MoM returns in year 3 and exit year
34. VALUATION: BASE CASE RETURNS ANALYSIS
Base Case returns a 24.5% IRR with a five-year exit
•DCF Valuation suggests that JoSB is currently undervalued
•Estimates of our base case were pulled from analyst reports and analysts themselves
•We are offering a 12% premium and are willing to go to a 20% premium
•By adding % leverage to the JoSB balance sheet the comp
• Great offer since stock price is at the highest it has been since inception
