JOSB and the conflicting inventory accounting disclosures
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Transcript of JOSB and the conflicting inventory accounting disclosures
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TryingtoMakeSenseofJosA.BanksInventory
Accountin DisclosuresP a g e |
DL | davianletter.com
Wednesday,February15,2
Trying to Make Sense of Jos A. Banks Inventory Accounting Disclosures
AnexaminationofJos.A.BankClothiers,Inc.s(JOSB) 10-Qreportforthe
quarterendedApril30,2011andwefoundmultipleinventoryrelateddisclosuresthatseemtodirectlycontradicteachother.
Forexample,onpage13ofthe10-Qreport,thecompanydisclosed:
120basispointincreaseingrossprofitmarginsmainlyasaresultofhigher
initialmark-upsdrivenprimarilybyretailpriceincreasesincertainproduct
categoriesandimprovedsourcing;
Whatdoesthecompanymeanbyimprovedsourcing?Therationalconclusion,
whendiscussedinthecontextofprofitmargins,isthattheywereabletogeta
betterdeal.
Seemssimpleenough,exceptJOSBalsostatedonpage18ofthesame10-Q
report:
Cashusedinouroperatingactivitiesof$12.9millioninthefirstquarteroffiscal
year2011wasprimarilyimpactedbyanincreaseinoperatingworkingcapital
andotheroperatingitemsof$38.0million,partiallyoffsetbynetincomeof
$17.8millionanddepreciationandamortizationof$6.2million.Theincreasein
operatingworkingcapitalandotheroperatingitemsincludedthefollowing:
anincreaseininventoryof$28.6millionprimarilyasaresultofthereplenishmentofunitssoldinfiscal2010,newstoreopenings,continued
salesgrowthandhigherinventorysourcingcosts ;
Onpage13ofthe10-Qreport,thecompanyclaimedthatitsgrossprofits
improved,inpart,becauseofimprovedsourcing.However,onpage18of
thesame10-Qreport,thecompanyseemstocontradictitselfbyclaimingthatit
hadhigherinventorysourcingcostswhichshoulddecreasegrossprofits.
Jos.A.Bankneedstoclarifyitsdisclosurestoavoidconfusinginvestorsand
alleviateconcernsaboutitsfinancialreporting.Itshouldanswerthefollowing
question:
Arethereferencedsourcingcostsarethesameordifferent?HowcanItellas
theybothseemtoimpactaccountingitemswithsimilarifnotthesameeffect?
Withtheir10-Kreportduesoon,JosABankshouldclarifyitsinventory
disclosures,andalleviatepotentialconcerns.
In Focus:
Inventoryaccountingdisclosures
donotaddup?
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