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Jos. A. Makes Bank

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Clothier posts stellar quarter.

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Every time I see a Jos. A. Banks (JOSB) commercial on TV, read its quarterly earnings report (earnings, mind you, not losses), or simply talk to someone who's shopped there (and had a great experience), I have to pinch myself as a reminder that the company's still around.

Why do I subject myself to this pain? Simple: 92% of Jos. A. Banks' share float is short. Yes, for every 100 shares available to be traded, 92 are short. I've never seen it this high! Short sellers are smart cookies. What do they know that I don't? As one TV personality would say -- actually, would yell -- "They know nothing!"

I am not going into the details why the stock is hated by Wall Street. I've done it too many times. Here is the link to the presentation I did on JOSB at Value Investing Congress in Pasadena in May of this year (opens PDF, see slide 32 on).

When the company reported its quarterly numbers today, there were no surprises: Sales were up 13%. Inventories (short sellers' hot issue, which I've long argued aren't an issue) were up 12.3% but lagged sales growth, a great sign.

The company is maintaining its gross margins - it didn't budge in the quarter. It has , however, increased its spending on marketing dramatically - which explains why earnings were up only 7.5% in the quarter, or 14.1% for 6 months. Of course, most retailers would sell their mother for an "only" 7.5% increase in earnings.

JOSB must be taking market share, and taking names. Oh - somebody please explain to short sellers that JOSB has no interest-bearing debt and $60 million in cash (I expect the cash number to break $100 million by the end of holiday season).

It's trading at 7.5 times earnings, if you take out the cash.
Position in JOSB

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