Men's Wearhouse Fires Its Chairman

Zacks

The board of directors of menswear retailer The Men's Wearhouse Inc (MW) has abruptly terminated the company’s founder and executive chairman George Zimmer. The company issued a statement, which cited no reason for the termination. The company also postponed its annual meeting of shareholders, which was scheduled on Jun 19.

Zimmer was the face of Men’s Wearhouse and appeared in many TV commercials. He had been instrumental in Men's Wearhouse’s growth from one small store in Texas to one of North America's largest men's clothing retailer with 1,143 locations.

It is being speculated that Men’s Wearhouse was looking for a new face to attract youth. Zimmer’s termination could also be due to his constant disagreements with the board over company matters. According to Zimmer’s statements, he remained concerned about the company’s operations. However, the company was performing quite well. In fact, the company has outperformed Zacks Consensus Estimate in the last seven out of ten quarters, delivering a positive surprise of 7.3%. The actual reason for his termination still remains a mystery.

In the recently concluded first quarter fiscal 2013 reported on Jun 12, Men's Wearhouse delivered solid earnings growth of 25% from the prior-year quarter, driven by a shift in the tuxedo season from the second quarter due to an early Easter. Revenues beat the Zacks Revenue Estimate and crept up 5.1% owing to strong tuxedo revenues. The early Easter pushed up the rental rates and sales of tuxedo accessories.

Men’s Wearhouse reaffirmed its earnings per share expectation for fiscal 2013 in the range of $2.70 to $2.80.  However, the company expects weak comparable store sales growth as a result of a continued decrease in average transactions per store.

Men’s Wearhouse holds a Zacks Rank #4 (Sell). Stocks in the apparel industry that are performing well and are therefore worth considering include Gap Inc (GPS), The Children Retail Stores Inc (PLCE) and Lululemon Athletica Inc (LULU), all of them holding a Zacks Rank #2 (Buy).

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