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Is The Men’s Wearhouse, Inc. (MW) the Next J.C. Penney (JCP)?

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The Men’s Wearhouse, Inc. (NYSE:MW) suddenly fired Founder and Executive Chairman George Zimmer yesterday.

This might sound like a normal event on Wall Street, but this firing had some unique circumstances.

What unique circumstances?

Not only did the firing take place on the same day of the annual shareholder meeting, but that meeting was canceled due to the firing. Could the timing have been any worse?

The Men's Wearhouse, Inc. (NYSE:MW)

Furthermore, The Men’s Wearhouse, Inc. (NYSE:MW) didn’t allow George Zimmer to issue a statement that would have prevented embarrassment. For example, The Men’s Wearhouse, Inc. (NYSE:MW) upper management could have allowed George Zimmer to state that he was leaving to spend more time with his family.

Will fundamentals win out in the end?

The Men’s Wearhouse, Inc. (NYSE:MW) has consistently improved its revenue and earnings over the past three years. In the first quarter, revenue improved 5.10% year over year, and earnings improved 23%.

But has The Men’s Wearhouse, Inc. (NYSE:MW) performed well compared to peers Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) and Kohl’s Corporation (NYSE:KSS) over the past several years?

MW data by YCharts

The Men’s Wearhouse, Inc. (NYSE:MW) and Jos. A Bank have delivered similar performances. However, Men’s Wearhouse has been the better investment because it pays a dividend. Men’s Wearhouse currently yields 2.00%. Since Men’s Wearhouse has $155.10 million in cash and no debt, the dividend appears to be safe.

The short interest on these companies are high:

  • Men’s Wearhouse 5.30%
  • Jos. A Bank 29.90%
  • Kohl’s 9.20%

When the consumer is weakening, it’s only a matter of time before the retail sector gets hit. This is likely the biggest reason for the high short positions. Sometimes shorts attack a company with unmanageable debt loads, but debt management is good for all three companies.

Men’s Wearhouse might have the smallest short position, but after today’s events, it might become the riskiest of the three companies mentioned above. Kohl’s is likely to be the safest investment going forward thanks to its product diversification. Men’s Wearhouse and Jos. A Bank are focused solely on menswear.

Customer backlash

Numbers are important, but sometimes other factors play a bigger role.

For instance, Men’s Wearhouse customers are looking at yesterday’s firing as a tasteless and despicable move. If you read any article covering the story, look at the comments on the bottom of the page. Customers don’t like the way the firing was handled, and the vast majority of them state that they will never shop at Men’s Wearhouse again. The most infuriating detail: George Zimmer was fired by the man he hired as CEO two years earlier.

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