Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The Men’s Wearhouse, Inc. (MW) Looks Better Off

Upon news of The Men’s Wearhouse, Inc. (NYSE:MW) shedding its founder and former CEO as chairman of the board, shares sank, and opinions flew of a misguided board of directors. For who could lead the company better than its creator and 3.5% stakeholder? Well, on Tuesday, we got a little more color from the company’s management regarding the firing of George Zimmer. There’s no question that Zimmer created a magnificent company, more than 1,000 stores strong, and it delivered plenty of value to shareholders over the years. Even though it’s been a painful divorce, perhaps The Men’s Wearhouse, Inc. (NYSE:MW) (and Zimmer, for that matter) is better off.

Not a good look

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

It was a very unceremonious departure for the longtime face of The Men’s Wearhouse, Inc. (NYSE:MW). Zimmer, who’d been out of the CEO position for two years, was abruptly released last week, with the company’s management issuing a vague statement regarding Zimmer’s future with the company.

Zimmer released his own statement quickly thereafter, saying he’d feared where the company was headed, and management’s response was to let him go.

Zimmer’s departure has sparked voices of disdain for The Men’s Wearhouse, Inc. (NYSE:MW), and support for its founder. For days following his firing, the stock sank.

But now that the company has issued a more detailed statement that specifically identifies the reasons why Zimmer was let go, it may be a good thing in the end.

Shareholder vs. shareholders

The board argued that Zimmer refused to accept that The Men’s Wearhouse, Inc. (NYSE:MW) is a public company that needs to take into consideration all shareholders, not just its founder. Zimmer argued over pay, strategy, and the potential to take the company private. By the sound of it (admittedly a limited point of view, coming from management), Zimmer was throwing up roadblocks at every crossroad. A large stakeholder advocating change in a company is not rare by any means, but Zimmer’s action sounded less like an activist investor’s calculated move, and more like a hissy fit.

The road ahead

The company is taking a short-term hit in firing its beloved star founder. Men’s Wearhouse’s Facebook page is riddled with complaints and threats to move to competitor Jos. A. Bank Clothiers Inc (NASDAQ:JOSB). In a way, this says something about the strength of the company’s brand. More than the prices, the selection, or the quality of the products, a large portion of the company’s customers seem loyal to a long-running tagline from a commercial.

Men’s Wearhouse management was right to shed its subsidiary, K&G — a store selling discontinued brand-name goods. The chain represented a third of the company’s overall square footage, and poor same-store sales were keeping the company chained down. Zimmer wanted K&G to stay, but the numbers just didn’t support his thesis.

The company has a strong balance sheet and a growing core brand — even if a now gone celebrity spokesman anchored it.

Bottom line: The way I see it, current investors should not be selling based on Zimmer’s departure.

The article Men’s Wearhouse Looks Better Off originally appeared on Fool.com and is written by Michael Lewis.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.