Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of The Men's Wearhouse soared 20% today after the suit and accessories retailer said it would explore options for K&G, its weakest-performing unit.
So what: The company's fourth-quarter results were less-than-impressive (loss of $0.07 per share on revenue of $608.4 million), but the possibility of a K&G sale reignites optimism over a prolonged turnaround. In addition to directly removing the operating uncertainty that K&G brings (same-store sales for the unit declined 5.7%), a sale would naturally allow management to focus on in its stronger namesake and Moores brands.
Now what: Management now sees full-year EPS of $2.70-$2.80, bracketing the average analyst estimate of $2.77. "We continue to closely monitor our customers' reactions to continued macro-economic uncertainties that dominate the headlines and, inevitably, their wallets and spending patterns," said CEO Doug Ewert in a statement. When you couple the demand headwinds still facing Men's Wearhouse with the fact that a K&G transaction is far from guaranteed, buying into today's surge doesn't exactly seem prudent.
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The article Why Men's Wearhouse Shares Surged originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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