Men's Wearhouse falls as co. lowers guidance

NEW YORK (AP) -- Shares of Men's Wearhouse slid Thursday as the retailer lowered its full-year earnings forecast and posted weaker-than-expected second-quarter results.

THE SPARK: The seller of men's clothing and accessories reported second-quarter adjusted earnings of $1.01 per share on revenue of $647.3 million. Analysts polled by FactSet expected earnings of $1.14 per share on revenue of $670.8 million.

For the year, Men's Wearhouse Inc. now foresees earnings between $2.40 and $2.50 per share. Its prior outlook was for $2.70 to $2.80 per share. Wall Street predicts earnings of $2.77 per share.

THE BACKGROUND: Men's Wearhouse fired George Zimmer, its chairman and face of the company, in June. Zimmer owns a minority stake in the company.

The clothier said its board cut ties with Zimmer because he had difficulty "accepting the fact that Men's Wearhouse is a public company with an independent board of directors and that he has not been the chief executive officer for two years."

Another issue, the company had said, was that Zimmer had been arguing for a sale of the business to an investment group. The rest of the board did not want to take the company private in a deal that would load it down with debt.

In August a report by Women's Wear Daily said that Zimmer had been reaching out to private equity firms to help him buy the company. The board of Men's Wearhouse has said that it is not interested in selling the company, so any attempt is likely to be in the form of a hostile bid.

THE ANALYSIS: John Kernan of Cowen and Co. said in a client note that the chain's soft forecast indicates it is bracing for a weak finish to the year. While the holiday season is nearing, Kernan said that Men's Wearhouse's results are more heavily weighted toward the second and third quarters.

The analyst reaffirmed a "Market Perform" rating and lowered its price target to $35 from $38.

Stifel Nicolaus' Richard Jaffe believes that men are part of the spending shift currently taking place.

"The consumer's shift in spending from apparel to big-ticket purchases, including homes, cares, and vacations, is, by our estimation, a factor impacting Men's Wearhouse's results," he wrote.

Jaffe said he's still confident in the company's long-term prospects, citing its on-trend merchandise and highly profitable tuxedo rental business.

The analyst maintained a "Buy" rating and $42 price target.

A representative for Men's Wearhouse did not immediately respond to an email seeking comment.

SHARE ACTION: Down $3.53, or 9.1 percent, to $35.24 in morning trading. The stock has traded in a range of $27.42 to $41.03 over the past year. It is up 24 percent for the year to date.