The Men’s Wearhouse, Inc. (MW): You Should Worry About This Retailer

Some retailers such as specialty apparel retailer rue21, inc. (NASDAQ:RUE) which cater to young men and women decided to take the step of going private so that it could avoid the regulatory distraction of its publicly traded status.

In 2012, rue21 increased sales 19% but free cash flow declined 28% due to increased capital expenditures. rue21 possesses plenty of liquidity on its balance sheet with cash and investments equating to an impressive 36% of stockholder’s equity.

rue21, inc. (NASDAQ:RUE) plans to expand extensively in coming years excluding public shareholders from any of the bounty.

Another apparel retailer, Body Central Corp (NASDAQ:BODY) faced a great deal of turmoil resulting from a buildup of out of fashion merchandise during 2012. This resulted in sales and free cash flow declining 2% and 108% respectively. Heads at the senior level rolled.

Recently, the company installed a new CEO and a new merchandising team with one merchandising executive keeping their finger on the fashion pulse in New York. Hopefully Body Central can clear out the bad inventory and bring in some merchandise that people will pay full price for.

Only time will tell as to whether Body Central Corp (NASDAQ:BODY) can turn itself around. Competition may see to it that it won’t.

Watch and be weary

Companies, such as The Men’s Wearhouse, Inc. (NYSE:MW), distracted by the publicity surrounding management disagreements can’t focus on growing the top and bottom line. In addition, George Zimmer still owns 3.5% of the company which means he might start selling shares and subsequently produce a drag on stock price appreciation.

Also, George Zimmer may convince friends and family that remain in Men’s Wearhouse’s employ–that could cause trouble for the company. For example, James Zimmer, George Zimmer’s brother remains in the executive position of Senior Vice President of Merchandising.

It’s safe to say that this drama is long from over. George Zimmer may come back and settle things with the board or continued chaos may serve as a distraction from strategic focus. If you are a long-term shareholder be wary.

William Bias has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. William is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article You Should Worry About This Retailer originally appeared on Fool.com and is written by William Bias.

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