Greenberg: If Jos. A Bank Gets Men's Wearhouse...
By: Herb Greenberg
| 10/09/13 - 09:23 AM EDT
NEW YORK (TheStreet) -- The one good thing about Jos. A Bank (JOSB) bidding for Men's Wearhouse (MW) is that it's a gift from the gods for Men's Wearhouse shareholders.
But for Bank? It looks like one of those situations where one wounded company tries to patch over its problems by acquiring a less-wounded competitor.
Both companies have been having a tough time, lately. Nevermind that Men's Wearhouse recently booted its founder, George Zimmer. Its sales have been up and down for well over a year, falling 2.3% last quarter.
Compare that with Bank's 10.7% decline following a 2.6% drop the quarter before.
More telling: While Bank's same-store sales tumbled by 15.9% last quarter, Men's Wearhouse's were down just 2.1%.
The story is the same throughout the Bank vs. Men's Wearhouse financial statements.
A deal like this might be fine if this were the case of a much stronger company acquiring a weaker competitor. But when a company whose business appears to be falling faster than its larger competitor -- whose stats (while not that good) are better -- it usually screams: Desperation.
Remember, everything appeared to be fine at Bank (steamrolling the shorts and skeptics, including yours truly on the skeptic side) as long as it was rapidly opening up new stores left and right. When that slowed, so did its growth.
In recent quarters the company has blamed its missteps on everything from sequestration to the weather and anything else that isn't nailed down. There's also the issue facing both companies: Demographics appears to be shifting away from the kind of clothing they sell.
The solution? Pull in a private equity firm, load up on even more debt and go after its bigger rival.
Reality: In the near-term, in my view, it helps distract from the issues that have caused Bank to badly miss and guide down for several straight quarters. Longer term: When you put two mongrels together you don't get a greyhound.
-- Written by Herb Greenberg in San Diego