Why Men's Wearhouse Shares Surged

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 (NYSE: MW  ) 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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