GM's Crash, Men's Wearhouse's New Suit, and Dick's Home-Run Profit

Unless you enjoyed some guac-packed "Tacos Tuesdays" deal, it wasn't a tasty trading session for Wall Street. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) slipped 67 points Tuesday on a light trading day as investors remain wary of developments in unsettled Ukraine.
 
1. Men's Wearhouse tries on Jos. A. Bank for $1.8 billion
It takes two (suits) to tango, and the dance is finally done after Men's Wearhouse (NYSE: MW  ) announced Tuesday that it will acquire Jos. A. Bank for $1.8 billion.
 
"You're going to like the way you look" ... remember? Since ousting smooth-talking founder George Zimmer, Men's Wearhouse had to deal with the absurd takeover attempt by its smaller rival Jos. A. Bank (NASDAQ: JOSB  ) , the suiting company famous for throwing loads of free apparel at you if you're willing to buy just one suit at full price. Men's Wearhouse declined the offer but realized that two suit stores that do the same thing would be more profitable together. Since the initial offer in October, Men's Wearhouse has relentlessly pursued Jos. A. Bank and finally is getting its prize.
 
Wow, mergers are really profitable for the shareholders. After rounds of trying to outbid each other, Jos. A. Bank finally succumbed to an offer of $65 a share, which is 56% more than its stock the day before the bidding began. Jos. A. Bank even dropped its takeover of Eddie Bauer to make this lucrative deal go down more smoothly. Men's Wearhouse stock is also up about 47% during the same time.
 
The deal brought an inevitable conclusion and consumers will have to deal with having one fewer generic suit store. Shareholders, however, are looking forward to heightened profits as the combined company shutters redundant stores sitting alongside each other in the same strip mall and maximizes winnings with the larger company.

2. Dick's fourth-quarter profits jump 7%
Underpromise and overperform -- it's the oldest recipe in the book for impressing people. Wall Street ate up the fourth-quarter earnings report from Dick's Sporting Goods (NYSE: DKS  ) with authority on Tuesday. Profit rose 6.9% for the quarter to $139 million for the sporting-goods retailer.
 
"Soft" is not something you ever want to hear, particularly in earnings outlooks from CEOs (except from the Snuggies CEO). Expectations for the fourth quarter were low since CEO Ed Stack's warning in the middle of last year that consumers would be cautious and sales would be soft for the rest of 2013. But it left plenty of room for upside, and investors reassessed the value of the stock with a fat 4.3% boost.
 
Because of a funny scheduling quirk, this year's fourth quarter was only 13 weeks, compared with last year's 14 weeks, making the results even more gold-medal worthy. Clearly, Olympics fever must have hit the USA early, as buyers stocked up on sports stuff (like curling brooms) during the holiday season.
 
3. GM crashes 5% on recall investigation
The number of the day is 5.15%. That's how much Detroit legend General Motors (NYSE: GM  ) dropped Tuesday on word that bad news from a few weeks ago is about to get worse (it's like the "check engine" light went on and now the engine finally stopped).

Here's the background. Just a few weeks ago, GM announced that it was recalling 1.6 million vehicles from the early 2000s that had problematic ignition switches. Things got worse when word got out that the company had known about the problem for years -- and then GM decided to issue a big-time public apology (cue the goodwill and late-night talk show tours).

But things got really worse when Congress just announced is own investigation. While Congressional hearings often turn into glorified Q&A sessions with little bite, investors think this one could be more than just a fender-bender for GM -- Rep. Fred Upton (R-Mich.) is leading the charge, and he's got a hard-nosed Midwest craving for auto-safety justice.

The takeaway is that the aforementioned 5.15% price drop by GM is more SUV than midsize sedan -- the mature company is considered a conservative investment by Wall Street, as a large, established company with little daily fluctuation expected in its stock price. Considering the stock is up 25% over the past year, the single-day collision caught investors like a deer in the headlights.

Wednesday:
  • The Treasury releases its budget
  • Fourth-quarter corporate earnings: Krispy Kreme, CVS Caremark

MarketSnacks Fact of the Day: After three years in the top spot, West Virginia was just replaced by Mississippi as the fattest state in the Union.

As originally published on MarketSnacks.com


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