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Why Shares of Tailored Brands Are Spiking Today

By Lou Whiteman – Aug 21, 2019 at 12:22PM

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The beleaguered retail brand has reportedly attracted the attention of a potential private equity suitor.

What happened

Shares of Tailored Brands (TLRD) traded up more than 11% on Wednesday after a report surfaced that the men's apparel retailer has been approached by a private equity firm regarding a potential acquisition. The report is a rare piece of hopeful news for investors in Tailored Brands, a company that by its own account has faced "significant headwinds" in 2019.

So what

Tailored Brands, owner of the Men's Wearhouse and JoS. A. Bank chains, has grappled with short-term issues including unfavorable foreign currency exchange movements as well as longer-term issues such as a trend toward business casual in the workplace. Investors have largely headed for the exits, with shares down more than 75% over the past year.

A man in a suit.

Image source: Getty Images.

That decline has reportedly attracted takeover interest. StreetInsider on Wednesday said Tailored Brands has hired bankers after an approach from Sycamore Partners regarding a potential acquisition. The company has been offered about $10 per share, according to the report, which would be a substantial premium to Tailored Brands' $4.34 close on Tuesday.

Now what

It's important for investors not to overreact to rumors, but you can certainly understand why talk of a buyout would be celebrated. Tailored Brands is in a tough situation with no clear path to revitalization. A life raft in the form of a private equity buyout would be welcomed.

Be warned that buying in at these levels in hopes of a quick payday from an acquisition is fraught with risk. Sycamore could get a close look at the books and decide to offer less or simply walk away, leaving holders with stock in a business desperate for a turnaround instead of a cash payout.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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