The market liked what it saw from clothier Men's Wearhouse, but not all pieces of the business are pulling their weight. Photo: Flickr via Gareth Simpson.

Is this where Men's Wearhouse (NYSE:TLRD) finally makes good on the promise of its Jos. A. Bank acquisition? No, not yet, but the men's clothing retailer's fourth-quarter and full-year 2014 earnings report on Wednesday at least indicates the rest of its business is beginning to gain traction.

Investors will have to wait for the back half of 2015 for the company's one-time rival to hit pay dirt, but they're apparently willing to do so -- Men's Wearhouse stock jumped nearly 9% on Thursday.

Let's look at the earnings report and see why the markets are excited by what they saw.

Things are looking up
Men's Wearhouse quarterly losses were much lower than what Wall Street had anticipated. Its namesake brand, which accounted for 41% of total fourth quarter sales, continued to show strength in a challenging market. Sales rose 8.4% year over year in the fourth quarter, to $379 million, on a 6.8% increase in comparable sales.

It's a good thing the Men's Wearhouse brand continues to wear well because its other divisions were something of a mixed bag. Comps in the Moores business in Canada rose 8.6%, but on a net basis were up just 0.8% due to currency exchange effects. But Moores represents only 6% of total quarterly sales, so while the gains are appreciated, they're not moving the needle at the moment.

Similarly, the K&G discount brand, which Men's Wearhouse decided against selling last quarter, also notched higher quarterly comps of 6.8%. Its contribution to total fourth quarter sales amounted to 9%, and the improvement in the business suggests management might have been right to keep the brand.

Just not everywhere
That might not be the case with Jos. A. Bank, which turned in another disappointing quarter of lower sales. Although management said the 6.6% decline in comparable sales was above its internal expectations and the coming year will be one of "strategic transition" for the brand, it nevertheless seems to underscore the belief that the acquisition was a miscalculation that benefited Men's Wearhouse's hedge fund owners rather than the smaller investor.

In the nine months that Men's Wearhouse has owned its former foe, comparable sales fell through the floor and are expected to remain in the basement through at least the first half of 2015. As Jos. A. Bank accounts for 36% of total quarterly sales, this amounts to a significant drag on performance.

Data: Men's Wearhouse quarterly SEC filings.

Those vaunted synergies are coming
Men's Wearhouse CEO Doug Ewert is counting on further "synergies" developing as the year progresses to make the acquisition worthwhile. In the company's release he said, "Fiscal year 2015 will be the year of strategic transition for Jos. A. Bank as we work on unlocking customer facing opportunities. Much of this work lies in systems conversions which will be completed in the second half of 2015."

Ewert maintained that the acquisition has exceeded Men's Wearhouse's estimates of initial synergy run-rate targets, such as merging the back-office functions of the two companies and store training programs, and Men's Wearhouse ended the year with run-rate synergies of $35 million. Since the bulk of the transition is still to come, Ewert does not anticipate much movement until the third and fourth quarters.

Investors are advised to wait until 2016 to expect to see the benefits of the costly acquisition. With the decision made to keep K&G in-house, Men's Wearhouse raised its 2017 guidance, which is now expected to be in the range of $5.75 to $6.25 per share. Current year earnings are expected to rise between 14% to 22%, hitting somewhere between $2.70 to $2.90 per share.

Competition might get more heated
But synergies are ephemeral, and Men's Wearhouse founder and former CEO George Zimmer had expressed concern about excess cost reductions. He said the retailer would become too aggressive in making cuts in an effort to make the integration work and that would ultimately impede progress in growing sales.

Men's Wearhouse also faces a tight, competitive market for business. For example, department store chain J.C. Penney reported that its men's business was one of its best segments in the last quarter.

The men's suits business is highly fragmented, which is one of the primary reasons the Jos. A. Bank acquisition cleared antitrust hurdles. But it doesn't mean the purchase was a good one for Men's Wearhouse investors who will have to rely upon the remainder of the retailer's operations to carry the Jos. A. Bank business forward.