Cramer’s Mea Culpa on The Men’s Wearhouse
On Thursday, “Mad Money” host Jim Cramer said he made a mistake when he recommended The Men’s Wearhouse’s stock on March 21. After all, the apparel retailer reported quarterly results below analysts’ estimates and forecast a weak second-quarter profit Wednesday, sending shares sharply lower.
“I made a mistake recommending this stock and when I make a mistake on this show, especially one where the stock’s down 18 percent in a single day, I own that mistake,” Cramer said. “I got it wrong and I'm sorry for it. I can't criticize others unless I criticize myself and I'm kicking myself in the butt on this one.”
Looking back, Cramer recommended The Men's Wearhouse for two reasons. First, he thought it would benefit from increased hiring, as more men with jobs means greater demand for suits. Second, he thought the company was benefitting from the closure of smaller, “mom and pop” stores across the country.
As it turned out, however, the U.S. only created 69,000 jobs in May, as reported Friday. Therefore, not many people are going back to work and so the demand for suit hasn’t really increased much.
“I should have realized that Men’s Wearhouse wouldn’t sell as many suits as we’d expected,” Cramer said. “If I’d told you to dump the stock then, you could have sidestepped today’s brutal decline.”
Cramer also admitted that just because “mom and pop” stores are closing doesn’t make the company immune to the broader economic backdrop. He also thinks that many “mom and pop” stores had closed long ago, so The Men’s Wearhouse had already absorbed those customers. In other words, there’s not much market share left to take.
In the end, Cramer thinks The Men’s Wearhouse is a sell. Things could get worse before they get better for this retailer, he said, so The Men’s Wearhouse is going to have to prove it’s turned things around.
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com