Men’s Wearhouse Loses Arbitration to JA Apparel
Saturday, January, 24, 2015
Men’s clothier Men’s Wearhouse, coming off a tumultuous year which saw its founder and former CEO forced out even as it consolidated several acquisitions, saw another setback when arbitration proceedings initiated against it by former licensee JA Apparel came out in favor of JAA. The arbitrator in the issue awarded JA Apparel $42.6 million in damages, which Men’s Wearhouse has agreed to pay in order to resolve the issue.
The arbitration proceedings were initiated over alleged breach of contract by JA Apparel concerning license agreements between JAA and Men’s Wearhouse. Men’ Wearhouse was confident that the licensing terms were clear and that the ruling would go in its favor, and has now seen its stock take a hit as the award was announced. However, it released a statement saying that its main priority is to put the conflict behind it, so it will pay the settlement even though it believes that JAA was in the wrong.
The surprise ruling has caused its stock to tumble slightly, with the settlement estimated to cost about $0.60 a share. However, the stock stabilized at $43.29 and is expected to remain stable despite the bad news. Men’s Wearhouse acquired JAA’s parent company in 2013 and came to a licensing agreement with the subsidiary that year as well. The relationship was never peaceful, however, and bitter disputes about the terms of the licensing were common and acrimonious from the outset, culminating in JAA initiating arbitration late last year.