The seven-time Formula 1 champion made the announcement on Thursday, claiming that he lacked "the motivation and energy" to carry on.
"His reputation has already been affected by his unsuccessful return to the sport," Stewart told BBC Sport. "People will applaud the decision as it should have happened a while ago.
"The speculation within the whole F1 community has been that Michael should be retiring - and hopefully not for a short period this time.
"In a way I am sorry Michael came back. Recently he's had too many incidents."
Stewart won Formula 1 world titles in 1969, 1971 and 1973.