Messy output in zsh working in emacs M-x shell

Question

I have changed my shell to oh-my-zsh, which is working great in iTerm.

However when I open up my Emacs, M-x shell, I see it also changes to zsh, but the output from executing commands is messy:

➜  Public  ls
ls


Drop Box    Dropbox-Public  tars
%                                                                                                  


➜  Public  ls
ls


Drop Box    Dropbox-Public  tars
%                                                                                                  


➜  Public  

Too many empty lines! I have to change it back to bash using:

(setq explicit-shell-file-name "/bin/bash")

However I want to use zsh, since it has great plugins. For example, I can see which branch I am working on currently directly in the command line using the git plugin.

Is there anyone familiar with zsh and emacs who can help me fix this?