40590 Encyclopedia Circle
The mission of The Men's Wearhouse is to maximize sales, provide value to its customers and deliver top quality customer service, while still having fun and maintaining the company's values. The Company's commitment to operate a growing, profitable and socially responsible compay is a commitment of which its shareholders can be proud. The Company seeks to adhere to its culture, not only as a means for achieving economic success, but because adherence is a worthwhile goal in and of itself.
The Men's Wearhouse, Inc. is one of the most successful men's specialty store chains in the United States, dominating the men's tailored clothing field. It has accomplished this by offering men a comfortable environment in which to buy high quality suits, dress slacks, sport jackets, and sweaters at 20 to 30 percent below department store prices. In June 1996, the company operated 299 stores in 29 states, and was opening about 50 new stores a year. To attract men, who notoriously dislike shopping, the stores were located in upscale strip shopping centers that were convenient to customers' homes and workplaces and eliminated the need to hike through large malls. A well-trained, friendly staff provided exceptional customer service, with tailors in every store and free pressing for the life of a garment. The combination of these factors plus aggressive radio and television advertising led to consistently increasing sales and earnings in a highly fragmented industry. Net sales for 1995 totaled $406.3 million, an increase of 28.1 percent over the previous year. Net earnings increased 36.3 percent in the same period. CEO George Zimmer and his family own 42 percent of the stock.
Early Years
In 1972 George Zimmer had been out of college for two years and was just back from a year in Hong Kong, where he had set up a factory for his father's raincoat manufacturing business. He became a manufacturer's representative for his father's company, living in Dallas and driving throughout Texas, Louisiana, and Oklahoma to sell boys' raincoats to stores.
When the buyer at Foley's in Houston, his biggest account, complained about racks of unsold raincoats, Zimmer talked his father into taking back $10,000 worth of merchandise. When Foley's dropped the raincoat line anyway, Zimmer got angry. In a 1993 Forbes article he explained, "As Tom Peters says, you have to be a monomaniac to build a business. The fuel for my monomania came from that situation with Foley's."
Taking $7,000, Zimmer rented a small store in a strip shopping center on the west side of Houston and stocked up with name-brand suits. He opened The Men's Wearhouse in August 1973, selling the suits well below the prices charged at Foley's and other department stores. With him at the opening were his father and Harry Levy, a good friend from college.
It took his father's firm more than six months to find a replacement for him. So from Monday through Thursday Zimmer was on the road, selling raincoats. On Friday and Saturday he would be in Houston, on the sales floor of The Men's Wearhouse. In those days, blue laws kept stores closed on Sundays. Harry Levy, who eventually became senior vice-president of planning, covered the store during the week.
Once he was able to devote his full time to The Men's Wearhouse, Zimmer quickly opened two more stores and incorporated the company. He promoted his three stores with small advertisements in the Saturday sports section of local newspapers. In the first year he had sales of $1 million and lost $20,000. At a friend's suggestion, he switched to TV, filming inexpensive ads and buying unsold commercial space at a discount. Executive Vice-President Richard Goldman, who joined the company in 1974 after selling Zimmer advertising space, told MR Magazine, "Mary Hartman Mary Hartman becomes the #1 rated TV show in Houston at 10:30 p.m.; commercials cost $700 each, except for ours, which we bought before the series started at $18.25 per spot." By 1981 there were 12 Men's Wearhouses, and by the end of 1985, the chain had grown to 25.
During those early years, Zimmer, Levy, and Goldman established the conceptual basis of their business, which has not changed. Goldman explained to MR Magazine, "Our strategy is to be like the old time men's clothing store around the corner, except that we add price as a key ingredient. We realize that men hate to shop, so we actually try to make it fun!"
The company targeted the moderate-income professional and semi-professional male worker. It kept its stores relatively small, between 4,000 and 4,500 square feet, because, as Zimmer told the Daily News Record in 1996, "Men don't really like taking their pants off in places larger than 5,000 square feet." The stores were clustered in a mid-sized city to take advantage of advertising and distribution savings and to make them convenient to get to. This was important because a customer had to go to the store twice (once to buy and get measured and again to pick up and try on the suit after alteration). The company expanded the merchandise mix, adding other tailored clothing--sport coats, dress shirts, and dress slacks&mdashø its suits and offered accessories such as ties and belts.
The company emphasized integrity and service. Employees, trained in customer service skills, were also treated as family, with everyone on a first-name basis, and most were hired full time. Zimmer began donating a percentage of pre-tax profits to charities, establishing a reputation for the company as being socially responsible. Vendors were also treated well, and the company never canceled an order. One of The Men's Wearhouse's biggest customers told Jeffrey Arlen of Discount Store News, "They do what they say they are going to do. They are very focused and honorable."
Some of the company's competitors disagreed. In the mid-1980's The Men's Wearhouse moved into California. Following its successful Texas formula, the company would open a store, advertise heavily with Zimmer doing his own television ads, and then open several more stores in the area. In 1989 Nordstrom Department Store sued The Men's Wearhouse for false advertising, disputing the company's claim that Men's Wearhouse suits were identical to those sold by Nordstrom. In 1990 C&R Clothiers also sued, complaining about false claims regarding pricing. Both suits were settled when The Men's Wearhouse agreed to stop running the ads.
1990-94: Explosive Growth
The first half of the 1990s saw tremendous growth for the company. It opened 17 new stores in 1990 and 19 the following year. In April 1992 Zimmer took the company public, selling 2.25 million shares at $8.67 per share and raising $12.7 million. That year new store openings jumped to 31, including the first Men's Wearhouse outlet center, in Houston. At over 7,000 square feet, this was much larger than the regular Men's Wearhouse stores. The outlet had limited services and carried greater quantities of merchandise.
In the fall of 1992, the company introduced Made by America (MBA), a sportswear catalog. The catalog contained only quality, U.S.-made sportswear. In keeping with its ecologically and socially responsible culture, the company avoided mass mailings by distributing the catalogs through its retail stores. When that proved unsuccessful, the company mailed catalogs to customers who had previously bought clothing through the mail. Although cleverly written (and with a percentage of sales going to reduce the national deficit), the catalog did not generate sufficient sales and was discontinued in 1993.
1993 was a rough year for most discount stores, with the Discount Stores News Stock Index of 86 stocks falling 5.9 percent. Except for its MBA catalog, however, The Men's Wearhouse had a great year. The company's second public offering raised $10.4 million, with 1.3 million shares selling at $12 per share. This allowed Zimmer to pay off debts while opening 40 stores during the year, including two more outlet stores. The company ended the year with net sales of $240.4 million and earnings of $8.7 million. Between 1991 and 1993, The Men's Wearhouse doubled its net earnings on a net sales increase of 80 percent.
In May 1994 the company completed its third public offering of one million shares at $29 per share, which generated net proceeds of $14.5 million. This provided the financing to open more stores and to acquire the licenses for tailored clothing produced for French designer Pierre Balmain and Italian designer Vito Rufolo. The company began manufacturing as well as selling the new lines, using its direct-sourcing capabilities in the United States and overseas. In addition to its private labels, the company offered brand name suits including Pierre Cardin, Geoffry Beane, Calvin Klein, and Oscar De la Renta.
The company purchased the Coach House in Pittsburgh, which gave the company a major presence in western Pennsylvania. In June The Men's Wearhouse hired Michael Batlin from Macy's West to expand its shoe business. The company had started selling shoes three years earlier, offering Rockport, Florsheim, and Bostonian; it began offering its own private-label brand in early 1994.
The company also decided to offer Big and Tall sizes. To provide the space for these expansions, it increased the floor space of its new stores an additional 500 square feet to 5,000 square feet. Company growth was aimed at the Southeast, and by the middle of the year, there were ten stores in Florida, five in North Carolina, 11 in Georgia, and about a dozen in neighboring states. At the end of 1994, there were 230 stores, more than double the number existing when the company went public in 1992. Net sales for the year increased 32 percent, to $317.1 million.
1995 and Beyond
1995 saw the opening of a 35,500 square foot office, training, and redistribution facility in California. Staff training had always been an important part of The Men's Wearhouse strategy, and all employees went through a three-day Suits University program, conducted at the company's executive headquarters. Richard Goldman explained the company's thinking in a 1995 interview with Discount Store News. "We want our people to feel they are being treated fairly, and it all starts at Suits U. First of all it's an all-expenses-paid trip to Northern California, which can mean a lot to a new employee. Once we get them at Suits U. we don't teach people how to use the cash register; that they can learn in the store. What we do is inculcate them with the corporate culture." Sessions included selling techniques, product information, in-store training meetings, and social events. Employees were trained in helping customers select an entire wardrobe, not just a suit or a pair of slacks.
During the year the company executed a revolving loan agreement of $100 million to be used primarily to pay for the company's planned growth and, in July, filed a secondary offering of two million shares. In September The Men's Wearhouse acquired the North American rights for exclusive use of the Botany, Botany 500, and Botany Couture labels. These had been owned by the McGregor division of Samsonite Corporation, which sold the tuxedos, sport coats, and suits through its 500 Fashion Group. Botany 500 became a prominent label in the industry in the 1930's. When Botany went bankrupt in 1972, its labels were bought by Joseph H. Cohen (JHC) of Philadelphia. JHC became a division of Rapid-American, which, after numerous acquisitions and name changes, was the predecessor of Samsonite Corp.
Although the company had planned to expand its Big and Tall inventory into more stores, it found the line selling better than expected in the first 50 stores, which, paradoxically, limited its expansion. "We weren't able to roll it out to as many stores as we wanted to. We had to go back and fill in at the stores where it was selling well," Richard Goldman told Daily News Record in a January 1996 interview.
1995 also saw the company move into new markets, including Cincinnati, Milwaukee, and Chicago, which was one of the top five markets for men's tailored clothing. The company's biggest competitor in Chicago, Today's Man, was facing financial difficulties, and within a year had closed all its stores in that market. In the meantime, sales in the new Men's Wearhouse stores were higher than expected.
Industry consolidation and weak sales were taking their toll on department and menswear specialty stores. Traditionally, most suits were sold in department stores or small mom-and-pop operations with one or two stores. In the first half of the 1990s, according to Kernkraut and Abramowitz at Bear Sterns, approximately 4,000, or 23 percent, of the men's clothing boutiques closed, and department stores cut back their men's suit departments. 1995 was a particularly bad year for the industry. Brooks Brothers, a subsidiary of Mark & Spencer, lost $4 million during the first half of the year; the 114-store Britches of Georgetown was put up for sale; Hartmarx sold its Kuppenheimer stores division; and several regional chains declared bankruptcy.
A major factor in the decreasing sales of tailored clothing was the move toward more casual business dress. The Men's Wearhouse responded to this trend by slightly increasing its stores' selection of sport coats and slacks, replacing about 60 suits with an equal number of sport coats. At the same time, the company increased the training employees received, stressing all aspects of a customer's business attire needs.
In late 1995 the company produced a video entitled "How to Dress Casually and Still Mean Business," in which a sales associate led the viewer on a guided tour of what is needed for a complete office wardrobe. The video was distributed to each Men's Wearhouse store. While managers could show it in the store (it was only seven minutes long), the company had a larger objective: staging free "how-to" fashion shows at local businesses. Managers mailed free copies of the video to human resource directors or other company contacts, with an accompanying letter offering to conduct a live fashion show for male employees, either on-site or at the store.
The company used a similar approach in an 1996 advertisement about business casual wear on Houston Chronicle Interactive, the Houston Chronicle's web site. That piece discussed textures and colors of jackets and sport coats, with tips such as "the belt should match your shoes," and "business casual socks are printed socks you can wear with a suit."
George Zimmer received some free advertising on the World Wide Web courtesy of Steve Kubby, publisher of Alpine World, an on-line magazine. In a letter to readers, Kubby wrote, "Several months ago we approached The Men's Wearhouse about supporting a tree-free alternative to magazines printed on paper made from trees.... I learned that under George's leadership, The Men's Wearhouse was actively involved in recycling, in using hemp paper, and in supporting environmental causes. So they agreed to 'advertise' with us--only they didn't want an ad!" Kubby also wrote that Zimmer actively participated, with money and time, in making the Oakland zoo "one that is endorsed by animal rights activists around the world."
During 1996 the company opened its first store in the Washington, D.C., market, marking its initial entry into the Northeast. It planned to open several more in the Washington-Baltimore area and to enter the Boston-Providence market before the end of the year. First quarter net earnings were 53 percent higher than in 1995, and comparable store sales rose 7.6 percent, compared to a 4.3 percent increase for the same period the previous year. As analysts at Robertson, Stephens & Company noted in their recommendation of April 30, 1996, "The Men's Wearhouse has never depended on strong industry growth but solely on the company's superior fundamentals and growth prospects."
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