The Men's Wearhouse, Inc. History

Address:

Public Company
Incorporated: 1974
Employees: 10,800
Sales: $1.27 billion (2001)
Stock Exchanges: New York
Ticker Symbol: MW
NAIC: 448110 Men's Clothing Stores; 448120 Women's Clothing Stores; 315222 Men's and Boys' Cut and Sew Suit, Coat, and Overcoat Manufacturing; 315224 Men's and Boys' Cut and Sew Trouser, Slack, and Jean Manufacturing

Company Perspectives:

The mission of Men's Wearhouse is to maximize sales, provide value to our customers and deliver top quality customer service while still having fun and maintaining our values. These values include nurturing creativity, growing together, admitting to mistakes, promoting a happy and healthy lifestyle, enhancing a sense of community and striving toward becoming self-actualized people.

Key Dates:

1973:: The first Men's Wearhouse store opens in Houston.
1991:: The company goes public.
1995:: A new office opens in California that also handles distribution and the training of employees.
1996:: The brands of Kuppenheimer and Joseph & Feiss are acquired.
1997:: Value Priced Clothing division formed from C&R Clothiers Inc. and NAL chains.
1998:: The company opens its first store in New York City.
1999:: Canada's Moores Retail Group and Atlanta's K&G Men's Center are acquired.
2000:: The first K&G Women's Superstore opens.

Company History:

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. To attract men, who notoriously dislike shopping, the stores were located in upscale strip shopping centers nearby customers' homes and workplaces, eliminating 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. With the acquisition of Moores Clothing, Men's Wearhouse became the owner of Canada's second largest manufacturing facility of men's suits and sport coats. In February 2002, the company operated 563 stores in the United States (497 under the Men's Wearhouse brand) and 113 Moores stores in Canada.

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. Despite this gesture, Foley's dropped the raincoat line, which angered Zimmer. 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 Men's Wearhouse in August 1973, selling the suits well below the prices charged at Foley's and other department stores. At the opening of the store, Zimmer was joined by 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, and from Monday through Thursday Zimmer continued to work as a traveling raincoat salesman. On Friday and Saturday he would be in Houston on the sales floor of 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 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 mid-sized cities 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 to its line of suits other tailored clothing--sport coats, dress shirts, and dress slacks--and offering 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 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-1980s, 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 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 lawsuits were settled when 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.

In 1993, most discount stores suffered a decline in business, with the Discount Stores News Stock Index of 86 stocks falling 5.9 percent. Except for its MBA catalog, however, 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, 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 by Pierre Cardin, Geoffrey Beene, Calvin Klein, and Oscar De la Renta.

Men's Wearhouse purchased the Coach House in Pittsburgh, which gave the company a major presence in western Pennsylvania. In June, 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: A Big Year

The year 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 Men's Wearhouse's 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, 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.

The year 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. This industry trend was especially pronounced during 1995. 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. 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 a 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 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 Men's Wearhouse about supporting a tree-free alternative to magazines printed on paper made from trees. ... I learned that under George's leadership, 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."

Ending the 1990s with a Shopping Spree

The last half of the 1990s was largely a tale of growth by acquisition, though the company did try out a couple of new concepts later in the decade. During this time, Men's Wearhouse would become a billion dollar business, with even more ambitious targets ahead.

In March 1996, the company joined a liquidator (Buxbaum, Ginsberg & Associates) in buying the assets of Atlanta-based Kuppenheimer Men's Clothiers, which had 43 stores. The unique arrangement allowed Men's Wearhouse to control Kuppenheimer's going out of business sales.

In December 1996, Men's Wearhouse acquired several men's clothing brands from Joseph & Feiss Co. Inc. (J&F), including Cricketeer, Country Britches, Joseph & Feiss, and Cox & Hawkins. J&F, a subsidiary of Hugo Boss AG, produced clothing at a Cincinnati plant that was not part of the deal. Men's Wearhouse ended 1996 with about 300 stores.

In 1997, Men's Wearhouse acquired 17 stores of southern California's C&R Clothiers Inc. and the six super-sized stores, up to 19,000 square feet each, of Walter Pye's NAL in Houston. These formed the basis of the new Value Priced Clothing Inc. division, created in January of the year following the C&R purchase.

Men's Wearhouse underwent an extensive corporate makeover in 1997. New, more subdued advertising emphasized service and expertise, in contrast to the brash, price-centered pitches of earlier years. Sales rose 30.5 percent to $631.1 million in the 1997-98 fiscal year, and earnings were up 36.6 percent to $28.9 million. The company had 396 stores, including 25 in the Value Priced Clothing division.

Men's Wearhouse unsuccessfully tried to buy Today's Man, then based in Philadelphia and in bankruptcy. The company did enter the New York City market in 1998, setting up a massive 7,600-square-foot store on Madison Avenue. The company then turned its sights northward.

Men's Wearhouse acquired the 107-store Moores Retail Group in February 1999. Men's Wearhouse had begun courting Moores the Suit People, Canada's largest retailer of men's tailored clothing, in 1995. Moores' CEO Martin Prosserman declined Men's Wearhouse's $100 million purchase offer. Men's Wearhouse did end up buying the company three years later for about $125 million in stock and assumption of debt. Moores, which had 2,000 employees and sales of $121 million (C$183 million) in fiscal 1997-98, had been founded in 1961 as Golden Brand Clothing. It entered the retail business in 1980. Moores had its own 200,000-square-foot factory in Montreal, giving Men's Wearhouse a formidable private label capacity.

In March 1999, the company merged with K&G Men's Center Inc., a publicly traded, lower-end men's clothing chain open only on weekends. K&G, based in Atlanta, had 34 stores and 1998 sales of $139 million. This bolstered the Value Price Clothing division, which then operated 20 stores under the SuitMax name. These were renamed K&G after the merger. Men's Wearhouse soon added the four-unit, Detroit-area Suit Warehouse to its holdings.

By this time, Zimmer was projecting sales of $10 billion within fifteen years. First, the company had to deal with the relaxed, "business casual" dress code of the late-1990s. The percentage of tailored clothing offered at Men's Wearhouse stores was 65 percent and slipping as Men's Wearhouse gradually added more casual clothes. It also provided more space for big and tall offerings and set out to revamp and expand its stores to take on a range of competitors.

A couple of new concepts were rolled out. Men's Wearhouse eyed the highly fragmented formal wear business, testing tuxedo rentals at a dozen Seattle stores in the spring of 1999. The formal wear market was younger than Men's Wearhouse's traditional customer base. By February 2002, tuxedo rentals were being offered at 373 Men's Wearhouse stores.

In 1998, Men's Wearhouse was testing a K&G Ladies concept in the Atlanta area. It bought its first women's shop there in May 2000, under the name K&G Women's Superstore. It had plans to expand K&G Women's nationally beginning in 2002, eventually opening 165 stores nationwide. Zimmer believed the ladies' side could equal the $1 billion in volume the men's side was then seeing.

In January 2000, Men's Wearhouse had 450 Men's Wearhouse stores in the United States and another 51 stores of other types. Men's Wearhouse stock migrated from the NASDAQ Stock Exchange to the Big Board in the fall of 2000. Zimmer persuaded the New York Stock Exchange to simultaneously announce a new dress policy.

Men's Wearhouse was reported to be bidding for Brooks Bros., marketer of upscale men's clothing, in the summer of 2001; instead, Retail Brand Alliance bought it from U.K. retailer Marks & Spencer. Men's Wearhouse's net sales slipped 4.5 percent to $1.27 billion in the fiscal year ending February 2, 2002. Net earnings of $43.3 million were half those of the previous year. Nevertheless, using past performance as a predictor, the future of Men's Wearhouse continued to hold promise.

Principal Subsidiaries: Golden Moores Finance Company (Canada); K&G Men's Center, Inc.; The Men's Wearhouse of Michigan, Inc.; Renwick Technologies, Inc.; TMW Capital Inc.; TMW Marketing Company, Inc.; TMW Realty Inc.; Twin Hill Acquisition Company, Inc.

Principal Divisions: Men's Wearhouse; Moores Clothing for Men; K&G.

Principal Competitors: Brooks Brothers; Federated Department Stores, Inc.; Jos. A. Bank Clothiers, Inc.; Today's Man, Inc.

The Men's Wearhouse, Inc. History

Company Perspectives:

Key Dates:

Company History:

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