The Men’s Wearhouse will close more than 100 tuxedo rental stores as customers have proven that they prefer to shop in a Men’s Wearhouse store.
In a conference call Wednesday following its report of a fourth-quarter loss, George Zimmer, founder and chief executive officer of the Houston-based men’s wear retailer, said: “What we’ve been experiencing since the acquisition [of After Hours] over three years ago is that customers would rather shop in a regular Men’s Wearhouse store than a Men’s Wearhouse and Tux store when given the choice.”
So when the stores are located within close proximity — about a mile or less — the tuxedo rental store will close. “There are hundreds of these stores that are very close to each other and there are about 145 stores that we have right now that we think should probably close when their leases expire or before,” Zimmer said.
About 35 such stores have already been shuttered, he noted, stressing that the closures are “going to strengthen our business as opposed to weaken it because we have such a high rate of recapture. Most of those customers are just going to the nearest Men’s Wearhouse store.” And when they get there, he said, it “will provide us the opportunity to sell additional product to those rental customers.”
Additionally, Zimmer said the company has clearly redefined its business as a “deep, deep” discounter and will now return to a brand-building message by the middle of this year. The company, which hired a new creative agency last year, said the campaign at Men’s Wearhouse and Moores, its Canadian division, for fiscal 2010 “will be driven by our efforts to synthesize our brand message and our promotional message in a way that strengthens the value proposition and can be found at our stores and emphasizes our quality.”
Zimmer said the company has seen that “we can wean ourselves off of the steady diet of being promotional, [and] that would be the direction we would like to move in. What we’re going to do is run more brand advertising than promotional advertising relative to last year.”
In the three months ended Jan. 30, the company recorded a net loss of $18.9 million, or 36 cents a diluted share, versus net income of $1.5 million, or 3 cents, in the 2008 quarter. Excluding store-related asset impairment charges, the loss came to 11 cents a share, better than the 16 cents expected by analysts polled by Yahoo Finance.
Revenues receded 4 percent to $457.2 million, from $476.4 million in the prior-year quarter, as volume dropped 6.8 percent to $294.3 million at Men’s Wearhouse and 6 percent to $92.7 million at K&G while rising 19.1 percent to $61.7 million at the Canadian Moores division. Same-store sales fell 7.1 percent at MW and 5 percent at K&G and rose 1.9 percent at Moores. Gross margin, excluding occupancy costs, fell to 53.7 percent of sales from 52.7 percent in the 2008 quarter.
For the full year, earnings contracted 22.7 percent to $45.5 million, or 86 cents a diluted share, from $58.8 million, or $1.13. Sales retreated 3.2 percent to $1.91 billion from $1.97 billion in the prior year.
In the first quarter, the firm said it expected EPS of between 12 cents and 16 cents on same-store sales that are expected to be flat to down in the low-single digits at MW and Moores and down in the low-single digits at K&G.
The company is upbeat about the prospects for its e-commerce business. Zimmer said that, after upgrading its Men’s Wearhouse site last year, the company now has over 1 million unique visitors monthly to the site. “Conversion rates are improving and revenues are growing significantly. In addition, we have millions of customer files at the SKU level that have largely remained untapped,” he said. “This is a unique opportunity for the future and we’re making significant investments in systems, talents and strategies that will result in some new initiatives that we believe will provide a significant boost to our multichannel offerings over time.
“Our goal is to make our real and virtual stores equally exciting and completely consistent with the Men’s Wearhouse brand, spirit, message and tone.”
Overall, Zimmer said that although business remains challenging, he is pleased with the results and optimistic about the future: “Despite the high domestic unemployment rate in 2009, the challenge to our business and significant decreases in consumer spending, we accomplished many of the critical goals we set for ourselves at the outset of the year — conserve and build our cash position, significantly lower expenses, improve productivity and drive efficiencies in our business.”
He concluded: “I believe there has been, and continues to be, a shift away from conspicuous consumption to conspicuous frugality, putting our brands in the sweet spot. Additionally, the suit is becoming a style symbol among the younger generation while remaining a need-based item among Baby Boomers. Clearly the trends are in our favor.”
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