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Men’s Wearhouse to Maintain Promotional Stance

At the company’s annual shareholders’ meeting, Zimmer says Men’s Wearhouse Inc. plans to keep offering deals.

SAN FRANCISCO — With promotions like buy one, get one free driving business in the down economy, The Men’s Wearhouse Inc. plans to keep offering deals for the foreseeable future.

This story first appeared in the June 24, 2009 issue of WWD.  Subscribe Today.

“We do not believe the economy has begun to recover,” said George Zimmer, founder and chief executive officer, in comments at the company’s annual shareholders’ meeting Tuesday at the retailer’s corporate offices in Fremont, Calif. He described the recession as the worst of six the business has had to weather since its 1973 start.

But with a healthy cash balance of $107.5 million at the end of this year’s first quarter, up from $76.7 million a year earlier, Zimmer said the company remains on the prowl for acquisitions. Earlier this month, Men’s Wearhouse fell short in its bid to buy the bankrupt Filene’s Basement, which was sold to off-price retailer Syms Corp. for $65 million last week.

Men’s Wearhouse had hoped to rebrand its deep-discount K&G men’s and women’s apparel stores as Filene’s, a move that could have boosted K&G’s women’s business. K&G sales for women’s apparel in the first quarter increased 19 percent to $20.7 million from a year earlier.

However, Zimmer called it “providential” that the Filene’s Basement deal didn’t go through. “We may have underestimated the difficulty in creating one brand out of two,” Zimmer said.

For the time being, K&G units this year are undergoing redesigns, while pursuing a “fashion without the victim” ad campaign.

Betty Chen, vice president and senior equity research analyst with Wedbush Morgan Securities, said Men’s Wearhouse’s highly promotional strategy has helped stabilize comparable-store sales, while building new business at the expense of higher-priced department stores, some of which are allocating less space to men’s wear. “The promotions drive new business and market share,” said Chen, also citing as positive company expense cutbacks.

Last year comparable-store sales fell 9 percent at the Men’s Wearhouse flagships, 11.7 percent at K&G and 5.6 percent at Moores, its Canadian division. For 2009, the company expects same-store sales to dip 4 to 6 percent.

Shares of Men’s Wearhouse fell 50 cents, or 2.8 percent, to $17.32 Tuesday as the S&P Retail Index slipped 1.8 percent, or 5.77 points Tuesday to 309.23, and the Dow Jones Industrial Average gave up a lesser 0.2 percent, or 16.10 points, to close at 8,322.91. Among the other retailers giving up ground were Coach Inc., down 5 percent to $25.13; Aéropostale Inc., 4.6 percent to $32.60; Macy’s Inc., 4.2 percent to $10.89, and J. Crew Group Inc., 4 percent to $23.28.