FREMONT, Calif. — Douglas Ewert made his wife a promise — he’ll never be the TV spokesman for Men’s Wearhouse. That’s a good thing, since that job is already taken by company founder George Zimmer.
But while Zimmer may continue to be the public face of the company, internally it’s Ewert who has been charged with leading the country’s largest men’s specialty store chain into the future.
On June 15, following the company’s annual meeting, Ewert, 47, will move up from his current post as president and chief operating officer to chief executive officer, succeeding Zimmer, who will remain executive chairman.
While his title may change, Ewert, who joined the company 16 years ago after starting his career at Macy’s West, has quietly been acting in that role for a while now.
“I was named president and chief operating officer in 2008 and in recent years have become way more involved in the day-to-day running of the company while George has been focusing more on strategy and marketing,” he said. “This is actually the way the company has been operating so things really aren’t going to change.”
Nevertheless, Ewert sees a bright future for the $2.1 billion company. “We have a ton of opportunity,” he said. “We will continue to grow organically and through acquisition,” he said.
Among the key priorities for the corporation are increasing sales within the existing divisions — Men’s Wearhouse, Moores Clothing for Men, K&G Fashion Superstore and the corporate apparel operation; exploiting the successful tuxedo rental and big & tall categories; growing Internet sales, and seeking acquisitions outside the U.S.
In its recently released annual report, the company said that while the opportunity to add significantly to the number of Men’s Wearhouse stores in the U.S. is “limited, we believe that additional growth opportunities exist through continuing the diversification of our merchandise mix, continuing our promotional strategies, relocating existing stores and adding complementary products and services.”
Attracting a younger customer is key to those strategies. Currently, the average age of the Men’s Wearhouse customer is in his 40s.
Over the past several years, the company has seen enormous growth in its tuxedo rental program, which Ewert characterized on the company’s fourth-quarter earnings call in March as “nothing less than spectacular.”
In 2007, the company purchased the 500-unit plus After Hours formalwear division from Federated Department Stores for $100 million, effectively catapulting it into the number-one position in the tuxedo rental business overnight.
The thinking behind the purchase was that renting tuxedos to young men for proms and weddings would introduce those shoppers to Men’s Wearhouse. Since the two companies were merged, Men’s Wearhouse has run a series of promotions for rental customers to encourage their conversion into full-time shoppers through a strategy called “rental to retail.”
“We have 3 million 27-year-old men in our tuxedo rental program and we’re putting a more interesting assortment in front of the customer,” Ewert said, including designer denim and other more-updated sportswear offerings. The company is also sending out more e-mails to “entice” these computer-savvy shoppers into the stores.
“We have the dominant share in the tuxedo rental business and sales rose 10 percent last year,” Ewert said. “The market is dominated by us and a whole group of moms and pops,” he added. “So we see the opportunity to grow aggressively for a couple of years.”
On the big & tall front, the company has “pretty quietly” built extended sizes into a $300 million business and growth in this category is running 40 percent higher than that of the regular-size business.
To exploit this business further, the company will open three dedicated Men’s Wearhouse Big & Tall stores later this year.
“We’ll open three freestanding stores this year to explore whether to roll out Men’s Wearhouse Big & Tall as separate boxes or keep it in existing Men’s Wearhouse stores,” Ewert said. The test stores will open in August in New York, Dallas and Houston.
They will look like a traditional Men’s Wearhouse store, he said, but offer a “broader assortment.” They will average around 6,000 square feet and will be skewed heavily toward tailored clothing. There will also be a tuxedo rental component.
“The opportunity for big & tall in this country is $6 billion,” Ewert said. “It’s a big and growing business.”
The key competitors are Casual Male Retail Group, the market leader with nearly 500 stores, as well as Jos. A. Bank Clothiers, which has recently started offering extended sizes online. The Foundry Big & Tall Supply Co., a new business owned by J.C. Penney, opened its first stores last month and is projecting a 300-unit chain within five years.
“There’s a lot of activity now in big & tall,” Ewert acknowledged. “That’s good because it will continue as an opportunity. But we’re not starting from scratch; we’ve been doing it for 11 years so we have a nice head start.”
He said a lot of companies shy away from the category since it is “inventory intensive and the turn is too slow. But it’s fairly safe inventory and we’re not afraid of slow turn. And most of the product doesn’t come with markdown liabilities.”
Although it ultimately paid off, Ewert said that for the first four years it offered big & tall, Men’s Wearhouse wasn’t sure it wanted to stay in the business.
“It’s a lot of work,” he admitted. “It takes a lot of inventory and store-line execution. It’s a tough business and there’s a huge learning curve. And the other guys are just learning.”
The corporate uniform division is also a strong growth vehicle for the company. In August, the company acquired Dimensions Clothing Limited and certain assets of Alexandra PLC, two leading providers of corporate uniforms and workwear in the U.K., for 61 million pounds, or about $97.8 million, in cash.
The two firms were organized into a U.K.-based holding company, in which Men’s Wearhouse controls 86 percent and certain existing shareholders of Dimensions control 14 percent. The acquisition is expected to add more than $200 million to Men’s Wearhouse’s coffers.
“Dimensions has a 40 percent market share in the U.K.,” Ewert said.
It also gives the company a foothold in the British market, which sources said would be the most logical region for Men’s Wearhouse to expand overseas. The purchase of Dimensions as well as the Moores chain in Canada in 1999 proves the company does not shy away from moving outside the borders of the U.S.
“We see international men’s retail as a potential for growth,” Ewert said. “We’re exploring opportunities to expand tailored clothing internationally.”
Any international stores would not operate under the Men’s Wearhouse name, he said, and the company has no particular timetable for when it would enter another country.
“We can either build or buy; we’re exploring [our] options,” he said. “We’re opportunistic. We generate a lot of cash flow and we make our money work.”
The company had $136 million in cash and cash equivalents on hand at the end of fiscal 2010 and no long-term debt.
Since going public in 1992, Men’s Wearhouse has strategically purchased some competitors who fell upon hard times, including Today’s Man, Kuppenheimer, C&R Clothiers, Walter Pye and K&G. In 1996, the company also purchased several clothing brands from Hugo Boss, including Joseph & Feiss, Cricketeer and Country Britches.
Looking internally, Ewert said “online is another big opportunity for us.” Online media and marketing spending will be increased this year, the offerings on the Men’s Wearhouse site will be expanded and will include Web-only items, and a new site for K&G is launching this spring.
Ewert is also focused on improving the productivity of the existing stores.
During the recession, Men’s Wearhouse was impacted by the high unemployment rate — especially among men who cut back on their tailored clothing purchases. Although sales are beginning to recover, in the fourth quarter ended Jan. 29 the retailer experienced a net loss of $14.1 million, or 27 cents a diluted share, versus red ink totaling $18.8 million, or 36 cents, in the year-ago quarter. Quarterly revenue grew 18.6 percent to $542.1 million from $457.2 million with sales at Men’s Wearhouse up 5.7 percent to $311.1 million, K&G up 4 percent to $96.4 million and Moores rising 7.3 percent to $66.3 million. Comparable-store sales expanded 4.3 percent at Men’s Wearhouse, 4.5 percent at K&G and, based on the Canadian dollar, 2.3 percent at Moores.
K&G has been the most impacted by the recession. Its core customers are African-American men, who have been particularly hard hit, Ewert said, with an unemployment rate as high as 25 percent. “We’re not focusing on growth here but stabilizing the business until the economy improves. This is not the time for us to be aggressive.”
In addition, K&G’s experiment to sell high-end designer brands such as Dolce & Gabbana, Gucci and Prada to women at 50 to 70 percent off regular retail has been discontinued to allow the company to focus on its “core urban [male] customer.”
Although it dropped the high-end brands, K&G is still the only division to sell women’s wear, which accounts for around one-third of its sales. “But we’ll make money at K&G this year,” Ewert said.
Ewert, who is low-key with a dry sense of humor and a keen sense for merchandising, is viewed in the industry as the right man to lead the company forward.
According to Janet Kloppenburg of JJK Research, who has been following the company for more than 20 years, “Doug has had the passion for running the business for the past five years and George has the passion for the strategic design of the business and the company culture. Doug is younger and wanted to manage and lead a company. George did that. Doug has the desire to help the brand evolve and change. International and e-commerce are the arms of the business that will have his stamp on them.” Kloppenburg said she “wouldn’t be surprised” to see the company expand internationally. “They understand the way to tap the tailored clothing market overseas as well,” she said.
Ewert stressed that although the titles may be different, there will not be any major changes under the new structure. “We have an extremely strong senior executive team and the two former presidents are still intact, so there’s complete continuity. We will continue to leverage George in our marketing and culture, so it’s the best of both worlds.”
He said he’s not concerned that the new executive chairman will second-guess his decisions. “Not any more than he ever has,” he said with a smile. “The way this company operates, every decision gets heard. George has a very strong personality, but his management style is deferential.
“This is a continuity story, not a change story.”
And down the line, Ewert said he will judge how well he does as ceo by how well the company performs.
“Our business is good. It doesn’t need a radical left-hand turn. What keeps me awake at night is that I’m responsible for 17,000 people, not how I will look in the long shadow of George Zimmer,” he said.
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