George Zimmer is building his empire.Generation Tux, the online tuxedo rental business founded in 2014 by the gravelly voiced founder of Men’s Wearhouse has acquired a competing business called Menguin in a stock exchange deal worth $25 million.As part of the deal, Menguin has relocated to Louisville, Ky., the headquarters of Generation Tux, and its chief executive officer, Justin Delaney, will become president of both brands, which will continue to be run as separate businesses. His cofounder Bogdan Constantin will serve as chief marketing officer.“I met these guys about a year ago and they had a small company that was doing about the same volume we do,” Zimmer said. “But the difference was that we invested many millions more than they did. They built their business on old-fashioned hard work and knowledge.”[caption id="attachment_10400511" align="aligncenter" width="200"] George Zimmer[/caption]The four-year-old Menguin has been experiencing a compound annual growth rate of 800 percent. Generation Tux expects to have sales next year of between $20 million and $30 million.He said the number of rentals and revenue of the two companies was similar, but the expense structure at Generation Tux is much higher. One marked difference is that Menguin did not own its rental inventory while Generation Tux does. Now that the two brands have merged, they will both draw from that same inventory, Zimmer said, which will elevate the merchandise selection at Menguin.“As I came to know them, I realized that it was not just that the economics made sense, but also the integrity of these guys and their competence," Zimmer said of the Menguin founders.He said that by adding Delaney and Constantin to the Generation Tux Inc. holding company, they will “overlay their skills with ours at Generation Tux. It’s a perfect match.”Delaney said, “When George first approached us about marrying the entrepreneurial spirit and marketing technology of Menguin with the back-end technology, brand legacy and mens’ wear expertise inherent in the Generation Tux name, we immediately embraced his vision for the union. Together we are well-positioned to become the singular dominant player in the online formal men’s wear rental category.”Zimmer admitted that while he employed “tech people,” he personally was “probably not as savvy about technology as I should have been running a tech business.” But now with Delaney and Constantin on board, he’s expecting a big boost in business. “There’s a big difference between having equity partners who give a damn and well-paid employees who only care about themselves,” he said.The deal officially closed right after Labor Day and since that time, Zimmer said, there’s been a definite uptick in sales. “It’s working better than I imagined,” he said. “We’re doing a lot more business and gaining a lot more users. I’m very pleased.”Zimmer said that the tuxedo rental business in the U.S. has around $1.5 billion in annual sales, including furnishings and accessories. “But I’d be surprised if the online piece is $100 million,” he said. “Up until now, the product and service haven’t been great, but we’ve hit upon a formula that is beginning to work.”The largest competition for online rental tuxedos is the Black Tux, which earlier this year created an exclusive partnership with Nordstrom to open showrooms in select doors of the department store retailer.
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