Jos. A. Bank Clothiers Inc. fired the first salvo of 2010 against its rival, The Men’s Wearhouse Inc., revealing Wednesday that it will enter the tuxedo rental business.

This story first appeared in the January 7, 2010 issue of WWD. Subscribe Today.

The Hampstead, Md.-based Jos. A. Bank will dip its toe into the business this month with a test initiative in about 5 percent of its doors. The business will then be expanded to more than half the firm’s 474 stores this spring.

“Our customers have asked us for this service,” said R. Neal Black, president and chief executive officer. “Although we are a national leader in the sales of tuxedos, we have not offered the specific formalwear products and services that are most commonly used by wedding parties and these products complete our formal assortment. We are continually looking for ways to expand sales and offer our customers ‘one-stop’ shopping. There are very few national companies in this business and with over 4.9 million customers in our database, this business offers a significant opportunity for the company.”

The most significant competitor is Men’s Wearhouse, which has been aggressively pursuing tuxedo rentals for several years, a move that culminated in the purchase of the After Hours formalwear chain in 2007. The tuxedo rental business has proven to be a lucrative one for the retailer, representing 21.1 percent of the company’s sales of $462 million in the fiscal third quarter, ended Oct. 31. In its third-quarter conference call in December, Men’s Wearhouse said it had rented three million tuxedos in 2009. It offers tuxedo rentals at its Men’s Wearhouse, Moores, K&G and Tux (formerly After Hours) stores.

Black said he believes rentals can reach the same level of performance at Jos. A. Bank in the future. “I don’t see any reason why it couldn’t be just as big,” he said, noting there’s room for “another big national player even without taking market share from them.”

One difference between the approach of Men’s Wearhouse and Jos. A. Bank is that the latter has “partnered with a national distributor who will own the inventory and deliver the orders to our stores, thus reducing the required investment and risk associated with starting up a new operation,” said David Ullman, chief financial officer of Jos. A. Bank. “With this structure, we expect that the incremental sales volume will add to the operating margins of the stores segment, although the gross profit rate will be lower than we achieve with our merchandise sales. Also, the tuxedo rental business has the potential to generate significantly higher gross margins if we choose to invest in our own infrastructure in the future.”

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