The marriage between Macy’s and the Tailored Brands is kaput.
On Wednesday, the retailers said they would wind down their tuxedo rental partnership this summer. A license for Tailored Brands to operate tuxedo rental shops inside Macy’s stores was established in June 2015 and 170 shops had been opened by the end of 2016. The original contract had called for adding another 130 shops, but those plans were put on hold in March.
“Macy’s is always looking for new partnerships that benefit both parties, as well as our customers, and we are grateful to have had the opportunity to collaborate with Tailored Brands. While the partnership did not produce the level of sales we expected, we will continue to benefit from the insights we gathered,” said Tim Baxter, chief merchandising officer of Macy’s Inc. “Both Macy’s and Tailored Brands remain committed to putting our customers first, and we plan to fulfill customer orders and ensure a positive customer experience as we wind down the shops.”
Tailored Brands now expects to report a one-time charge of approximately $17 million, $2.5 million of which are non-cash costs. Excluding these charges, the company expects to report an operating loss in fiscal 2017 in the range of $7 million to $8 million. Originally, Tailored Brands said the operating loss could be as high as $19 million to $20 million.
As a result, Tailored Brands now expects to report fiscal 2017 diluted earnings per share in the range of $1.37 to $1.67, and adjusted diluted EPS, which excludes the one-time charges, of $1.60 to $1.90. Previous guidance had called for diluted EPS in the range of $1.45 to $1.75.
“Innovating new business models is an important catalyst for long-term growth and we saw the partnership with Macy’s as an opportune way to expand our leadership in the tuxedo rental market,” said Tailored Brands’ chief executive officer Doug Ewert. “Unfortunately, the initiative did not generate the revenue that both companies had envisioned. We believe it is in the best interest of our company and our shareholders to wind down the partnership.”
The Tuxedo Shops at Macy’s will continue to take new orders until June 1, and the operations will wind down by July 14.
All customers with outstanding rentals after this period will be contacted and offered the option of transferring their reservation to a nearby Men’s Wearhouse or Jos. A. Bank store.
In March, Tailored Brands said the partnership had failed to live up to expectations and it was evaluating its future. Macy’s also has had its share of challenges. In late February, the department store reported that soft sales and charges related to store closings and severances resulted in a drop of 13.1 percent in earnings in the fourth quarter and 43 percent for the year.