By Jean E. Palmieri
with contributions from Vicki M. Young
 on August 29, 2018
Men's Wearhouse

It was Doug Ewert’s choice to leave Tailored Brands, but his departure as chief executive officer is also seen as an opportunity to get some fresh blood into the company.

That was the consensus of the men’s wear community on Wednesday as they continued to digest the surprise news late Tuesday that the longtime leader of the Fremont, Calif.-based company would be exiting at the end of September. Ewert, 54, said after the market closed on Tuesday that he would be retiring after a 23-year career with the men’s wear retailer.

Wall Street was apparently not rattled by the news since the company’s stock rose 4 percent Wednesday to close at $23.39.

On Wednesday, Ewert told WWD he would be open to providing more details about his decision and future plans after the company’s earnings are released on Sept. 12.

Coincidentally, the news of Ewert’s impending departure came at the same time Bruce Thorn, president and chief operating officer, said he too would be leaving Tailored Brands. Thorn, 51, has been named president and ceo of Big Lots Inc. He will assume that role at the end of September.

Once both Ewert and Thorn are gone next month, that leaves Tailored Brands without its two top executives. As a result, speculation was rampant Wednesday about who might be named to the top posts. Two internal names were tossed around as possible successors: Mary Beth Blake, currently president of the Jos. A. Bank division and the former president of K&G, as well as Scott Norris, president of Men’s Wearhouse and Moores, the company’s Canadian division.

Cofounder and former ceo George Zimmer, who was ousted from the company in 2015 in a bitter battle with Ewert and the board at the time, was also mentioned, but his return is seen as highly unlikely.

“I think that bridge has been burned at both ends,” said one source close to the company. “They need someone who understands Millennials, new media and growth strategies.” As a result, the prevailing thinking is that the next ceo will come from outside the company.

“Doug put together a very good senior management team,” the source continued. “And he changed the look and feel of the board, so he leaves the company in really good shape.” He said Thorn might have been able to step into the ceo role, but his departure puts an end to that. And Blake and Norris are “good merchants,” but don’t have the operational skills to be ceo’s, the source believes. “They’re not big-picture people.”

Dinesh Lathi, former ceo of online home decor site One Kings Lane Inc., was named executive chairman of the Tailored Brands board on Tuesday and may be named interim ceo after Ewert departs. Before One Kings Lane, Lathi spent seven years in various executive roles at eBay Inc., and before that spent eight years in investment banking and private equity.

Lathi, 47, has been a director since 2016, and serves on the company’s audit committee. He is also on the board of teen value chain, Five Below Inc., where he serves on its audit committee. Lathi is considered to have expertise in the areas of strategy, digital/omnichannel and technology, and to be an audit committee financial expert, according to the Tailored Brands proxy statement.

David Edwab, who is vice chairman of the board and was formerly vice chairman of the company, could also be tapped to serve as either interim or permanent ceo. But Edwab, a former investment banker and accountant who was the dealmaker for the former Men’s Wearhouse during his tenure, is busy with other projects outside the tailored clothing company.

“Dinesh is a smart guy,” one source said. “He could be good to help them grow the company.”

But whether it’s Lathi or one of the many potential ceo candidates from outside the company, the source agreed that it was “time for a change. Doug was good for what he did, but the company needs to grow.”

Jefferies analyst Randal Konik, who follows Tailored Brands, put out a note on Wednesday, that said: “New blood can be good.” He said he was in favor of the “swift appointment” of Lathi as executive chairman, pointing to his background that “spanned the consumer digital space, private equity and investment banking. His background — and Rolodex — should be an asset in vetting ceo candidates. Ewert remaining a strategic adviser through year-end will also help in ensuring a smooth transition. Thorn’s simultaneous departure looks bad, but his ambitions for a more senior role [ceo at Big Lots] makes sense.”

Konik is also a fan of Jack Calandra, chief financial officer, who joined the company in January 2017 after serving in that role for Banana Republic, Gap Direct and Gap International.

The analyst noted that the company is “insulated” from disintermediation from Amazon, and that there are job market/fashion trends that are catalysts for growth ahead. Konik said legacy balance sheet issues are in the rearview mirror, and the strength of the custom clothing program along with a Jos. A. Bank brand recovery are “key sources of upside.” He also pointed to a strengthening labor market as a plus for the company’s comps, and that it should benefit from fashion trends such as slim-fit suiting and performance fabrics. “Plus, the growing penetrating of operating margin-accretive custom suiting should yield a $200 million-plus mid-shift opportunity long term,” the analyst noted.

Konik reiterated his “buy” rating on the stock with a target price of $40, saying that it was “now extremely cheap.”

Allen Questrom, former ceo of Federated Department Stores, Neiman Marcus, Barneys New York and J.C. Penney, assumed Zimmer’s board seat at the then-Men’s Wearhouse after his departure. He is no longer associated with the company.

He praised Ewert, saying he was “well liked and well thought of in the industry.” But he too thinks it’s time for some new ideas.

“I believe that a ceo should not stay in that position more than five to seven years,” Questrom said. Ewert has been ceo since 2011. “As ceo’s, we often think that there’s no room for new thoughts.”

But Questrom believes the future is bright for the company. “The business has not done as well as it should have,” he said. “But it’s an outstanding and unique company. I’m a big believer in the company and I don’t think they’ve capitalized on their strengths.”

He approved of the company’s recent decision to get out of the dry cleaning business but is not a fan of its uniform division, believing it to be a distraction. “They need to focus on being the best men’s wear company in the country,” he said.

Questrom also said the next ceo should have both an operational and merchant background. “He or she has to be a good operator, but in retail, a merchant has to be on top.”

load comments
blog comments powered by Disqus