Yehuda Shmidman wore a Joseph Abboud tuxedo to his wedding 16 years ago, so he’s been a fan of the brand for a long time. Now he’s the steward.
He said his company, while a newcomer to the brand management scene, is well-funded and believes its opportunity centers around acquiring “well-established legacy brands with a strong following that have reached a critical size and have an opportunity for growth.”
And the Abboud brand, which was founded more than 30 years ago and has sales of more than $500 million at Tailored Brands’ stable of stores, checked all those boxes.
Under the terms of the deal, Tailored Brands has entered into a licensing agreement with WHP for the exclusive rights to sell and rent Joseph Abboud branded apparel and related merchandise in the U.S. and Canada.
“I love the brand personally and have been a customer and a fan for many years,” he said. “He dresses men to make them look and feel their best.”
Shmidman would not reveal the length of the deal, but it is believed to be long-term.
He also sees the potential to bring the Joseph Abboud brand to other global markets, including Asia, the Middle East, Europe and Latin America. He said the brand’s longtime license with Onward Kashiyama in Japan was part of the purchase agreement, “so we will inherit the license in Japan and a small business in Mexico,” he said. “But after that, the whole world is wide open.”
Abboud, who is known for his modern take on classic American men’s wear, celebrated his 30th anniversary in 2017. Known for his trademark earth tones and textured, nubby fabrics, his career has been a roller-coaster ride. The Boston-born designer got his start working at the Louis Boston luxury men’s store in college before embarking on a design career. He was on the team at Ralph Lauren and Chanel before launching the Joseph Abboud label in the spring of 1987. He won two Council of Fashion Designers of America awards before selling his trademarks to GFT for $65.5 million in 2007. The brand changed hands several times after that — with Abboud in and out of the creative process — before being sold six years ago to Tailored Brands. Abboud has served as chief creative officer since then.
But whether Joseph Abboud, the designer, is part of WHP’S plan is still unknown. Abboud actually signed a deal to exit Tailored Brands at the end of January. Shmidman said what will happen then is “TBD. We’ll engage with him after the end of January and we’ll see where [those discussions] go,” he said.
Abboud said he had actually given Tailored Brands his notice in July and was planning to leave the company even before he knew about the potential sale of the brand. “I hope the new owner does well for the sake of the brand,” he said.
Abboud added that he hasn’t yet spoken to Shmidman and won’t meet with him or anyone else until he has officially exited Tailored Brands. “Then I can decide if it’s the right opportunity for me and if we share the same vision,” he said.
But if it doesn’t work out with Shmidman, he’s still planning to stay actively involved in the business. “I’m not a celebrity, I’m a working designer,” he said. “And there are some iconic brands that are really interesting to me.”
He pointed out how he built the Black Brown label into a $250 million business for Hudson’s Bay and its Lord & Taylor division when he was creative director of that proprietary brand. And he would definitely be interested in replicating that success for another company where he believes “I could make a difference. That doesn’t mean I won’t have a conversation with WHP, though. I don’t have a non-compete and on Feb. 1, the world is my oyster.”
Shmidman feels the same way about the Joseph Abboud brand.
He said since acquiring the Anne Klein brand eight months ago, WHP has inked deals to expand to China and Mexico and is “working on India.” It also signed a license to expand into jeans. “That’s the playbook for us.”
With Abboud, he sees a number of categories that could be complementary to apparel, including travel and home. “But we want them to be selective and accretive,” he said.
He stressed that because Tailored Brands will continue to own and operate the factory in New Bedford, Mass., it will also continue to produce the upper-tier Joseph Abboud Collection. That upscale made-in-America product “won’t go away.”
However, the Joseph Abboud flagship on Madison Avenue will be shuttered, according to Tailored Brands’ chief executive officer Dinesh Lathi. “We have decided to wind down operations of the New York store,” he said. “This was shared with employees last week, and we are currently working to identify continued employment opportunities at one of our other New York stores for those who are affected.”
Until WHP can start its international and category expansion of the brand, however, the success of the Joseph Abboud label is tied to Tailored Brands. But Shmidman is unconcerned.
“Tailored Brands is a terrific partner,” he said. And although the company is in a restructuring mode, he believes that Lathi, and his team are “very strong and have a great vision. We think they’re fantastic partners.”
For Lathi, the deal made good financial sense.
“The Joseph Abboud brand has played and will continue to play an important role in the assortment at our retail brands and we look forward to our new partnership with WHP and to the next phase of our relationship with the designer Joseph Abboud,” Lathi said. “This transaction allows us to unlock value in the Joseph Abboud trademarks through an experienced partner that will focus on building the brand through international and category expansion. We plan to use the proceeds from the transaction for debt repayment, which will strengthen our balance sheet and provide additional financial flexibility to invest in our customer-facing transformation strategies.”
He added: “The purchase price alone is not the key driver here, although paying down debt does give us more financial flexibility to invest in our customer-facing strategies. The bigger strategic move here is to unlock value in the Joseph Abboud brand by selling it to a dedicated brand management company with the experience, expertise and capital to further build the Abboud brand’s value through international and category expansion. This type of international investment in the Joseph Abboud brand is not part of Tailored Brands’ strategy. Equally important, the sale allows our teams to better focus on unlocking value through our own customer-facing transformation.”
As reported exclusively by WWD in December, Tailored Brands has been struggling the past few years as it attempts to navigate the more casual workplace. Add to that the fact that following the acquisition of competitor Jos. A. Bank for $1.8 billion in 2014, the retailer carries a total debt load of $2.1 billion, according to S&P Capital IQ, which factors in long-term debts and lease obligations.
Most of the executives who had been running the company at the time of the Bank acquisition have exited, including Doug Ewert, former ceo, who left at the end of 2018 and was succeeded by Lathi, who had been executive chairman. Other longtime executives are also gone, including Scott Norris, the onetime president and chief merchant of the flagship Men’s Wearhouse division, and Mary Beth Blake, the president of Jos. A. Bank, who left at the end of last year.
Although the purchase price for the Abboud brand won’t make much of a dent in the company’s debt load, it’s an indication to Wall Street that the new management team is at least prepared to make some bold moves to reverse its fortunes.
As reported, the Joseph Abboud brand had garnered quite a bit of interest among brand marketing firms, with companies ranging from Marquee Brands and Sequential Brands Group to Bluestar Alliance negotiating to acquire the brand. However, WHP’s terms, which reportedly included a longer licensing deal, tipped the scales, sources said.
Shmidman stressed that although WHP is a new company, thanks to its well-heeled backers, it has more than $1 billion in capital to buy and grow brands. “Our stage is high-growth brands that we’re able to scale quickly,” he said.
He said that the way WHP is structured today, the creative, marketing, social and brand management teams are in-house and the company licenses out the operational duties. “When you pair great branding with great operations, you have great growth,” he said.
Following the close of this transaction, WHP will have more than $1.4 billion in retail sales across its portfolio of brands including Anne Klein and Joseph Abboud.
The Abboud deal is expected to close in March.