The struggles at Jos. A. Bank have led to the brand’s first major casualty.
Paul Fitzpatrick, a former Macy’s executive who had come on board in late 2014 as president to run the business, has left the company and will be replaced by Mary Beth Blake, the corporation’s president and chief merchandising officer.
In a conference call Thursday morning by Tailored Brands, formerly Men’s Wearhouse, chief executive officer Doug Ewert revealed the changes in discussing the company’s net loss in the fourth quarter of $1.1 billion, or $21.86 a diluted share, compared with a net loss of $35.9 million, or 75 cents, in the same year-ago period.
Ewert said Blake is a “great merchant” who will now be tasked with “focusing her full attention” on turning around the Bank business.
Blake, also a Macy’s veteran who joined Men’s Wearhouse in 2008 to run its K&G superstore division, inherits a business that has been a drain on the corporation’s earnings since it was acquired for $1.8 billion in 2013.
As reported Wednesday, Jos. A. Bank’s comparable-store sales in the fourth quarter dropped 31.9 percent as Tailored Brands moved away from the stores’ aggressive buy-on-get-three-or-more-free promotions and customers turned their backs on the business.
While the corporation remains committed to breaking the promotional cycle, it also said it will close 80 to 90 full-line Jos. A. Bank stores this year, along with all 49 Jos. A. Bank and nine Men’s Wearhouse outlet stores and between 100 and 110 MW Tux units.
On the call, chief financial officer Jon Kimmins, said the situation at Jos. A. Bank is not expected to improve this year and projected that comps will decline in the mid-teens for fiscal 2016 or $150 million in total. Specifically, the fall in comps should account for $130 million of that number while $20 million will come as a result of the store closures.
Despite the tough showing, Ewert remains committed to fixing the Jos. A. Bank brand. Calling it a “transitional time” for the business, Ewert said that although it will “take a lot of work,” he “truly believes we can fix the business model” and the division will “can be significantly profitable” in the future.
He said research has shown that the customer who was drawn to Jos. A. Bank for its hefty promotions is not the core customer and frequently doesn’t return after the sales are over. So the company is seeking to further appeal to its more loyal shoppers — Baby Boomers with income in excess of $100,000 — by offering some new merchandise including a premium Reserve line designed by Tailored Brands’ chief creative officer Joseph Abboud that will hit stores in the second and third quarters. A custom clothing and shirt initiative will also be added, he said.
Ewert said there is potentially some light at the end of the tunnel. Although he cautioned that the months are traditional a “low volume” period, the comps at Jos. A. Bank in January fell at a slower pace, dropping 16 percent in January and 11 percent in February.
He pointed to strength in the 1905 younger-skewed line, along with big & tall, shoes, tuxedo rentals and “non-tailored clothing.” He also sees an opportunity to grow with Millennials, which currently represent only 15 percent of Bank’s business, as well as women, who are “major influencers for this brand.”
He pointed to the stronger showing of the company’s other nameplates: the flagship Men’s Wearhouse division where comps rose 4.3 percent in the fourth quarter, and K&G, which posted a 1.9 percent gain, as reasons for optimism.
The Macy’s tuxedo rental initiative is expected to be a profit generator — but not immediately. The rollout of the shops — 166 this year and 122 in 2017 — is expected to result in a loss of $10 million in 2016 as Tailored Brands invests in building and staffing the shops. But the company hopes to turn a profit by next year, Kimmins said.