Men’s Wearhouse shares are getting hammered after the company reported ugly earnings.
The founder of the company, George Zimmer, says it’s clear where the retailer went wrong.
“It was a mistake to acquire Jos. A Bank,” Zimmer, who was fired from Men’s Wearhouse in 2013, told Business Insider in an interview. “I think everyone realises that, including Men’s Wearhouse at this point in time.”
When he founded Men’s Wearhouse in 1973, Jos. A Bank had 16 stores in the US, including one in Houston where Zimmer was living at the time.
“I have a 40-year record of competing against them,” Zimmer said.
When Men’s Wearhouse board members expressed interest in acquiring Jos. A Bank, Zimmer says he told them that the retailers’ customers and merchandise were far too similar to successfully combine them.
“It wouldn’t make sense to own both,” he recalled telling the board.
Men’s Wearhouse fired Zimmer two years ago, citing disagreements about compensation and Zimmer’s alleged efforts to take the company private.
On year later, Men’s Wearhouse purchased Jos. A Bank for $1.8 billion.
Now Men’s Wearhouse stock and sales are tanking, largely because of Jos. A Bank’s performance.
Through the first week of December, the quarter-to-date same-store sales at Jos. A Bank were down 35.1%.
Men’s Wearhouse is booking a $90.1 million charge for the failed investment.
Zimmer said he suspects customers are leaving Jos. A Bank to shop at Men’s Wearhouse.
“I think they thought they could position Jos. A Bank differently than Men’s Wearhouse, and apparently they are not able to,” Zimmer said. “I have many friends still at the company — I spent 40 years there — and I know that it must be traumatising.”
Men’s Wearhouse CEO Doug Ewert blames the disappointing earnings on the company’s decision to scale back on Jos. A Bank’s aggressive “buy-one, get-seven-free” promotions.
“When we acquired Joseph Bank, we knew that we needed to correct the promotional model,” Ewert said. “However, we underestimated the impact to the near-term performance as we began to execute the difficult, but necessary, corrective steps. We remain confident that these steps will restore a long-term, sustainable, profit model and reshape the business for a healthy and growing Jos. A. Bank.”
Zimmer says he’s surprised no one at Men’s Wearhouse has contacted him for guidance on the company he founded.
“Two and a half years ago the senior management and board of directors called me in and told me that my furniture was being put in storage and I was being fired,” Zimmer said. “In that two-and-a-half-year period of time not one of them has called me — now might be a good time.”