Wednesday, October 23, 2013

What Is Men's Wearhouse Up To?

I covered the retailing industry when Men's Wearhouse did its IPO. Iconic founder George Zimmer was the commercial pitchman, featuring a deep, raspy voice, lots of sincerity and the tag line, "You'll like the way you look. I guarantee it."  Whenever I went to New York to visit family I would stop by the east side midtown store, and it never failed to have good traffic.  The younger guys usually needed a suit and accessories for big job interviews, the first day on a new job, or for a wedding or a graduation.  As it is for most men, time spent in a store is anathema and we are looking for help.

Men's Wearhouse advertised and delivered a high customer service model alongside promotional pricing and nice average tickets.  The service reputation was rightly played up in their ads, which George Zimmer consistently did for decades. 

So, now Jos. A. Bank. a heavily promotional retailer with bare bones service makes an unsolicited bid for Men's Wearhouse.  It's rejected with the usual patter about unsolicited bid, predatory price, not recognizing the value inherent in the company, distracting the company from the value-adding strategies of the current board, and so on.  Meanwhile, the price is eventually raised and a deal is done.

Now, a tactic from the eighties reappears.  We've always said: "There's nothing new on Wall Street," or put another way, "Wall Street is Green: we always believe in recycling old ideas."  Men's Wearhouse wants to make a deal to presumably pock mark its balance sheet, making it more difficult for Jos. A. Bank to buy the company.  Men's Wearhouse announces that they are in talks to buy Allen-Edmonds, a Port Washington, WI maker of fine, hand crafted men's shoes with a long history.  Prices are premium, and the shoes are made in the U.S., and the company turned itself around under the ownership of PE investors Goldner Hawn. Allen-Edmonds has started making inroads into China's insatiable markets for high end goods, and it has also started a line of specialty accessories and apparel.  

If a man bought a Ralph Lauren Polo suit, Allen-Edmonds shoes wouldn't be out of place.  But, how could the brand be sustained under ownership by Men's Wearhouse?  The price point is totally off, and the core signature styles are probably for an older customer demographic than the one responsible for their growth.  If it were bought at a price satisfactory to Goldner Hawn, the only way to make it work would be to essentially destroy the brand by taking all the production and material sourcing offshore while making the shoes totally machine-made.  Goodbye value.  

I'm a bit surprised that there hasn't been a quote from an Allen-Edmonds spokesperson pooh-poohing a deal.  The home for A-E is with a high end, global marketer of goods with a story.  

Maybe this is just a bit of corporate pique on the part of MW.  Brands can be built slowly and impaired quickly.  Customers who get confused about what their favorite retailer is doing leave quietly and never come back.  I'm scratching my head on this one.

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