For years The Men’s Wearhouse, Inc. (NYSE:MW) has been offering reasonably priced suits and guaranteeing your personal opinion. Founded in Houston in 1973 by former CEO George Zimmer, the company offers dress clothes, sportswear, outerwear and professional clothes for men, women, and children. The company owns and operates 1,143 stores that include The Men’s Wearhouse, Inc. (NYSE:MW), Tux, K&G, and Moores Clothing. The company is an established brand, but with the recent separation from its founder, can you still trust the The Men’s Wearhouse, Inc. (NYSE:MW) guarantee?
Furious George
George Zimmer started The Men’s Wearhouse, Inc. (NYSE:MW) and poured himself into turning it into a successful business. Like many founders, Zimmer found it hard to relinquish control of his publicly owned company. He wanted veto power over major corporate decisions including executive compensation and would not accept anything less than total control of the company. He butted heads with current CEO Doug Ewert and many key management team members over strategic plans involving K&G. K&G is the company’s weakest brand which experienced a 5.3% decline in same store sales last quarter. According to the board, Zimmer effectively left them with the option of supporting the current management or giving control back to the founder. They chose the former.
Zimmer was a good spokesman and has had tremendous success with The Men’s Wearhouse, Inc. (NYSE:MW). He promoted hiring diverse employees despite having a mostly male customer base, and was the voice behind the famous tagline, “You’re going to like the way you look. I guarantee it.” Zimmer operated the company to benefit five groups that he listed from most important to least important. This list was employees, customers, shareholders, vendors and communities. The fact that Zimmer ranked shareholders as the third most important group of stakeholders is a red flag. Shareholders are the people that put their money and trust into a company and make it possible to grow. They should be number 1. The other 4 stakeholders are essential to creating a successful business, but it’s important to adequately value the shareholders.
With Zimmer gone, the company will be able to operate with less management discourse and can make more decisions with investors in mind. Even so, I’m really going to miss those commercials.
The Wearhouse’s foundation
Looking at the company without Zimmer, The Men’s Wearhouse, Inc. (NYSE:MW) has plans for future growth and has experienced recent success. This past quarter the company saw a $0.13 improvement in earnings per share which represented a 23.1% earnings growth. This positive report has been attributed to a calendar shift that extended the company’s prom season from 3 weeks to 5 weeks. This shift allowed for a 25% increase in tuxedo rentals which accounted for $0.10 of the EPS growth.
