George Zimmer, the founder and face of The Men’s Wearhouse, Inc. (NYSE:MW), was abruptly fired as the company’s Chairman after butting heads with the CEO. Disagreements regarding the sale of K&G, the company’s discount brand, as well as executive compensation, led the board to conclude that Zimmer was undermining the authority of the CEO. Zimmer, owning just a 3.5% stake in the company, doesn’t have enough voting power to pressure the company into letting him return. A leveraged buyout of the firm is possible, although Zimmer would likely demand control of the company. Without Zimmer it’s unclear whether Men’s Wearhouse will retain the qualities that make it a great American company.
What makes Men’s Wearhouse so special
The Men’s Wearhouse, Inc. (NYSE:MW) focuses on one thing and one thing only: men’s formal wear. Unlike department stores and other retail outlets, which cater to a wide variety of customers, Men’s Wearhouse aims to provide the best experience possible for men looking to buy a suit or rent a tuxedo. Customer service is key.
I recently needed to buy a suit for a wedding, and The Men’s Wearhouse, Inc. (NYSE:MW) was the first and only place I considered. The moment I walked into the store I was greeted by an employee who proceeded to show me a variety of different suits. I told him my price range and the occasion and he found the perfect suit for me. I was quickly measured, picked out a couple of shirts, and within 20 minutes I was done. Two weeks later I picked up my tailored suit, which fit perfectly, and I was on my way.
This level of customer service is what makes The Men’s Wearhouse, Inc. (NYSE:MW) stand out. The employees are knowledgeable and do everything they can to find you the perfect suit. The whole process is fast and easy. The focus on the customer is what has led to Men’s Wearhouse becoming the dominate destination for men’s formal wear.
A Zimmer-less company
One sticking point between Zimmer and the board of directors was the rising compensation of top executives. Current CEO Doug Ewert had his salary more than double to $1.25 million for the current year, along with up to $1.25 million in bonuses and other incentives. Zimmer opposed increasing the compensation, so it’s no surprise that the board wanted him gone.
The Men’s Wearhouse, Inc. (NYSE:MW) needs to maintain its intense focus on customer satisfaction in order to remain competitive. You can buy a cheaper suit almost anywhere, but the level of service offered by Men’s Wearhouse is the main draw. I’d gladly pay a little more for a suit in order to avoid having to sift through racks of options and deal with employees with little or no knowledge of a proper fit.
I wrote about The Men’s Wearhouse, Inc. (NYSE:MW) in January in an article entitled Suit Up With This Stock, concluding that the stock was a bargain at around $32 per share. Since then the stock has risen by nearly 16%, and although the stock still looks reasonably priced I am concerned about the future of the company.