Men's Wearhouse addresses niche in men's fashion

HOUSTON -- Apparently, consumers indeed "like the way they look" in their Men's Wearhouse suits, to paraphrase founder and ceo George Zimmer's famous tagline. "We had a fantastic 2004," he stated, with a double-digit sales increase that makes the retailer today's top men's dress clothing retailer, according to the company's cfo.

"Not only did Men's Wearhouse increase in dollar share, but its position in men's dress clothing rose from No. 2 to No. 1," said Neill P. Davis, evp, cfo and treasurer, citing research conducted by The NPD Group.

There are few places left outside of the department store channel to purchase an affordable, high-quality suit except for Men's Wearhouse stores. The specialty market, aside from high-end men's wear stores, has consolidated to the point where Men's Wearhouse dominates the retail landscape--partially by design. During the past few years, Men's Wearhouse has strategically leveraged revenue increases into improving the quality and value of its products. Zimmer repeatedly discussed the importance of reinvesting profits in its opening-price-point suits in particular, upping the level of tailoring, style and fabrication around the $200 range. The focus on suits in this price range is intended to build loyalty with young customers seeking attire for special events or job interviews.

The strategy appears to be working, based on a 13.1% annual sales increase from $1.393 billion in 2003 to $1.547 billion for fiscal 2004 across North America. Stores in both the United States and Canada also experienced individual double-digit revenue increases. Comps were healthy as well, rising 7.3% in the United States and 7.1% in Canada.

While focusing on affordable suits has been key to the company's success, it is only part of the corporate growth strategy for its 707 stores. One of the most successful initiatives for 2004 came in the form of a new Men's Wearhouse customer loyalty program called Perfect Fit. According to Davis, "85% of volume and 75% of transactions" took place under this new rewards initiative.

The company is now implementing a similar rewards program at its Canadian Moores Clothing For Men division, based on its dramatic success at Men's Wearhouse.

This form of direct marketing, commonplace in the women's wear specialty market, is not as typical in the less-competitive men's wear arena, which added to its impact. While the company continues featuring Zimmer in its Men's Wearhouse advertising, it launched a new campaign for another retail division last year, K&G Fashion Superstores, that also proved successful in terms of the corporate bottom line. This chain currently represents approximately 20% of overall volume.

K&G is the company's discount division, which sells off-price merchandise from department stores. The assortment includes shirts, ties and footwear under national brands, such as a Jones New York three-button suit for $199.00. K&G also assorts women's apparel. The only other division that currently houses ladies' wear is the company's new Bride & Joy retail chain, as previously reported in DSN Retailing Today. This bridal wear concept currently stands at two units in the San Francisco Bay Area. In an interview regarding this chain with Doug Ewert, who was recently promoted to evp and coo from evp of merchandising at Men's Wearhouse, this chain could expand to "100 units." With the fate of dominant bridal specialist David's Bridal unknown due to Federated's acquisition of parent company May, the market could be especially receptive to this new competitor.

While its retail divisions, particularly Men's Wearhouse, remain core, the company has also branched out into the tuxedo rental and dry cleaning businesses. While Men's Wearhouse is currently performing well, Davis acknowledged that it is a "mature concept from a store count point of view," so the company is diversifying to maintain corporate growth.

Men's Wearhouse stores have been increasing square footage as leases allow to accommodate its fast-growing tuxedo rental business. Moores also added formal-wear rentals to its offering.

Branching out even further, the company now operates approximately 25 dry cleaning stores in the Houston area, with top market share in this region. The success of this local initiative may expand it into a national business.

"In the U.S. it is estimated that the dry cleaning industry is $9 billion to $11 billion in volume, a highly fragmented space with no credible vendor," said Davis. Out of some 45,000 companies, Davis believes that Men's Wearhouse has an opportunity to leverage its reputation for quality and service in its retail suit business into the business of cleaning those suits, giving the company "a significant competitive advantage."

As this stand-alone cleaning business expands, it will not be competing on price; in fact, it will offer relatively premium services and environmentally friendly non-petroleum based cleaning fluid, which Davis said is "better" for the fabric than traditional solvents.

While the future of its dry cleaning business is undetermined, the retailer is clearly not resting on its laurels. Some of the initiatives it is trying on for size may prove better fits than others. However, its diverse wardrobe should keep The Men's Wearhouse looking sharp from a business perspective.