When Men’s Wearhouse bought Hampstead-based men’s clothier Jos A. Bank, its intent was simple — to expand their reach to older, affluent customers.
But getting rid of the brand’s famous buy-one, get-three promotion set the tone for what ended up being a rocky acquisition, capped with Wednesday’s announcement that up to 130 Jos. A. Bank stores and outlets and up to 100 Men’s Wearhouse Tux stores would be closed by Tailored Brands, the two companies’ parent.
So exactly what is Bank’s future? Some analysts saw the retrenchment as a promising start; others had a wait-and-see attitude.
“I think it’s a smart move,” said Steve Marshall, a former Jos. A. Bank merchandising executive who last year opened his own menswear line, Wilkes & Riley. Marshall left Jos. A. Bank after Men’s Wearhouse bought the company.
“I think they’ve learned some lessons and I think they’re learning what doesn’t work and what does work,” he said.
In a conference call with investors Thursday morning, Tailored Brands’ leadership was largely focused on the company’s struggles with Jos. A. Bank.
“In spite of a challenging start, we continue to believe in the the long-term potential of Jos A.Bank,” said CEO Doug Ewert, adding that the Baltimore brand will be executives’ “primary focus” as it is the only underperforming brand in the company.
Ewert added that the closures will “improve overall productivity” of the brand’s brick-and-mortar stores.
Mark Millman, CEO of Millman Search Group, was surprised to hear about the closure of Jos. A. Bank’s outlet stores.
“It’s a pretty dramatic move that Men’s Wearhouse is making,” said Millman. “Outlets have done well.”
Millman added that his clients in the outlet business have shown good numbers and get a lot of foot traffic. In general, outlets are a good way to hook customers and move merchandise that isn’t selling in the regular stores, said Millman.
“It all helps in building and marketing the brand.”
But Karyl Leggio, finance professor at the Loyola Sellinger School of Business, saw it coming.
“It’s not terribly surprising,” she said.
Jos. A. Bank is in need of facelift, one that its leaders hope to bring by raising people’s expectations about the clothing. Outlets take away from that image.
Also, outlets have lower margins than regular stores, making them difficult to maintain when sales are struggling.
“If you’re having trouble with margins, outlets are usually on the way out,” said Leggio.
Marshall also shared that point of view.
“If you’re struggling to stabilize the core brand … you don’t need a secondary brand taking your eye off the ball.”
Despite complaints from Bank’s customers about dropping the discounts, Ewert defended the decision to get rid of the deal.
“We were aware the promotion model we inherited was problematic for a number of reasons,” said Ewert, citing reducing brand value and lack of returning customers among the reasons why the promotion was jettisoned.
The company wants to introduce a promotion model that appeals to both new and existing customers.
“Promotions remain important to our Jos. A. Bank marketing efforts,” said Ewert.
As of the now, the typical Jos. A. Bank customer is an affluent baby boomer with disposal income in the six figures. Spouses of those customers also tend to shop at Jos. A. Bank for their husbands, a market the brand wants to target, said Ewert.
“We have the financial flexibility to make the needed changes to Jos. A. Bank.”
With the closures, Jos A. Bank is going to have even more of a difficult time retaining customers.
“No one is going to drive 50 miles to go to another Jos. A. Bank store,” said Millman. As more department stores start carrying their own menswear lines, getting customers will be more challenging.
“There’s a lot of competition, everyone is getting into it. It’s an easy business,” said Millman.
Ewert also announced that Jos. A. Bank plans to release a high-end line with Joseph Abboud called Reserve this spring. Marshall sees it as a positive move.
“Assortment always helps change the tide,” he said. “If assortments are strong, it overcomes a lot of the hill.”