Tailored Brands, owner of Men’s Wearhouse and Jos. A. Bank stores, said it will halt expansion of its Macy’s tuxedo concessions after the effort tallied operating losses between $19 million and $20 million.
Tailored Brands and Macy's partnered in mid-2015; the former expected a slow ramp-up and initial losses of $10 million, but that number grew to $14 million because it missed the bulk of the wedding season, executives said. But when Tailored Brands again recorded Macy's concession losses in 2016, the company realized the partnership isn’t panning out.
Tailored Brands recorded a non-cash impairment charge of $14 million in the fourth quarter related to its fixed assets in Macy stores and has halted plans to increase its tuxedo concessions from 170 to 300, according to a Seeking Alpha transcript of executives' call with analysts. Shares plummeted 32% Thursday amid that news as well as its report of a 2.2% decline in its overall Men’s Wearhouse business after a 4.3% rise in the year-ago period, though Jos. A. Bank same-store sales rose 3.6% after falling 32.3% last year.
Tailored Brands executives expressed plenty of frustration with their Macy’s partnership, and aren’t sure how much they can restructure the company’s agreement with the struggling department store, beyond arresting the expansion. The woes add to the struggles the company has seen since the ouster of founder George Zimmer, the face of the company since its launch in 1973 (best known for his trademark promise “You’re going to like the way you look. I guarantee it").
Zimmer and Tailored Brands jousted over the direction the company should take, with Zimmer warning Men’s Wearhouse against purchasing Jos. A. Bank, an acquisition that has weighed on the menswear company. Now it must also contend with another problem of its own making: The partnership with Macy’s, which itself has struggled with falling traffic and sales and which is massively shrinking its brick-and-mortar footprint as a result.
One positive surprise for Tailored Brands is its Jos. A. Bank business, which struggled with its pattern of aggressive discounts, including a longstanding buy-a-suit-get-three-free promotion that made boosting prices difficult. Tailored Brands appears to be seeing some traction there, but is now feeling headwinds on the Men’s Wearhouse side.
Still, the men’s apparel category continues to hold many opportunities, especially in custom tailoring, executives told analysts. “[M]en want personalization. Our tailoring, combined with our personal knowledge of our customers is a prime example of another competitive advantage,” Tailored Brands CEO Doug Ewert told analysts. “No level of sophisticated measurement algorithms can replicate the work of a skilled tailor or the guarantee of a great fit like we can. And nowhere is perfect fit more important than in custom where our unmatched high-touch service model paired with our access to rich customer data will help us scale this high-growth new business in an omnichannel experience.”