George Zimmer is out at Men’s Wearhouse
The one thing George Zimmer couldn’t guarantee was his job at Men’s Wearhouse.
The apparel retailer’s founder and longtime pitchman was abruptly dismissed from his position as executive chairman, the retailer said in a curt statement Wednesday.
By starring in the company’s television commercials since 1985, Zimmer endeared himself to generations of shoppers. He marketed suits by intoning, in his distinctive gravelly voice: “You’re going to like the way you look. I guarantee it.”
The company said it expects to discuss with Zimmer “the extent, if any, and terms of his ongoing relationship” with the brand, which has corporate offices in Houston and Fremont, Calif. The chain added that it had postponed its annual shareholders meeting, which had been scheduled for Wednesday, so it could renominate its board members without Zimmer.
The company gave no explanation of why Zimmer, who launched the company four decades ago, was being suddenly booted. Until midmorning Wednesday, the Men’s Wearhouse website linked to a substantial section dedicated to Zimmer, with links to his YouTube videos and an “Ask George” section for questions.
Zimmer said in his own statement that he had spent recent months expressing concerns to the board “about the direction the company is currently heading.”
“Instead of fostering the kind of dialogue in the boardroom that has, in part, contributed to our success, the board has inappropriately chosen to silence my concerns by terminating me as an executive officer,” he said.
But analysts suggested that the 64-year-old spokesman’s appeal may have waned among the growing demographic of younger suit buyers.
“Management has been evaluating [Zimmer’s] effectiveness, particularly with the millennial consumer,” even as Zimmer was easing out of day-to-day operations, Stifel, Nicolaus & Co. analyst Richard E. Jaffe wrote in a note to clients.
“We believe that despite Zimmer’s planned transition to a smaller role at the company, he had difficulty letting go of the reins and the leadership of the business,” Jaffe wrote. “We believe that this led to a conflict with the board and his subsequent termination.”
By failing to provide details about Zimmer’s firing and instead allowing rampant speculation, the company is “doing a disservice to shareholders,” said Jerry Reisman, an expert in retail law and a partner in the law firm Reisman Peirez Reisman & Capobianco.
“It leaves too many unanswered questions, and all you have left is fear,” he said. “Even if it’s a misguided fear, it could cause investors to sell the stock.”
In the last year, Men’s Wearhouse stock had risen more than 30% but tanked nearly 7% shortly after trading opened Wednesday. The stock closed down 43 cents, or 1.2%, at $37.04.
Zimmer owned 3.5% of the company’s outstanding shares as of May 9, according to a Men’s Wearhouse regulatory filing.
Zimmer first ventured into the apparel industry fresh out of college in 1971, working for his father’s coat manufacturing business in Hong Kong. In 1973, he and his college roommate opened the first Men’s Wearhouse in a small space in Houston, selling $25 polyester sports coats and using a cigar box as a cash register.
The company, which says it sells 20% of all suits bought in the U.S., went public in 1992 and entered the Los Angeles market the next year.
Lately, the business has performed well, reporting this month that first-quarter revenue increased 5.1% to $616.5 million. Net income rose 23% to $33.1 million, or 65 cents a share, from $26.9 million, or 52 cents a share, a year earlier.
The $8.7-billion men’s clothing industry is in the midst of a turnaround after suffering a slowdown during the recession. After a 1.7% revenue slump on average each of the last five years, the market will start to grow 1.2% annually through 2018, according to research firm IBISWorld.
Industrywide, sales of men’s suits increased 13% from May 2012 to April 2013, reaching nearly $2.6 billion over the period, according to research firm NPD Group Inc.
Zimmer was an untraditional executive.
He never forced Men’s Wearhouse employees to undergo criminal background checks.
He serves on the board for the Institute of Noetic Sciences, which advocates and conducts research into controversial topics such as psychic abilities, postmortem consciousness, alternative healing and meditation.
Records show that Zimmer donated $70,500 in 2009 and 2010 in support of Proposition 19, an unsuccessful ballot initiative in California that would have legalized marijuana possession and cultivation.
Zimmer was vocal about his business philosophy, which prioritized employees and customers over investor returns, according to Motley Fool analyst Andrew Marder.
“With Zimmer gone, the board will be free to focus more exclusively on shareholders and generating higher earnings,” Marder wrote in a client note. “Whether that trade-off — more cash for less consciousness — will work for the company in the long run remains to be seen.”
Even before being fired, Zimmer was scaling back his involvement in Men’s Wearhouse and inching toward retirement, analysts said. He named Doug Ewert as chief executive in his place two years ago. In March, he resigned his board seat at for-profit education provider Apollo Group Inc.
In an advertising campaign last spring, Zimmer made a blatant appeal to the newer generation of consumers.
“Traditionally, when we’d say he’s a suit, we’d think of a certain type of guy: bankers, lawyers, chairmen of boards…hey, people like me,” Zimmer says in the video over images of grizzled, older men in pinstripes and pocket watches.
The screen then pans over scenes of younger men in slim-cut garb as Zimmer declares that “now the ones wearing the suits are the digital guys, the creators, the change agents.”
The campaign accompanied a basket of initiatives from Men’s Wearhouse, which included fresher styles and an updated website featuring customization options, sartorial suggestions and varied filters.
Even after his departure, the company can continue using Zimmer’s image and the 500 hours of footage he shot, Jaffe wrote.”
The company, which has 1,143 stores, runs its eponymous brand as well as Moores and K&G; outlets. The business also makes corporate clothing and uniforms in the U.S. and Britain.
As for the now vacated spokesman position, Twitter and Facebook users are suggesting that Men’s Wearhouse solicit an audition from actor Jonathan Goldsmith, who portrays the Most Interesting Man in the World character for beer brand Dos Equis.
Bearded, rumbly voiced and besuited, he’s a dead ringer for Zimmer.
@tiffhsulatimes
