C&R; Clothiers Files Chapter 11, Plans to Sell Some Stores to Men’s Wearhouse
Culver City-based C&R; Clothiers said Wednesday it has filed for Chapter 11 bankruptcy-court protection and agreed to sell up to 19 of its low-priced menswear stores for $13.5 million to Men’s Wearhouse, a rapidly expanding and profitable competitor from Northern California.
Men’s Wearhouse will use the stores to launch a new division offering even lower-priced menswear than the Fremont-based chain now carries, a company spokesman said. The new division will retain C&R; Clothiers’ name as well as company President Neil Dinerman.
“We believe that this new opportunity will enhance our ability to not only grow revenues and market share but also make us a more dominant player in men’s clothing,” said David Edwab, chief operating and financial officer for Men’s Wearhouse. The company plans to open new C&R; units throughout the country.
Men’s Wearhouse will not buy about four of C&R;’s existing stores, and those will close, said David W. Levene, a Century City bankruptcy attorney representing C&R.; Many of C&R;’s 300-plus employees “will presumably have employment opportunities with the new owners,” he said.
In its Chapter 11 petition filed late Tuesday, C&R; Clothiers listed assets of $13.6 million and liabilities of $17.6 million. Under Chapter 11 of the U.S. Bankruptcy Code, a company is allowed to continue operating but is protected from creditor claims while it works out a plan to pay its debt.
The agreement announced Wednesday to sell assets and leasehold interests for up to 19 stores in Southern California must be approved by the bankruptcy court. C&R; will ask the court to approve the sale outside of a reorganization plan so that the transaction can be completed quickly. Men’s Wearhouse would also lease C&R;’s distribution center in Culver City and would purchase all inventory on hand.
A longtime fixture in the Southern California retail marketplace--and the subject of many parodies for its “what a difference a day makes” commercials from a few years back--C&R; Clothiers has struggled in the region’s prolonged economic downturn and fierce retail competition. A previous stint in bankruptcy court in 1992 was blamed at the time on an ill-fated expansion into Northern California and an attempt to sell more expensive, cutting-edge fashions, which flopped with consumers.
In comparison, Men’s Wearhouse has been growing quickly as other menswear chains go out of business. Menswear retailers discovered during the recession that women aren’t the only ones looking for bargains and have been competing aggressively on price ever since.
Men’s Wearhouse, founded in 1973, is one of the nation’s largest off-price retailers of men’s tailored business clothing, including designer suits. It operates more than 300 stores across the country, including 33 in the Los Angeles area. Men’s Wearhouse is well known for its television ads, which feature the company’s bearded co-founder and Chairman George Zimmer giving carefully scripted selling tips to trainees at its “Suits University” in Fremont, before declaring “I guarantee it.”
Edwab said that the transaction “would provide us the opportunity to quickly begin operating a new, opening price point concept and penetrate a different segment of the discount men’s apparel market.” The purchase will not affect the company’s plans to open 45 to 50 Men’s Wearhouse stores per year in fiscal 1996 and 1997, he said.
For the six months ended Aug. 3, Men’s Wearhouse reported net earnings of $7.1 million, or 34 cents per share, on sales of $202.6 million. In the same period last year, the company posted net earnings of $4.98 million, or 26 cents per share, on sales of $167.1 million.
