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How low can they go?
With the two remaining moderately priced men’s wear chains — Men’s Wearhouse and Jos. A. Bank Clothiers — trying to one-up each other on promotions, consumers will be the winners in 2010. But how long can these megachains continue to offer buy-one-get-one/two/three-free items without ultimately shooting themselves in the foot?
When reporting its third-quarter earnings in early December, Men’s Wearhouse founder and chief executive officer George Zimmer said the company would continue to promote aggressively this year. “Until we have clear signs that the consumer is spending freely without promotion, we are guaranteeing that we’ll get our business by marketing heavily and promoting heavily,” he said. Over the past year, he added, the company has had success with its buy-one-get-one-free and buy-one-get-the-second-for-$100 promotions.
However, it’s taking a toll on the bottom line. The 1,274-unit retailer said it was expecting a fourth-quarter loss of 15 to 19 cents, versus analysts’ earlier expectations of a 1-cent profit. Analysts weren’t thrilled, trading the stock down.
Although Zimmer is not expecting 2010 to be as promotional as last year, the company has no plans to return to regular-price selling any time soon.
Men’s Wearhouse’s promotional stance, which kicked into high gear during the dismal holiday 2008 season, was a direct response to that of its primary competitor Jos. A. Bank. The Maryland-based Bank continued these aggressive promotions in the 2009 holiday season, with a deal to get two pairs of pants and two sport shirts free with the purchase of a sport coat or leather jacket. In a recent research report, Margaret Whitfield of Sterne Agee said the promotions appeared to have been successful, and she is expecting the company to post a same-store sales gain of 2 percent.
Capitalizing on its strong holiday season, Bank turned up the heat even more in January, when it announced it would enter the tuxedo rental business — one of Men’s Wearhouse’s most-lucrative and fastest-growing segments. The plan, Bank said, is to test the initiative in about 5 percent of its doors this winter and expand to more than half of its 474 stores by spring.
Bank’s chief executive officer, Neal Black, said he hopes to grow tuxedo rentals to at least the volume of that at Men’s Wearhouse — 21.1 percent of the company’s $462 million in sales in the third quarter. “I don’t see any reason why it couldn’t be just as big,” Black said, noting there’s room for “another big national player even without taking market share from [Men’s Wearhouse].”