The Joseph Abboud brand is expanding its reach and will be added to all Jos. A. Bank stores within a year.
Men’s Wearhouse, which owns the Abboud label, said Thursday that it will begin flowing the merchandise into its 600 newly acquired Bank stores beginning this spring.
“The Joseph Abboud brand DNA targets the modern traditional customer with superior fabrics, high-quality construction and timeless style,” said Doug Ewert, chief executive officer of Men’s Wearhouse, during a conference call Thursday morning to discuss fourth-quarter and year-end results. “Joseph Abboud shoes will arrive in all stores this spring, and we’ll begin introducing tailored clothing in select stores this summer. We anticipate it will take a year to complete the tailored clothing rollout.”
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The Joseph Abboud acquisition, which Men’s Wearhouse purchased in July 2013 for $97.5 million, has been a home run so far, Ewert said, bringing in $230 million in sales in its first year. Abboud product was added to all Men’s Wearhouse stores over the course of 2014. The retailer also began offering Abboud custom clothing last year and it too is now available in all Men’s Wearhouse stores. The custom clothing program is being introduced into the company’s Moores stores in Canada this month. “Beyond tailored clothing, we see an opportunity to grow a custom dress shirt business, and we will be introducing Joseph Abboud custom dress shirts in all Men’s Wearhouse and Moores stores later this year,” Ewert revealed. “Going forward, we expect to grow a sizeable business in custom clothing. For only $100 more than an off-the-rack suit, we can offer a customer a high-quality design or suit, made in our U.S. factory with more than 150 fabric choices tailored to specific measurements, customized with the features that customers want, and delivered in three weeks.”
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The first Joseph Abboud retail store is on track to open by the end of the month, he said. The store, at 49th Street and Madison Avenue in New York, is seen “as an important step in furthering the brand exposure and to develop potential growth with our current and future international licensing partners.”
In response to a question about potential rollout of Joseph Abboud stores, Ewert said, “We’d be thrilled if the customer response would indicate that — that’s a big opportunity for us. We obviously haven’t opened the first store yet, so it’s too soon to declare a victory there and a new chain, but that would certainly be lovely to see.”
In the short term, the addition of the Abboud brand into the Jos. A. Bank stores represents a significant shift in merchandising strategy for the Bank chain. “This fall, the assortments will take a major leap forward as we introduce in the Jos. Bank stores new styles in every product category, including updated fashion and seasonal basics, a new collection targeting a younger traditional customer, further expansion of Joseph Abboud, and custom-tailored clothing and dress shirts,” Ewert said.
He said that after analyzing sales and getting feedback from Bank customers, “we validated our assumptions that there are significant opportunities to update and improve the assortments.” He said that too many styles have not had “an update to the fit or styling for a long time. There’s been too much basic inventory carried in each store because the systems were too inadequate to efficiently replenish [the assortment]. Even seasonal fashion product was put through a pack-and-hold process and repeated year after year. Taken in total, the slow inventory turns and lack of freshness, once cured, will result in revenue synergies.”
Ewert said the Bank customer “has been responding well to the small amount of newness that they’ve seen. Starting this spring, we’ll begin balancing the assortment with more of the best-selling tailored and slim-fits and less of the slow-selling traditional fit. We’ll increase the assortment of plain-front pants and decrease pleated pants. We’ll add more big and tall product by extending the sizes offered across all levels of quality. And we’ll introduce an expanded assortment of shoes, including updated styling and extended sizes.”
Tuxedo rental is also seen as an opportunity for Bank. The program was relaunched in all stores on Jan. 1 and includes the addition of designer styles and color-matched accessories, Ewert said.
He said a new pricing model will also be instituted this year that will focus more on value and less on promotions. About 25 percent of the assortment will be repriced this spring and 50 percent by the second half. In the fourth quarter, Bank’s net and comparable sales continued to slide, but Men’s Wearhouse said both the sales associated with the chain and the synergies derived from it were running ahead of schedule.
“In the nine months since the acquisition,” Ewert said, “Jos. A. Bank has transitioned many of the back-office functions, began store training programs, began the work to instill its employees with the Men’s Wearhouse culture and launched tuxedo rental in all its Jos. A. Bank stores.”
The company expects Bank’s comps to remain in negative territory through the first half of the year with “improvement” in the second half. Gross margin is expected to parallel the comp performance. He said comps are expected to be down in the low single digits for the year.
The company expects total synergies from the combined company to be “at least $150 million,” Ewert said, and $35 million of that has already been achieved — higher than the original estimate of $15 million by the end of 2014.
In the three months ended Jan. 31, Men’s Wearhouse recorded a net loss of $35.9 million, or 75 cents a diluted share, versus a loss of $30.4 million, or 64 cents, in the year-ago quarter. Excluding a series of nonrecurring items, the loss was reduced to 3 cents a share, better than the 7-cent loss expected, on average by analysts. Among the special items were a $42.6 million arbitration settlement paid to former licensee The Siskind Group and acquisition and integration costs related to the $1.8 billion Bank purchase.
For the full year, including special items, the net loss was $387,000, or 1 cent a diluted share, compared to net income of $83.8 million, or $1.70. Revenues were $3.25 billion, 31.5 percent above the 2013 mark of $2.47 billion. Subtracting Jos. A. Bank’s sales contribution of $684 million since June, sales would have increased 3.9 percent to $2.57 billion.
The stock closed at $52.26, up $4.22 or 8.78 percent on the New York Stock Exchange.