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Spiffing Up Men's Wearhouse


When George A. Zimmer, CEO of Men's Wearhouse Inc. (MW), was pitching his company to investors before its 1992 initial public offering, he showed a picture of a man in a dentist's chair. His point: Most men consider suit shopping about as enjoyable as root canal.

From the day Zimmer founded his retail chain in 1973, he has striven to offer an alternative to stuffy department stores and chichi boutiques -- a comforting setting where buying men's clothes is painless and maybe a little fun, too. The bearded, gravel-voiced Zimmer even stars in his own ads, because he believes his everyman persona calms shoppers. "I have more credibility than a hired actor," he says with the same conviction he uses to spout his trademark line, "You're going to like the way you look. I guarantee it."

Zimmer may sell staid corporate wear, but his formula for guaranteeing his company's longevity is anything but conventional. To hold down costs, Zimmer, 55, locates Men's Wearhouse in outdoor shopping plazas rather than malls, and he shuns splashy flagship stores in high-rent neighborhoods. He recently cut expenses by moving the manufacturing of one line of suits from Italy to Korea. That frugal approach allows him to sell suits for between $250 and $300 -- about half the price specialty-store competitor Jos. A. Bank Clothiers Inc. (JOSB) charges for comparable suits. The neatly displayed clothes in Zimmer's stores are designed to cater to the unpretentious guy who wants to do as little as possible to maintain his wardrobe. One of the chain's most popular items is a $50 dress shirt that doesn't wrinkle and has unbreakable buttons.

Zimmer's bargain-basement approach is racking up some impressive results. So far this year, profits at the Houston-based company have jumped 48%, to $33.3 million. Same-store sales are up 8.2% in the U.S., coming off a 6.1% growth pace in 2003, when sales totaled $1.4 billion. The company's stock now trades around $30.50, up 22% year to date and far outperforming the 6% increase in a Standard & Poor's index of 25 apparel retailers.

Still, Zimmer knows he has to think beyond suits if he's to keep customers coming through his doors. With 508 Men's Wearhouse stores in the U.S. and 114 in Canada, where they're called Moores Clothing for Men, the company is perilously close to saturating the market. And Jos. A. Bank and smaller competitors are quickly encroaching on Zimmer's territory. So the entrepreneur is continually looking for ways to broaden Men's Wearhouse's potential audience.

Zimmer's latest idea is to diversify beyond sport coats and ties to pouffed skirts and lace veils. Late this year, he'll test two bridal shops, locating them adjacent to Men's Wearhouse stores, in Northern California. Zimmer hopes to capitalize on his tuxedo-rental business, which he launched in 1999. The unit is on track to post $80 million in revenue this year, up from $51.5 million last year.

A bridal business will present entirely new challenges for Zimmer, though. He'll have to offer higher levels of service than he's used to, catering to finicky women who often demand multiple alterations. The infrastructure and staffing that are required are so daunting that most retailers have dodged the bridal market altogether. Zimmer, who works out of Men's Wearhouse's Fremont (Calif.) offices, figures that since he already rents tuxedos for 100,000 weddings a year, it's not too much of a stretch to try to outfit brides.

Behind the scenes, Zimmer stretches the boundaries of traditional management practices, especially when it comes to managing people. He's adamant that happy employees attract loyal customers. Unlike most retailers, Men's Wearhouse doesn't perform drug tests or criminal background checks on job candidates. Every five years, all full-timers receive a three-week paid sabbatical on top of their regular vacations -- virtually unheard of in the retail industry.

SETTLING SUITS

Zimmer, whose 8.7% stake in Men's Wearhouse is now worth $94 million, changed the company's stock ownership program to reduce inequities. Today, most employees get some stock. And the average store manager, who earns $50,000 a year, gets the same number of shares from the company as higher-paid managers do. "It sounds corny, but it breeds loyalty," says independent retail analyst Janet Kloppenburg. Indeed, turnover among store managers is only about 10% annually, according to the company -- far below the industry average of 25.1%.

That's not to say Men's Wearhouse has been free of labor disputes. In California, some tailors and store managers at K&G Fashion Superstore -- a low-priced clothing chain owned by Men's Wearhouse -- filed lawsuits alleging they weren't properly paid overtime, among other issues. The company settled those suits but is still fighting similar charges brought by a group of Men's Wearhouse store managers. Zimmer declined to comment, citing pending litigation.

The labor unrest is a rare black mark for Zimmer, who has always been obsessed with the human relations side of management. A few years after he graduated with an economics degree from Washington University in St. Louis in 1970, he went to work for his father, an apparel manufacturer in Dallas. Zimmer started as a purchasing agent in Hong Kong, then worked in the U.S., selling clothes out of a Buick Electra. One of Zimmer's customers once asked him to take back some unsold goods and promised to place a large order to compensate. Zimmer's father balked, but Zimmer took the return anyway, believing it was important to maintain the customer's loyalty.

That disagreement motivated Zimmer to strike out on his own. "George always took strong positions on things he felt deeply about," says his father, Robert. Dad was a good sport, though, investing $300,000 to help his son open the first Men's Wearhouse in Houston and later joining the company's board of directors.

Zimmer has never been the typical buttoned-down executive. Brash and comical, the CEO isn't afraid to tell an off-color joke in public. He's so determined to have face time with the rank and file that he attends more than 20 Men's Wearhouse holiday parties all over the country every year. A recovering alcoholic, Zimmer resists the temptation to imbibe by gleefully dancing the night away with employees. And after 18 years of appearing in his ads, he still smiles proudly when strangers recognize him on the street. "After all these years," he says, "I'm an institution unto myself."

He still has some surprises up his sleeve, too. Early this year, eyebrows shot up all over the company when Zimmer proposed appointing Deepak Chopra to the board of directors. Chopra writes books and gives seminars on spirituality and alternative medicine -- two of Zimmer's passions -- but some executives wondered what value he would bring to the company. Zimmer argued that he would contribute ideas on social responsibility and team-building. Shareholders elected Chopra this summer -- another victory for Zimmer's out-of-the-box ideas. "This is not some New Age flighty business model with false nobility and no sustainable earnings," Zimmer says. Indeed, if he has proven anything, it's that in retail, one size doesn't always fit all.

By Louise Lee in Fremont, Calif.


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