Letter To Our Stakeholders
After thirty-eight years as CEO, the confluence of two unrelated recent events leads me to be a bit more reflective than usual. More frequently, I am asking myself how did The Men’s Wearhouse become the dominant player in its category and how will it remain so for the next thirty-eight years?
The two events are my decision to step up to the role of Executive Chairman, handing over the CEO position to our extraordinarily capable, significantly younger President, Doug Ewert, and our Company’s performance subsequent to the severe economic downturn that has rocked not only the United States, but the entire world.
I say, “stepping up,” rather than stepping down, because my plan is to stay very involved in marketing, corporate culture, and company strategy, while leaving the managing of the Company in the capable hands of Doug and our strong executive team. This will allow me to extend my career and play a role in the Company’s continued success.
Tying Seemingly Disparate Elements Together
Our unique ability to understand how to tie what may appear to be disparate elements, or stakeholder interests, into a coherent whole lies at the center of our story. Most significantly, we have always focused on our employees, on their well-being, their energy, and their ability to come together as teams.
This focus has in 2010 once again placed MW on “Fortune Magazine’s 100 Best Companies to Work For” list but, much more importantly, this focus has led to the extraordinary service that an energized work force provides and that separates the Men’s Wearhouse and Moores brands from other competitors in the men’s tailored clothing category.
Another key way that the Men’s Wearhouse and Moores brands “tie it all together” is how our wardrobe consultants help men put together “concepts.” Men who, unlike women, are indecisive in how to tie their wardrobe together, need to be helped to assemble the various elements in their wardrobe. Our wardrobe consultants are well trained and equipped to satisfy our customers’ needs for coordinated wardrobes resulting in strong average transaction values. This focus and commitment to the customer experience will remain a constant theme in our efforts to drive increases in shareholder value.
It is beyond the scope of this letter to discuss all the ways we tied together various strategies in marketing, real estate, and merchandise.
But for many years, as we evolved our model, we carefully evaluated and modified the relationships between these elements. Much of that model is still intact and will not change at the Men’s Wearhouse and Moores brands.
The results of our ability to tie all of these components together are evident in this past year’s performance.
Total sales for 2010 were $2.1 billion, an increase of more than 10 percent over the previous year. We enjoyed our best year to date for tuxedo rental, which increased by 9 percent. Our tuxedo rental to new retail customer conversion continued to increase in 2010. We achieved a 150 percent increase in revenues driven through e-commerce sales and we expanded our geographic presence in the corporate uniform segment to include the United Kingdom.
Migrating To The Millenial Mindset
Change is inevitable, and our customer base is front and center. Baby Boomers will retire and have significantly less need for our core product, and they will be replaced by Millennials. So how do we respond to this critical transition? We will need to continue to turn our approximately 3 million annual tuxedo rental customers into retail customers. And we are already engaged in this effort as the percentage of retail customers who start as rental customers is increasing and will continue to increase as our merchandise assortments, marketing, internet and mobile strategies, and store experience become increasingly relevant for these Millennial customers.
Pursuing Opportunities To Build On Our Core Competencies
The mix of our retail brands has evolved over the years, with the addition of Moores Clothing for Men, a market leader in the Canadian men’s apparel industry, the addition of K&G Fashion Supercenters, a niche player in the off-price segment of the retail industry focusing on men’s tailored clothing in the United States, and the entry into the tuxedo rental market segment in the United States and Canada through our Men’s Wearhouse and Moores stores as well as the acquisition of After Hours Formalwear which now operates as Men’s Wearhouse and Tux.
Making adjustments to stay in step with market conditions and customer needs is and will continue to be a key focus in order to realize appropriate returns on invested capital.
These adjustments range from leveraging common customers (rental to retail), adding product categories – such as denim at Men’s Wearhouse and women’s clothing at K&G – and expanding product offerings in certain customer segments such as Big and Tall across all retail store brands.
Last year we made a significant investment in the corporate uniform (non-rental) business in the United Kingdom, acquiring Dimensions and certain assets of Alexandra. This investment is proceeding well.
Embracing Change To Ensure Continuity
“We have two types of customers – Baby Boomers and Millennials. We have benefitted from a deep relationship with the first. We’re working to build the same with the second.”
So continuity and change are both in our future. I am really excited about that future, my new role, and what Doug will offer our organization both in terms of continuity…and change. We will remain focused on tying together the interests of all our stakeholders, which is the best way to maximize value to you, our shareholders.
I guarantee it!
George Zimmer
Chairman of the Board and Chief Executive Officer
April 2011