There are so many lessons in this fascinating story of the firing of the Men’s Wearhouse founder George Zimmer. Among them:
1. Instantly sell the stock when the founder leaves.
2. When the door slams, a window (or two) always open.
3. The key is to eye the new opportunities — there are always many — reassess your new priorities and move on.
Here’s the story. I wish George the best of luck with his two new ventures. Read on:
Ousted Founder of Men’s Wearhouse Watches His Old Company Struggle by James B. Stewart
George Zimmer at his offices in Oakland, Calif. “I’m so happy not to be working in the retail store business,” he said. Credit Jason Henry for The New York Times
When George Zimmer, founder and public face of the retail chain Men’s Wearhouse – “You’re going to like the way you look. I guarantee it.” – was fired two years ago by his handpicked board, there was no sugarcoating the message.
The lead director, Bill Sechrest, called him in and said: “You’re terminated. We’re packing up your office furniture and putting it in storage,” Mr. Zimmer recalled. He got no severance or lucrative consulting agreement. “They didn’t even ask for a noncompete clause,” he said. “They thought Men’s would be just fine without me.”
His abrupt ouster, after clashing with the board over the company’s direction, came as a personal blow, especially since he counted some of the directors among his closest friends. One senior executive had been his best friend since childhood. The famed author and new-age guru Deepak Chopra was on the board. “I didn’t think a man of his elevated consciousness would care about an extra nickel for shareholders,” Mr. Zimmer said. “But he didn’t support me.”
That evening, Mr. Zimmer came home and told his school-age children he’d been fired. “Life isn’t about getting knocked down,” he told them. “We all get knocked down at some point. It’s about getting back up.”
Since then, Mr. Zimmer, now 67, has started two digital businesses: zTailors, which matches tailors to customers, and Generation Tux, a tuxedo rental business. On New Year’s Eve, he’ll be in Times Square officiating at the first two marriages of 2016 – winners of a Generation Tux contest. One will be a male couple, so three of the four newlyweds (plus Mr. Zimmer) will be outfitted in Generation Tux tuxedos.
While Mr. Zimmer has moved on, Men’s Wearhouse stock has been plunging, the victim of a costly acquisition of the rival men’s wear chain Joseph A. Bank and rising competition from e-commerce businesses. (Several start-ups now offer custom-tailored men’s suits, jackets and shirts online.) Its shares have dropped by more than 60 percent over the last three months.
Mr. Zimmer acknowledges some amount of schadenfreude. He told me he now felt more sweet than bitter. “Getting fired was a blessing in disguise,” he said. “I’m so happy not to be working in the retail store business.”
A year after Mr. Zimmer’s ouster, Men’s Wearhouse acquired Joseph A. Bank for about $1.8 billion – a merger Mr. Zimmer had vociferously opposed. “I competed with them my entire career,” he said. “A deal never made sense. Why do you want to add hundreds of retail stores when there’s more competition than ever from the Internet? And that price was so far from where I thought it should be that I didn’t even bother to look at the details.”
The deal was a rare recent example of the notorious corporate finance maneuver called the “Pac-Man” defense, in which a company that is a target of a takeover fends off an unwanted bid by making a bid for its suitor. Joseph A. Bank had started the battle months earlier when it offered $2.3 billion for Men’s Wearhouse.
Since first deployed in the early 1980s, the Pac-Man tactic has been widely discredited, in large part because it often ignores the interests of shareholders while preserving the jobs (and lofty compensation) of a company’s management and directors. Men’s Wearhouse may prove a textbook illustration: The company’s value today is below $1 billion, less than half of what Joseph A. Bank offered.
“This may be the last of the Pac-Man defenses,” said John C. Coffee, a professor of corporate and securities law at Columbia University. “It’s capitalism gone mad. The bottom line is that bidders almost always overpay, and they overpay the most when their own positions are threatened. All of these converged here.”
This month, Men’s Wearhouse lowered earnings forecasts and said comparable sales dropped over 14 percent at Joseph A. Bank outlets after the company stopped its “Buy-One-Get-Three-Free” promotions in October. Men’s Wearhouse said the ubiquitous Joseph A. Bank promotions – lampooned by Jerry Seinfeld – were “unsustainable.” Men’s Wearhouse shares swooned on the news.
A Men’s Wearhouse spokesman, Diego Louro, declined to comment, citing the quiet period before the company’s next earnings release in early December.
Caught in the downdraft is Men’s Wearhouse’s largest shareholder, Eminence Capital, a hedge fund run by Ricky Sandler, which manages $6 billion. Eminence, which also owned shares in Joseph A. Bank, had pushed for a merger of the two chains.
Mr. Sandler said this week that he still believed in the promise of the merger, which is to lift sales and profits by differentiating the two brands and eliminating the cutthroat promotions at Joseph A. Bank.
He believes men’s tailored clothing will be relatively insulated from Internet competition, given customers’ need to try on clothing that often requires alterations.
The “Joseph A. Bank brand had been tarnished more than anybody thought by the excessive promotions,” he said, “and they’re kind of ripping the Band-Aid off. It’s a positive long-term move for the combined earnings power” of the two chains. He conceded that in “a perfect world,” Men’s Wearhouse would have paid less for its rival, but said the price was “well worth paying.”
After a drop in Men’s Wearhouse stock this month, Eminence raised its stake to 13 percent, from just under 10 percent.
Mr. Zimmer, who lives in the Bay Area, says he feels bad for Men’s Wearhouse employees, but not for Eminence. “I don’t have a high regard for hedge funds,” he said. “Nothing personal – I’ve never met the Eminence people – but I love the idea they might lose a fortune. Hedge funds may force companies to be more efficient, but that’s not always the best thing for every stakeholder group, like employees. It’s curious we’ve allowed capitalism to become all about shareholders.”
While in New York recently, Mr. Zimmer said, he had his driver pull over when he spotted a Men’s Wearhouse store. After he used a restroom, he poked his head into the tailor shop. “As soon as the tailor saw me he embraced me and started sobbing,” Mr. Zimmer said. “I have a bond with tailors. It’s not because I’m a tailor myself but because they know I care about how they experience their jobs.”
This season is especially poignant for him. Of the 50 or so black-tie staff holiday parties thrown every year at Men’s Wearhouse stores around the country, he made a point of attending at least 15. When Mr. Zimmer ran the company, employees could rent a tuxedo for the evening free, but the perk no longer exists.
“I know they miss me at the holiday parties as much as I miss going to them,” he said.
The merger “is a tragedy for the employees,” he added. “They’ve lost the glamour of it all.”
Lousy AT&T cell phone service?
Son Michael called AT&T and complained about their poor cell phone service here in Indian Wells, California. They sent him a network extender. His phone went from abysmal to five excellent bars. He can hear and speak perfectly. His conference calls are now crystal clear. AT&T’s network extender works like this: It “talks” to your cellphone, but routes your incoming and outgoing calls over the Internet. It’s plugged into our Netgear router.
T-Mobile does something similar. But their phones simply latch onto the WiFi in our house and automatically route all calls — incoming and outgoing — over the Internet.
Most new cellphones come with the ability to do what T-Mobile does. But the carriers often don’t turn it on.
The worst carrier is Verizon. It sells a Network Extender for $250. If you complain loud enough, it will give you a $75 cents off coupon, reducing your price to $175 (which is more than you can buy a used extender on eBay for).
It gets worse. Verizon’s network extender is 3G — i.e. poor quality. I’m told that one day they’ll introduce a better 4G/LTE version. But there’s no due date. And no one in Verizon’s public relations department seems to care about their lousy cell phone service or its affect on customers.
The reason for Verizon’s insane management decision is — and I kid you not — by turning on WiFi calling and/or giving away a network extender to paying customers with lousy service at their homes — like me — Verizon is acknowledging its lousy service. I kid you not: Verizon’s management lives in the fantasy world that it has the best cell phone service in the country. And it persists in advertising that nonsense.
Kudos to AT&T. They apologized for their poor service and sent Michael a network extender for free. It works perfectly on Michael’s phone and also on Anne’s AT&T cell phone. It works perfectly in our Coachella Valley house where service from Verizon is terrible.
Perhaps the classic blonde joke
A blonde goes to the doctor’s and finds out she is pregnant with twins.
She starts crying and the doctor asks her what’s wrong.
She replies, “I know who the dad is for one of them but I don’t know who the dad is for the other,”
A repair man for a local Hunter Douglas distributor came by and fixed our blinds. Thank you. The man had four tours in Iraq, often working on military communications. We talked about business opportunities in the local Coachella Valley. We concluded they’re immense. They range from home automation, home security, home entertainment, home networking to improving cell phone service in peoples’ homes — see above. And then there are the businesses who are finding that installing decent cell phone service and WiFi Internet communications in their common areas increases their buildings’ appeal. Opportunities are everywhere.