OPERATIONS

Zimmer strikes back again

BY Dan Berthiaume

Fremont, Calif. – George Zimmer, the founder and executive chairman of Men’s Wearhouse who was stripped of his executive chairman title last week and has been engaging in a war of words with the retailer ever since, continued his verbal battle in an open letter released on June 26.

"To justify their actions, they now have tried to portray me as an obstinate former CEO, determined to regain absolute control by pushing a going private transaction for my own personal benefit and ego," Zimmer said in the statement. "Nothing could be further from the truth."

Zimmer stated that he raised the idea of selling Men’s Wearhouse in a private transaction as one possible action earlier this year, but the board immediately rejected the idea without seeking professional financial advice and went on to try to marginalize and silence him.

Men’s Wearhouse has not publicly responded to Zimmer’s letter, but earlier this week released a statement saying that Zimmer was removed not to hurt him, but because he could not accept his role at the company.

The text of Zimmer’s open letter follows.

From George Zimmer
June 26, 2013

Since 1973 when I opened the first The Men’s Wearhouse store in Houston, with the help of tens of thousands of current and former employees, we have built a multi-billion dollar company based on two guiding principles. The first is to serve customers by delivering value and an enjoyable shopping experience and the second is to embody the values of servant leadership by trusting and empowering our employees to create that experience. I believed that if we did these things right, customers would be satisfied, employees would feel appreciated and motivated and shareholder value would be created. And, in fact, all this has happened.

Over the years, as CEO, I consistently encouraged the company to take a longer term approach of investing most of our profits back in the company, delivering value to our customers and building a loyal and dedicated workforce totally committed to service, rather than pursuing shorter term strategies based on financial engineering. Inside the Boardroom, we often had spirited discussions about how best to achieve these objectives. Regardless of whether the Board eventually sided with my point of view or not, I believe this dialogue and discussion led to better decisions that contributed to the success of The Men’s Wearhouse.

Unfortunately, this dynamic seems to have changed.

Just one month after the directors unanimously nominated me for reelection to the Board, last week they abruptly fired me from my management role and postponed the Annual Stockholder Meeting so they could nominate a new slate of directors that excluded me. To justify their actions, they now have tried to portray me as an obstinate former CEO, determined to regain absolute control by pushing a going private transaction for my own personal benefit and ego. Nothing could be further from the truth.

The reality is that over the past two years, and particularly over recent months, I believe that the Board and management have been eroding the principles and values that have made The Men’s Wearhouse so successful for all stakeholders.

Earlier this year, concerned with the Board’s response to the short term pressures of Wall Street, I encouraged the Board to at least study a broader range of strategic alternatives beyond simply selling the K&G division, including the possibility of a going private transaction. Rather than thoughtfully evaluating the idea or even checking the market to see what value might be created through such strategic alternatives, the Board quickly and without the assistance of financial advisors simply rejected the idea, refused to even discuss the topic or permit me to collect and present to the Board any information about its possibilities and feasibility, and instead took steps to marginalize and then silence me.

Such behavior by the Board does not strike me as consistent with sound principles of good corporate governance or the core values of The Men’s Wearhouse, but instead suggests that the directors were more concerned with protecting their entrenched views and positions than considering the full range of possibilities that might benefit our shareholders and indeed all our stakeholders.

To be clear, at this point I have not concluded that taking The Men’s Wearhouse private is a better means of preserving the unique culture and values that have made the company so successful over the years. What I do know is that as a founder and large shareholder, I am greatly concerned about the future of the company if this culture and these values are lost, and believe that the Board should be open to at least consider the full range of possibilities that could optimize the future value of the company for all stakeholders.

To the countless employees who have attempted to contact me over the past week, I appreciate your kind gestures and support. I am so very proud of the company we built together and nothing will change that. I encourage you to stay focused on serving your customers and maintaining your jobs. Please do not concern yourselves with my well-being at the risk of your own.

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FINANCE

Bed Bath & Beyond has dreamy Q1

BY Dan Berthiaume

Union, N.J. – Bed Bath & Beyond Inc. reported positive financial results for the first quarter of fiscal 2013. Although net earnings fell from $206.8 million to $202.5 million, net earnings per diluted share increased roughly 4.5% from $0.89 to $0.93.

Net sales for the fiscal first quarter of 2013 were approximately $2.6 billion, an increase of approximately 17.8% from net sales of approximately $2.2 billion reported in the fiscal first quarter of 2012. Comparable store sales in the fiscal first quarter of 2013 increased by approximately 3.4%, compared with an increase of approximately 3% in last year’s fiscal first quarter.

As of June 1, 2013, the company had a total of 1,478 stores, including 1,008 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 266 stores under the names of World Market or Cost Plus World Market, 83 buybuy Baby stores, 73 stores under the names of Christmas Tree Shops or andThat!, and 48 stores under the names of Harmon or Harmon Face Values. During the fiscal first quarter, the Company opened four Bed Bath & Beyond stores, two World Market stores, one buybuy Baby store and one Harmon Face Values store and closed one Christmas Tree Shops store.

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News

DSW and Loehmann’s step into shoe agreement

BY CSA STAFF

DSW’s division the Affiliated Business Group has entered into a joint agreement with Loehmann’s which renders ABG the sole supplier for Loehmann’s footwear departments in the company’s U.S. locations and e-commerce site.

The initial roll out is expected to begin at a few stores starting December, with the balance of the chain and e-commerce launching in the first quarter 2014. ABG will plan, procure and deliver the entire women’s and men’s footwear inventory, while Loehmann’s will provide staffing for the shoe departments.

"We are thrilled with our partnership with ABG,” said Loehmann’s CEO Steven Newman. “Through their association with DSW Inc., ABG’s expertise in creating a compelling assortment in footwear at everyday value will elevate our product offering to our savvy fashion conscious customers who already find great designers at amazing prices at our Loehmann’s stores as well as our website."

"We look forward to partnering with Loehmann’s,” added DSW president and CEO Mike MacDonald. “Our broad supplier base, product knowledge and retail capability will support Loehmann’s brand positioning objectives. We are confident our partnership will bring our expertise and passion for footwear to Loehmann’s customers."

ABG partners with multi-category retailers in the development of strategies and business models designed to build seamless on-brand shoe assortments.

"We are very pleased to partner with Steven and the Loehmann’s team,” said ABG’s SVP and GM Christopher Lanning. “We are committed to customizing a fashion footwear assortment and shopping experience that will meet the footwear needs and desires of Loehmann’s customers.”

DSW is a leading branded footwear, handbag and accessories retailer that offers a wide selection of brand name and designer fashion for women, men and children. It operates 377 stores in 42 states, the District of Columbia and Puerto Rico, and operates an e-commerce site and a mobile website. DSW also supplies footwear to 347 leased locations in the United States under the Affiliated Business Group.

Loehmann’s has stores in 11 states and D.C. and operates an e-commerce site. The department store offers consumers discount women’s dresses, suits, sportswear, shoes, handbags and accessories as well as menswear.

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