June 20, 2013 10:05:41 AM
NEW YORK -- Men's Wearhouse doesn't like the way its founder looks anymore.
The men's clothier said Wednesday that it fired executive chairman and face of the company George Zimmer, 64, who has appeared in many of its TV commercials with the slogan "You're going to like the way you look. I guarantee it."
The company announced the move in a terse statement that gave no reason for the abrupt firing of Zimmer, who built Men's Wearhouse Inc. from one small Texas store using a cigar box as a cash register to one of North America's largest men's clothing sellers with 1,143 locations.
The firing appears to end the career of one of TV's most recognizable pitchmen. Zimmer's gravelly-voiced slogan became almost a cultural touchstone, and his natty but down-to-earth charm made dressing sharply feel more accessible to men.
Zimmer said in a written statement that over the past several months he and the board of directors disagreed about the company's direction.
"Over the last 40 years, I have built The Men's Wearhouse into a multi-billion dollar company with amazing employees and loyal customers who value the products and service they receive at The Men's Wearhouse," he said in a statement. But he noted that "instead of fostering the kind of dialogue in the boardroom that has, in part, contributed to our success, the board has inappropriately chosen to silence my concerns by terminating me as an executive officer."
The bad blood didn't spook investors, though. Men's Wearhouse shares slipped just 43 cents to close at $37.04. The stock is still near its 52-week high of $38.59 and ended Wednesday up about 19 percent since the start of the year.
Beyond creating a successful company, Zimmer is known as something of a cowboy in the business world.
He brought in spiritual leader Deepak Chopra as a member of the company's board in 2004. He put his fortune to work behind California's failed Proposition 19 in 2010, which would have legalized marijuana in California, where he lived. And Men's Wearhouse didn't conduct criminal background checks on new hires because Zimmer believed that everyone deserves a second chance.
"He's one of a kind," said Richard Jaffe, a Stifel Nicolaus analyst. "He's an entrepreneurial visionary. He made looking terrific available for every man in America."
Through his personal publicist Zimmer declined to comment for this article beyond the written statement. Calls to company executives and board members were immediately referred to a company spokesman, who declined to comment beyond the release.
Jaffe speculated that Zimmer, who handed over his title as CEO to Douglas Ewert in 2011, may have had difficulty letting go of the company's reins.
"Clearly, something happened abruptly and fairly dramatically," he said. Jaffe also speculated that perhaps the company was looking for a new spokesman so it could target younger shoppers.
Like many clothing retailers, Men's Wearhouse saw its sales and profits battered during the Great Recession, but over the last two years the company's business has been recovering. For the latest year ended Feb. 2, revenue rose more than 4 percent to $2.48 billion. Net income rose over 9 percent to $131.7 million.
The firing comes a week after Men's Wearhouse reported that its fiscal first-quarter profit increased 23 percent.
Three months ago, the company said it was conducting a strategic review of its K&G store division, which it acquired in 1999. The division, which accounts for about 15 percent of the company's total revenue, operates stores in largely urban markets that cater to hard-hit low income shoppers and has seen business decline. Jaffe speculated that deciding what to do with that division could have been a point of contention.
Still, a few other analysts and experts in executive recruiting said privately that the ousting could be something more than just wrangling over the direction of the company and pointed out that the timing of the announcement was odd. It happened the morning that the company's annual shareholder meeting had been set to take place. Men's Wearhouse delayed the meeting but didn't give a new date.
The company said the purpose of postponing the annual meeting is to re-nominate the existing board of directors without Zimmer. It said the board expects to discuss with Zimmer the extent, if any, and terms of "his ongoing relationship" with the company, language that seemed to leave a small window open for him to remain an advertising spokesman.
Also highlighting the suddenness of the firing: The company's website still prominently spotlighted Zimmer for much of Wednesday, calling him "The Man Behind The Brand" and linking to YouTube videos of "the man in action." The pages were still available by midafternoon, though a prominent link from the site's front page had been removed.
"This is very rare to fire a founder. Founders are generally entrenched in the company," said Eleanor Bloxham, CEO of The Value Alliance, a board advisory firm.
In 1971, fresh out of college, Zimmer made his first foray into the clothing industry, working in Hong Kong for six months as a salesman for his father's coat manufacturing business, according to the company website. In 1973, he and a college roommate opened the first Men's Wearhouse store, which sold $10 slacks and $25 polyester sport coats, in Houston. His personal car was a van with the company logo on the side and clothing racks in the back.
The company aired its first TV commercial in the 1970s when commercials for clothing were rare. Zimmer starred in his first commercial in 1986, with the line "I guarantee it." In 1997, Zimmer added the line "You're going to like the way you look" in the ads.
Men's Wearhouse kept expanding, focusing on large markets where business was sluggish to take advantage of lower real estate costs. It also expanded beyond sports coats and trousers to casual sportswear in the 1990s and then went into the tuxedo rental business in 2000.
The company went public in 1992, and has been cited by Fortune magazine as one of the top 100 best companies to work for.
Ellis Verdi, president and founder of Devito/Verdi, which created the advertising for the company's K&G stores a few years ago, called the Men's Wearhouse ad campaign that Zimmer starred in "one of the best retail campaigns in history."
"George Zimmer allowed the company to have a strong brand image," Verdi said. "You can't just snap your fingers and get another 20-year campaign."
According to the company's most recent proxy filing, Men's Wearhouse has paid Zimmer an annual licensing fee of $10,000 for use of his likeness in ads and marketing. But it stipulates that the annual licensing fee goes up to $250,000 if Zimmer ceases to be an employee for any reason.
Zimmer owned 1.8 million shares of Men's Wearhouse as of the company's May 9 proxy filing, a 3.5 percent stake.
The company, based in Fremont, Calif., also runs the Moores retail chains and sells uniform and work wear in the U.S. and U.K.
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