WASHINGTON, June 23, 2013 — A flurry of business stories this week sought clever ways to explain why nationwide clothier Men’s Wearhouse (ticker symbol MW) doesn’t like the way its founder looks anymore. The company announced last Wednesday that it had fired its executive chairman and founder George Zimmer, 64.
While the sacking of a top company CEO or board member is fairly rare, it’s not exceptional. But it’s highly unusual and risky to get rid of someone like Zimmer. He’s been the face and the voice of Men’s Wearhouse for decades, regularly appearing in many of the company’s TV commercials with the slogan “You’re going to like the way you look. I guarantee it.”
The company announced its move in a brief, antiseptic statement last week that gave no reason for Zimmer’s abrupt termination. Over the years, he’d been instrumental in building Men’s Wearhouse Inc. from one small Texas store using a cigar box as a cash register to its current position as 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.
In a written statement, 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,” Zimmer wrote. However, “instead of fostering the kind of dialogue in the boardroom that has, in part, contributed to our success,” he continued, “the board has inappropriately chosen to silence my concerns by terminating me as an executive officer.”
Beyond creating a successful company, Zimmer has long had a reputation as a maverick in the business world.
He brought in sometimes-controversial spiritual leader Deepak Chopra as a member of the company’s board in 2004. He put money 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.
Analysts speculated endlessly just why Zimmer may have been terminated so abruptly, and so close as well to the annual stockholders’ meeting that it had to be postponed. Even odder, the action came just a week after the company reported its fiscal first-quarter profit increased 23 percent.
Speculation ranged from issues of corporate control and direction to the positioning of the brand to attract business from an incoming millennial generation that seems to have little regard for largely traditional men’s business attire and image.
Zimmer had passed his CEO title on to his successor, Douglas Ewart, in 2011. It’s not uncommon for a veteran exec—Zimmer had helmed his company since 1971—to step on the toes of his chosen successor almost out of habit. But when a company board throws its support behind the new man, as the board of Men’s Wearhouse apparently did, sparks fly and the old guard usually loses out in the end.
That’s what happened to the legendary Steve Jobs at Apple (AAPL) back in the 1980s when his chosen successor, software exec John Sculley, prevailed upon the board to send the mercurial Jobs packing, even as he and the board began to make a series of missteps that nearly killed the company a decade later before Jobs staged his transformational coup.
More recently, dissident shareholders at oil and gas giants Chesapeake Energy (CHK) and Occidental Petroleum (OXY) pushed out their legendary CEOs, Aubrey McClendon and Ray Irani, due to increasing irritation at exorbitant executive compensation packages at both companies and the additional issue of ruinous corporate debt levels at Chesapeake.
Similar to the apparent situation at Men’s Wearhouse, Occidental’s chair actively undermined his successor, which directly led to his ouster.
An additional issue was the poor performance of shares in both companies which flattened or sank (in the case of debt-ridden Chesapeake) during a time when most other companies seemed to be recovering from the 2008 debacle.
Men’s Wearhouse, however, seemed to have recovered from the Great Recession during that time, adding another element of mystery to Zimmer’s ouster.
Insider intrigue aside, the likely culprit lurking behind the colorful Zimmer’s sacking was likely the board’s fear of the company running into trouble in the out-years if it doesn’t figure out a way to capture the millennial business that it clearly covets. But that’s a tough call, because it’s hard to figure out which way to go.
Does a men’s clothier try to educate this rising generation into the usefulness, desirability, and above all the fashion statement that classic men’s business clothing connotes? Or does a company like this try to go with the flow and try to compete in the casual, trendy market dominated by the likes of J. Crew (JCG)?
If it’s a matter of looking for a more youthful image in its product pitches, however, the Men’s Wearhouse board may be barking up the wrong tree. Aging Kentucky Colonel Sanders was always KFC’s best pitchman when it came to fried chicken, and his face still adorns company packaging even though he no longer walks among us. Homely, aging, bird-faced Frank Purdue, also a chicken man, fronted commercials that accomplished the impossible: they put an identifiable brand on a commodity.
More recently, “the most interesting man in the world”—who bears a remarkable resemblance to Zimmer—has proved an enduringly popular, iconic pitchman for Dos Equis across the entire male demographic, even though this interesting guy likely hasn’t seen his twenties since the ’50s. Nonetheless, his admonition, “Stay thirsty, my friends,” today is as ubiquitous a phrase as the ancient Clara Peller’s “Where’s the beef?” query was for Wendy’s (WEN) in the mid-1980s.
At any rate, it will be interesting to see how the Men’s Wearhouse situation turns out in the months and weeks ahead. Zimmer, technically, is still the company’s pitchman, but will they roll out new Zimmer commercials this summer or fall or will he disappear from view, replaced, perhaps, by someone like Eminem who, presumably, has a more contemporary fashion sense?
Right now, however, the board’s apparently precipitous action seems like the wrong move at the wrong time. It will be interesting to see how board members respond to shareholder questions when the annual meeting is rescheduled—a meeting during which the slate of board members will be voted upon.
Is there something the board is withholding from the public? It’s all up to shareholders, their representatives, and the often-passive financial press to find out. Until then, it’s probably best to steer clear of MW stock. This market has been capricious enough as it is. No investor needs to hike his or her risk profile at this point.
—AP contributed to this report.
*NOTE: In photo above, taken in 1999, Zimmer is seated second from left. (AP/File)
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
Follow Terry on Twitter @terryp17
This article is the copyrighted property of the writer and Communities @ WashingtonTimes.com. Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.