Jos. A. Bank, recently acquired by Men's Wearhouse, is in the process of sharply reducing the number of BOGO (Buy One Get One) sales and other extreme discounting measures that have lifted sales over the last few years at the expense of margins.
"The biggest challenge we face at Joseph Bank is reversing the margin corrosive strategy that drive top-line results by progressively lowering prices and increasing promotional marketing spend over multiple years," said Doug Ewert, CEO of Men's Wearhouse, last week on the company's second-quarter conference call. "I believe this strategy is unsustainable, produces diminishing returns and erodes brand equity."
Soon after the June acquisition was completed, the company began testing new promotional and advertising strategies aimed at stabilizing gross margins. During July and August, Jos. A. Bank refrained from lowering prices below the previous year and that led to some revenue erosion, "illustrating the challenges we will face moving forward," said Mr. Ewert.
Comps were down 1.3 percent in August and are expected to be negative for the balance of the year given the pricing changes. The chain will also be facing positive year-ago comps, driven by promotions.
On the merchandise side, Jos. A. Bank may be able to take advantage of untapped opportunities to reach younger consumers and in big & tall, as well as in expanding footwear, pants and accessories. But slow turns and long inventory lead times inherent in men's wear will prevent a quick change.
"Of course we will careful to make sure we don't take our eye off our loyal customers by seeking their permission to testing before making wide spread changes," said Mr. Ewert. "Bottom-line, we anticipate at Joseph Bank some volatility in top-line sales as we stabilize the margin, test alternative messaging, develop revenue synergies and ultimately build a foundation for future growth and a return to historically high margin levels."
The tailored clothing market has become highly promotional over the years and the challenges facing Jos. A. Bank were evident on josabank.com. The lead promotion featured "Buy 1, Get 2 Free" on "Most Everything Online." By comparison, menswearhouse.com was playing up its new Joseph Aboud collection but still included a "Buy One Get One for $100" deal on suits and sports jackets.
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