Men's Wearhouse: Zimmer wanted to regain control
The men's clothing retailer said Tuesday that Zimmer seemed to have difficulty "accepting the fact that Men's Wearhouse is a public company with an independent board of directors and that he has not been the chief executive officer for two years."
Coming forth with more details on its relationship with Zimmer appeared to please investors, as the chain's stock rose more than 5 percent in midday trading.
Men's Wearhouse fired Zimmer from his executive chairman role last week in a terse statement that gave no reason for the abrupt dismissal. But some analysts had speculated then that it may have had something to do with a power struggle behind the scenes.
Zimmer, who resigned from the Men's Wearhouse board on Monday, handed over the CEO title to Douglas Ewert in 2011.
Zimmer helped build 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 64-year-old was the face of the company, appearing in TV commercials reciting the slogan, "You're going to like the way you look. I guarantee it."
But Men's Wearhouse said Zimmer -- who owns 3 ½ percent of the company's stock -- advocated for "significant changes that would enable him to regain control." The chain said Zimmer had refused to support Ewert and other members of its senior management unless they gave in to his demands.
The retailer also said Zimmer expected veto power over certain corporate decisions, such as executive compensation, even though it has an independent board committee that sets such policies.
Men's Wearhouse also said Zimmer, who had initially supported looking at strategic options for its K&G unit, did an about-face and began objecting to the review process. Men's Wearhouse announced a strategic review of K&G three months ago. The division, acquired in 1999, accounts for about 15 percent of the retailer's total revenue. It operates stores in largely urban markets that cater to low-income shoppers, who have faced more pressures recently due to the tough economy. K&G has seen a decline in its business.
In addition, Men's Wearhouse said that Zimmer also reversed course on his opposition to taking the company private, with the retailer saying that he began arguing for a sale of the business to an investment group.
Men's Wearhouse said its board unanimously agrees that now is not the time to sell the company and that such a move would create risk and not be in shareholders' best interests. The chain said a going-private transaction would also require it to take on a lot of debt to pay for such a deal.
The company maintains that it was left with no choice but to fire Zimmer, as he had in essence drawn a line in the sand -- essentially making the board choose to either continue its support of Ewert and its management team or reinstate Zimmer as the sole decision maker.
Men's Wearhouse said its board strongly felt that continuing its support of Ewert and the management team was the best choice for its shareholders and workers.
The chain said it didn't want a total breakdown of its relationship with Zimmer and that its actions were not taken to hurt him. The company said it made "considerable efforts" to try to find a solution that would've seen Zimmer continue to have significant involvement with the business, but that he wouldn't accept anything other than full control of the company.
Last week, Zimmer said in a written statement that over the past several months he and the board have disagreed about the direction of Men's Wearhouse. At the time, Zimmer said that the board chose to silence his concerns.
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 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.
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.
Shares of Men's Wearhouse climbed $1.87, or 5 percent, to $37 in midday trading. The stock has traded between $25.97 and $38.59 over the past year.
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