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Jos. A. Bank Clothiers considering acquisitions

When reports surfaced that Jos. A. Bank Clothiers Inc. had bid for a designer jeans maker, CEO R. Neal Black said the company's board decided it had to go public with plans to pursue potential acquisitions.

While the Hampstead-based men's apparel seller still isn't confirming or denying reports that it bid on jeans designer Lucky Brand, part of Fifth & Pacific Cos. Inc., company officials have announced they are considering acquisitions to spur growth. They have hired New York-based retail investment banking firm Financo LLC to help them explore options.

"It was getting out that we were being more open in the market about seeking something," Black said in an interview Monday. "The time was right to make it publicly clear what we were intending. We've always looked at that as one of many elements of strategic opportunity that we might take."

Jos. A. Bank, which operates 607 stores in 44 states, has been looking for acquisition opportunities, but it hasn't made any in its 108-year history. Rumors of an impending deal were stoked earlier this month when Women's Wear Daily reported that Bank was a bidder in an auction of Lucky Brand.

A spokeswoman for Fifth & Pacific said no public announcements have been made regarding sales of any of its brands, which also include kate spade and Juicy Couture, and declined to comment further.

Black declined to comment on the Women's Wear Daily report. He said "rumors" had raised questions about the company's strategy and prompted directors to decide during a board meeting to make the announcement about seeking acquisitions. Black also declined to comment on whether the company is negotiating any potential deals.

"We'd like to find an opportunity where we can leverage the management expertise we have and the assets of the company and where the combined enterprise represents long-term value for shareholders," he said.

Pursuing acquisitions makes sense as a way for Jos. A. Bank to grow as it looks to move beyond its deep-discount promotional strategy, said Howard Davidowitz, chairman of New York-based Davidowitz & Associates, a national retail consulting and investment banking firm. Davidowitz is not working with Bank.

Bank reported a sharp drop in first-quarter profits this month, and Black had outlined a five-step strategy that included boosting online sales, luring customers who wear big and tall sizes and continuing to open new full-line and outlet stores.

"Almost every retail company reaches a point where the strategy and approach has got to move on to continue growth and earnings," Davidowitz said. "They should have done this a couple of years ago. What they need is a business that could take off to provide the growth they need. They need a shot in the arm, and I believe an acquisition is the way to do it."

He said Bank's experience running a retail chain puts it in a strong position to operate a chain specializing in men's or women's apparel or other merchandise, a retailer with outlet stores or a purely online seller.

"The skill set is in running a very good chain, and those skills would apply to other products," Davidowitz said. "I think there will be a bunch of potential targets out there for them."

But he called an acquisition of rival chain Men's Wearhouse "very unlikely." The Houston-based retailer ousted its chairman and TV pitchman, George Zimmer, last week without explanation. "It's too big," Davidowitz said of Men's Wearhouse. "I don't think that is going to happen."

Mark Montagna, a senior analyst with Avondale Partners, an investment banking and wealth management firm in Nashville, said he is skeptical of Bank's announced plans.

Rather than a shift in strategy, he said, he viewed the retailer's announcement as a reaction to the company's annual meeting Friday morning, during which shareholders voted in a nonbinding action to reject pay packages for top executives and asked the company to use large cash reserves to offer a dividend or buy back some outstanding shares. The company's acquisition strategy announcement, released after a board meeting Friday, said it plans to retain capital not needed for operations to pursue potential deals.

"You have about a 1 percent chance that they find an acquisition," Montagna said. "The only logical thing is another retailer, especially menswear, because that's their expertise. I don't think Men's Wearhouse is up for sale, and Men's Wearhouse is trying to sell K&G [Fashion Superstore division]. I don't think Jos. Bank would have interest in that.

"I don't view this as being very serious, and I don't think they're going to find a suitable acquisition."

But Gilbert W. Harrison, chairman and founder of Financo, the firm assisting Bank in exploring acquisitions, said his client is "open to finding a profitable company with extremely good management, but where Jos. Bank can use the many resources that they have to aid in the growth of this company. They are looking at other types of retail companies" besides men's apparel.

He said it's a good time to pursue acquisitions because "the economy is growing again. We believe the consumer feels better about themselves, and that's the time in which you would make an effort to do something."

lorraine.mirabella@baltsun.com

Copyright © 2014, The Baltimore Sun
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