NEW YORK - Men’s Wearhouse is shedding some light on why it parted ways with founder George Zimmer.
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.
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 Monday from the Men’s Wearhouse board, 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 because of the tough economy. K&G has seen a decline in its business.
In addition, Men’s Wearhouse said Zimmer also reversed course on his opposition to taking the companyprivate, 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 also would 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 - forcing the board to choose to 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 was the best choice for its shareholders and workers.
Business, Pages 22 on 06/26/2013