Watch CBSN Live

JoS. A. Bank's Foray Into Tuxedo Rental Should Give Men's Wearhouse Competition

JoS. A. Bank Clothiers (JOSB), a retailer that aggressively expanded in the men's formal-wear space over the last few years, will now try to make its way into another arena. The company announced this week that it will start renting tuxedos with plans to have the service in half of its 474 stores by the spring.

JoS. A. Bank already sells tuxedos. Said R. Neal Black, the company's president and chief executive officer: "There are very few national companies in this business and with over 4.9 million customers in our database, this business offers a significant opportunity for the company."

Well, there might be few national companies in tuxedo rentals, but one of them is Men's Wearhouse (MW), the main, and larger competitor of JoS. A. Bank, with nearly 1,300 stores. It also has an agreement with another mega chain, David's Bridal, to rent tuxedos.

So how is the tuxedo-rental business treating Men's Wearhouse? In its third quarter, tuxedo rentals represented 21.1 percent of its $462 million in total net sales. Rental sales increased 1.2 percent during the period.

During its third-quarter conference call, Men's Wearhouse Chairman, CEO and visible commercial spokesman George Zimmer said that his company rents about three million tuxedos a year. But also revealed during the call was that the retailer expects a low-single-digit decline in tuxedo rentals during the fourth quarter, which will play a role in a projected loss for the period.

But none of this will likely impact JoS. A. Bank's plans. The retailer opened 350 stores in the last 10 years and plans 30 to 40 new units in 2010, up from 10 to 15 in the current fiscal year. Plus, it doesn't seem like the recession has much impact on the company's financials. During the first nine months of fiscal year 2009, JoS. A. Bank posted a strong 4.6-percent same-store sales gain year over year, and net income shot up a whopping 27 percent.

JoS. A. Bank proved its success in the retail-sales business, and if its execution in tuxedos is similar, the chain should become a large player in the space, right beside Men's Wearhouse.