Why Men's Wearhouse Is Dressing Down

In a move that is sure to cause shopping-center owners further angst, it looks like Men's Wearhouse (MW) could close as many as 145 of its Men's Wearhouse and Tux stores when their leases expire.

Yes, this is another entry in the depressingly long list of recent store closings. The difference is that this is not an act of desperation, but of common sense.

In 2007 Men's Wearhouse bought the After Hours Formalwear and Mr. Tux chains, adding 507 tuxedo-rental units to the company. Renamed Men's Wearhouse and Tux, the acquisition gave the retailer a huge market share in tuxedo rentals. The problem was that the company's nearly 600 namesake stores also offered rentals.

Chairman George "I Guarantee It" Zimmer explained in the company's fourth-quarter conference call: "Most of those customers are just going to the nearest Men's Wearhouse store." He also added that if landlords are willing to make rent deals, the company would consider keeping some locations open.

While Men's Wearhouse is cutting back the tuxedo stores, it might soon ramp up K&G Fashion Superstore. This high-quality discount chain for both men and women, acquired in 1999, has 107 locations scattered across the country and has grown slowly.

My sense is that the pace will pick up. The company just launched a spirited new ad campaign for K&G, and during the conference call, Zimmer singled out the concept for more investment.

Putting more resources into a discount chain makes sense in this economy, especially since consumers changed their shopping habits in the recession. It certainly makes more sense than a retail closet stuffed with tuxedos.