Men's Wearhouse (NYSE:MW) is buying the Joseph Abboud clothing brand for $97.5 million, apparently in an effort to acquire exclusive labels, Bloomberg reported on Thursday (July 18).
The deal, which includes a U.S. clothing factory, will reunite the chain's creative director, Joseph Abboud, with the clothing line he created. The sale is expected to close in the third quarter.
It's also the retailer's first major move since firing its founder and longtime commercial spokesman, George Zimmer, in June.
In a prepared statement, Men's Wearhouse CEO Doug Ewert repeatedly described Abboud as an "exclusive brand," but exactly what that will mean isn't clear. Both Nordstrom (NYSE:JWN) and Bloomingdale's (NYSE:M) currently sell Joseph Abboud suits, starting at about $700 on the Nordstrom website. The current Men's Wearhouse prices start about $50 below that.
The "exclusive" language suggests that Men's Wearhouse plans to make Joseph Abboud a house brand. That's an odd move considering that the brand is well established at other, more upscale chains. Making Abboud a Men's Wearhouse exclusive won't boost the discount chain's image—it's more likely to devalue the Abboud brand, since it will no longer be associated with the pricier Nordstrom and Bloomingdale's.
Another option in buying the supplier would be to offer exclusive (to Men's Wearhouse) designs at a lower cost, but still profit from other chains that sell more expensive Abboud designs. In effect, instead of depending on other suppliers to produce lower-cost Joseph Abboud knockoffs, the chain could order those up itself, getting the benefit of both the lowest price and the Abboud label.
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