March 10--Call it a hard-learned lesson for Jos. A. Bank: Too much of a good thing can be ... too much.
The struggling men's clothing chain halted its often-mocked "buy one, get three free" promotion strategy late last year, but the bleeding continues.
Consequently, its parent company, Tailored Brands, which also owns Men's Wearhouse and suit brand Joseph Abboud, is closing hundreds of stores and working to develop a new business model as sales plunged 31.7 percent last year at Jos. A Bank alone.
But Wall Street is seeing a silver lining.
Upon news of the store closings, Tailored Brands' shares soared more than 11 percent Thursday, and industry watchers say sales figures in January and February show the bloodbath could be coming to an end. "It's still a work in progress, but it got less bad in January and February," said Richard Jaffe, research analyst at New York-based Stifel Nicolaus.
That's because in addition to closing about 250 stores (including 80 to 90 Jos. A. Bank locations in oversaturated markets, and Men's Wearhouse and Jos A. Bank outlet stores), killing "buy one, get three free" was likely the right move, analysts say. "They didn't solve the problem overnight, but it looks like they are on the right path," said Jaffe.
It's not clear which Chicago-area locations will close.
Jos. A. Bank noted in the fall that the deep discount of "buy one, get three free" was "an unsustainable promotional strategy." The once-successful promotion was lampooned in a stinging sketch on "Saturday Night Live."
Consumers thought the sale was "ludicrous," said Jaffe, and they had no interest in stuffing their closets with four suits when they only needed two. Ending the promotion was "desperate measures for desperate times," he said.
And at first glance, killing the deep discount seemed to make things worse: After announcing the end to "buy one, get three free," Tailored Brands' stock tanked 43 percent, and sales continued to plunge. Revenue at Jos. A. Bank plunged more than 13 percent in the third quarter of last year.
