Houston-based Tailored Brands, hit by a double whammy of the pandemic and the societal shift to more casual clothing, said it would close 500 stores “over time” and shave its supply-chain footprint as it plans to lay off 20% of its workforce. Such moves can reduce costs but fewer outlets also mean a company may have less opportunity to generate revenue because of its fewer outlets.
“Unfortunately, due to the COVID-19 pandemic and its significant impact on our business, further actions are needed to help us strengthen our financial position so we can navigate our current realities,” CEO Dinesh Lathi said in a statement this week. “While today’s announcement is a difficult one, we are confident these are the right next steps to protect our business and position us to more effectively compete in today’s environment.”
Tailored Brands has postponed its second-quarter earnings report until August but last month disclosed preliminary results of net sales sinking 60.4% to $286.7 million, “reflecting the impact of the COVID-19 pandemic” and shutting down its stores to stem the spread of the coronavirus contagion, the company said then.
After reopening stores in May, the company said its year-over-year same-store sales declines were steep: Men’s Wearhouse stores sunk 65% and Jos. A. Bank’s plunged 78%. It warned in a regulatory filing last month that the lockdowns and its mounting debt could force it into a bankruptcy protection if it couldn’t boost liquidity significantly.
The spate of store closings, which also include Moore’s Clothing for Men and K&G, represent roughly one-third of its brick-and-mortar business, or 3 million square feet nationwide. At 20%, the layoffs will run north of 3,800 workers, according to a regulatory filing.
Tailored Brands also has replaced Chief Financial Officer Jack Calandra with a chief restructuring officer, Holly Etlin, who took the newly created position after serving as a managing director at AlixPartners, a consulting firm best known for its turnaround work.
“Jack and I have been discussing a transition,” Lathi said. “With a full appreciation of both the challenges to be solved and the opportunities to be realized in the next phase of the company’s journey, we both agree this is the right time for a change.”
Earlier this month, Tailored Brands skipped a $6.1 million payment toward $600 million senior notes maturing in 2022. That started the clock ticking on a 30-day grace period before it officially lands in default. In previous regulatory filings, the company has cautioned that a default on the bonds would domino into a series of other defaults down the line, leading to a potential bankruptcy protection petition.
Tailored Brands has seen sales wither in recent years as men began to shun suits and ties in favor of a more relaxed look at the office. That trend accelerated during the pandemic when consumers were mandated to stay home, more formal events such as weddings and galas were canceled, and they opted for workout gear or even pajamas over polos and khakis.
Menswear icon Brooks Brothers was forced into bankruptcy protection earlier this month, following a parade of retailers in an already challenged industry that have either closed up completely or pared down significantly during the pandemic.