George Zimmer, the Men's Wearhouse founder and besuited TV pitchman, looks a little startled as I enter his office. "Oh!" he exclaims in that famous languid and gravelly voice, and his hand darts up to his desk and shoves something small into a drawer while his assistant stifles a laugh. There's a distinctly skunky-smelling haze in the air, and the sounds of downtown Oakland, California, waft through the open windows.
It's been almost three years since Zimmer was abruptly fired by the company he built from a single store into a multibillion-dollar empire, and he's begun to settle into the world of tech startups. He's wearing a charcoal suit--from his startup Generation Tux, an online formalwear-rental outfit--that hangs slightly loose in a way that's breezy rather than ill-fitted, along with a looser-fitting floppy-collared shirt. He explains that the brilliance of this particular suit is a comfy little hidden stretch-band on each side of the waist. Women don't get it, he confides. But men love it.
As comfortable as Zimmer seems in his new life, he's also tormented by the loss of his old one--and how his longtime boardroom colleagues, in his telling, ambushed and fired him two years after he turned over his CEO role to his handpicked successor, Doug Ewert. After battling with his former board over his ouster, Zimmer launched not one but two startups that compete with Men's Wearhouse. In addition to Generation Tux, there's zTailors (the z is for Zimmer)--essentially an Uber that summons tailors for house calls. He has a hundred-some employees and more than $30 million in funding from investors like Salesforce Ventures, and Workday and PeopleSoft co-founder David Duffield.
Zimmer, who's now 67, says his new companies will utterly transform how people shop for clothes. Whether or not he's right about that, there's something comforting in knowing that he's out there hawking suits again. His face was a near daily presence on TV for decades, and that reliable promise--"You're gonna like the way you look. I guarantee it"--was a nice safety net. You knew he'd be there if you needed him.
Which is probably why his dismissal became such a sensation. Late-night host Jimmy Kimmel said it was like firing Santa Claus. "You lost my business. I guarantee it!" became a refrain on Facebook. At first, the board offered no public explanation for the firing. Eventually, it announced that Zimmer had left it no choice: He had become an obstructionist bent on retaking the authority he'd ceded to Ewert.
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For a time, the board looked smart. The company paid $1.8 billion to acquire competitor Jos. A. Bank, a previously discussed merger Zimmer had opposed. From the time Zimmer was fired to mid-2015, the stock price nearly doubled, to $65, partly on hopes that Jos. A. Bank could be repositioned as an upscale complement. But then the new numbers started coming in, and the stock crashed to the midteens, where it languishes today. Sales at Jos. A. Bank have plummeted since its new parent eliminated its aggressive buy-one-get-three-free suit promotion, and the heavy debt Men's Wearhouse took on to pay for the acquisition has hampered earnings. In February, the business announced it would restructure as a holding company called Tailored Brands, a move that could better insulate the chains from each other. Though the Men's Wearhouse unit continues to perform well, Wall Streeters speculate that the company might be headed for bankruptcy. A Barclays analyst recently called it "uninvestable." Lawyers are circling with class-action shareholder lawsuits.
To Zimmer, it's a great "I told you so" moment, made even sweeter by the prospect that he might build something special again with his new companies. But he's hardly moved on. Stifel analyst Richard Jaffe, who's followed Men's Wearhouse for 20 years, says Zimmer has "founder's regret"--a condition that sometimes afflicts entrepreneurs who let go of the reins, causing them to scramble to get hold of them again. In fact, Zimmer tells Inc. exclusively that he's been talking with private equity groups about trying to buy back Men's Wearhouse. "The combination of what I've built in the past couple of years and what we created in the 40 years before would be a fantastic new-paradigm business," he says. "And, obviously, the existing board and executive team would mostly have to be replaced."
Zimmer's now in tech, but he's no technocrat: "We have to learn to think with our hearts, and then let our brains do the calculations."
Don't get Zimmer started about those executives. "Cassius and Brutus, I believe their names are," he says. "You read Dante's Inferno--they're standing next to Lucifer in the frozen lake." He says he enjoys the role of "betrayed benefactor"--it gives him a kind of righteous power now that Men's Wearhouse is suffering. "I'm dealing with a big deck," he says. "I really feel the future of Men's Wearhouse is in my hands."
It's impossible to understand Zimmer's journey without understanding his involvement with something called the Institute of Noetic Sciences, which studies "the intersection of science and spirit," as he puts it. "Noetic is a fancy word for knowledge that does not come through the five primary senses," Zimmer explains. "It's like intuition." He has long been a board member of the institute, which was founded by a late lunar astronaut who was an outspoken believer in UFOs, and occasionally retreats to its headquarters in California's Sonoma County to, he says, "talk about science and new ways of understanding how consciousness and matter and energy are connected."
It's easy to dismiss Zimmer's interest in noetics as more evidence of his inner stoner. (Zimmer, who says he once smoked six joints in one hour with hippie icon Baba Ram Dass, used to inhale "anything that combusts." Now, he reassures me, it's just pot.) But it always comes up as he explains key decisions. If the coldly analytical technocrat is today's model entrepreneur, Zimmer is the opposite. "We have to learn to think with our hearts, and then let our brains do the calculations," he says. In business, the approach translates to making decisions based on humanistic values, rather than purely economic ones. To Zimmer, bigheartedness was the core of Men's Wearhouse; it was a company built as an extension of his psyche.
The first Men's Wearhouse store opened in Houston in 1973, thanks to $30,000 in credit from Zimmer's dad, $7,000 of his own, and help from a college buddy. Zimmer started opening a store per year around that city for the next decade, and expanded to San Francisco in the early '80s. Apparel was a natural choice for him. His dad worked for a discount clothier, and later started a raincoat company called Royalad Apparel. Zimmer grew up hiding in the clothes racks as his dad visited stores around New York City, and spent summers packing coats in the warehouse. In college, he grew his hair into a bushy "Jewish Afro" and got involved with the Vietnam War protest movement. He also joined a fraternity and ran with a more conservative crowd. "I saw myself as a kind of liaison officer between the straights and the freaks," he says. In time, he realized that becoming an entrepreneur would allow him to continue nurturing his independent streak and have a respectable career.
Zimmer started shaping the company with his philosophies. In the mid-'80s, he decided to break the traditional retail cycle of inflated prices and constant discounting, and establish everyday low prices instead. "Our business went down double digits," he remembers. "Had we been a public company, we'd have all been fired." That's exactly what happened a few years ago to then J.C. Penney CEO Ron Johnson when he tried the same thing. "But all we really needed was the courage of our convictions," says Zimmer. "It was tough, because people kept saying, 'George, we're doing less business!' I'd nod and say yeah. But by the second year, it started to turn around."
Then came those ubiquitous commercials, and then an IPO in 1992, which funded more aggressive expansion. Men's Wearhouse had about 100 stores when it went public, and afterward, 50 or 60 new ones opened each year. It was anything but a conventional public company: Zimmer's executive team included his brother, who retired last year after 35 years, and his dad, who joined as the head of real estate after Royalad failed. There were old friends, too, including Charlie Bresler, a psychologist in Fresno, California, who joined the company in 1993 without any particular job lined up. Zimmer and Bresler had been tournament bridge players together as kids, and, Zimmer explains, "when you play bridge, you get an intuitive sense about your partner." Bresler spent six months doing nothing but shadowing Zimmer; eventually, he became president.
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Policies were designed around Zimmer's values. When the company first established an employee stock-ownership plan, any income employees earned up to $200,000 counted toward their stock distribution. "About five years in, I looked at the annual distribution and saw that there were half a dozen of us at the top getting half the money," Zimmer says. He lowered the threshold to $100,000, and then to $50,000. Eventually, the average store manager got as many shares as top executives. When Zimmer left, turnover among store managers had been around 10 percent for years, compared with an industry average of 25 percent.
"Capitalism was never meant to be about maximizing short-term shareholder value," Zimmer says. That message didn't always go over well on Wall Street--his bankers at Bear Stearns warned Zimmer not to talk about his "crazy ideas" on the road show before the IPO--but it didn't stop the company from dominating its category. When Zimmer was fired, one in five suits purchased in the U.S. were coming from Men's Wearhouse.
Jaffe, the Stifel analyst, calls Zimmer "lucky and smart," but says the company's success was a function less of Zimmer's management ideas and more of his having perfectly ridden the changing winds in mainstream men's retail. As mall department stores found they could make more money per square foot with in-store brand-name boutiques than they could with large suit departments, Men's Wearhouse swooped in with more convenient (and cheaper) locations, wider inventory at lower prices, onsite tailoring, and solid service.
Marshal Cohen, a longtime retail analyst with NPD Group who started his career in menswear competing against Men's Wearhouse, uses words like revolutionary for Zimmer. "He was constantly trying to reinvent the business," Cohen says. "He wasn't always right, but you have to give him credit. He was always saying, 'This is where we're going, folks,' even if it wasn't happening yet."
Such a moment came in 1999. An employee suggested getting into tux rentals, a segment that had no big national chain. Zimmer saw it as a "minor league" for new customers, one revolving around proms and weddings. Men's Wearhouse already had real estate all over the country and a tailor in each of its stores, so a tux station could be added with little incremental cost. By 2013, Zimmer says, the company was pulling in more than $400 million a year in tux rentals, at an astonishing 80 percent gross margin--15 to 20 percent of the retailer's revenue, he estimates, and closer to 50 percent of its profit.
And yet, problems lurked.
In 1999, Zimmer's suit business was booming. Then an employee suggested something even better.
Zimmer was loved at his stores, because the rank and file made good money and he made high-profile efforts to connect with them. Every year, the company would hold dozens of black-tie holiday balls all over the country, many of which Zimmer would attend, get on the dance floor, and play the fun, famous boss. In the upper ranks, though, Zimmer was known as what one insider calls a "tough son of a bitch." He drove his executives hard; he railroaded big decisions; he had a tough time giving credit to others. Former executives say he routinely disregarded anyone's priorities but his own.
Richie Goldman--one of Zimmer's first hires, who stayed for almost 30 years and ultimately ran marketing--says Zimmer often surprised him with his "sheer genius--his ability to take a step back and see the simple solution that others missed." At the same time, "I spent a lot of time backpedaling for George with the other executives," Goldman says. "I felt he treated senior management of the company with disdain, and I never understood it."
Even the famous "I guarantee it" line is in dispute. Zimmer has long told interviewers that he made it up on the spot--that the script read, "That's a fact, Jack," but he ad-libbed instead. "That is not true," Goldman insists. "A copywriter at an agency came up with it. I cringe every time I hear George tell the story."
Zimmer wasn't blind to the discord. He recalls telling store employees that if a bride and groom came in to browse tux rentals and said they could get a better deal elsewhere, the store should match that price on the spot. His reasoning was that, since wedding parties were big-ticket sales involving multiple groomsmen and family members, giving up $20 per tux from an extraordinarily high margin was worth it. "Obviously, it would be best if a supervisor authorizes the markdown, but that's not always possible in real time," he would tell the staff. "So I'm authorizing you: Get the wedding party!" He later learned that, once he'd left the room, another executive would contradict him. "They'd say, 'George is full of shit. Do not give unauthorized discounts.' "
Zimmer tells me this story over patty melts at a diner near his office where the waiters know his name. "I've always allowed people to badmouth me," he says. "A couple of weeks ago, somebody was saying to me, 'George, they used to just tear you apart when you walked out of those meetings.' Maybe I should have been a little more concerned about that."
Doug Ewert joined Men's Wearhouse from Macy's in 1995. He was a neckwear buyer at first, and over the years Zimmer groomed him to take over. Ewert became CEO in 2011, but Zimmer was an active executive chairman, and they began to clash.
One dispute had to do with K&G, a long-underperforming deep-discount menswear chain that Men's Wearhouse bought in 1999. Ewert and the board wanted to sell K&G. Zimmer did not. In the spring of 2013, the company announced that it had hired a bank to explore selling K&G, and tensions boiled over at a board meeting. Zimmer was also furious that the board had voted to increase key executive salaries--theirs included--by as much as twofold, without consulting him. Ewert's base salary doubled, to $1.25 million; Zimmer was offered $1 million. (For the previous 20 years, Zimmer had donated his $500,000 salary to a scholarship fund for employees' kids, and funded his lifestyle by selling stock.) Zimmer had never implemented Whole Foods-like executive compensation caps, but he considered them part of the company's DNA. He lost it in the meeting. "I would have thought you guys knew I can't be bribed," he seethed.
After the meeting, Zimmer decided it was time to take the company private. A neighbor and confidant of his in Piedmont, a ritzy enclave in the hills above Oakland, a serial entrepreneur and investor named Chris Hemmeter, started talking to bankers about putting together a deal. Zimmer says he told the board on a call that spring that he'd been advised the company could get a 30 to 40 percent premium for shareholders by going private. "Isn't it our fiduciary responsibility to explore it?" The board had discussed going private several times over the previous few years and had put the issue to rest, concluding that it would saddle the company with too much debt. And here was Zimmer pushing the idea again.
"I thought you guys knew I can't be bribed," Zimmer seethed to the board. Two months later, he was gone.
Two months later, there was another board meeting. The night before, Deepak Chopra, the New Age guru and a friend of Zimmer's who was also on the board, led Zimmer on a guided meditation that focused on the best way to protect his legacy. Afterward, Zimmer told Chopra (who did not respond to multiple requests for comment) he agreed his legacy was on the line, but allowing Ewert to continue leading the company was the real danger. "What I learned in the meditation is that Doug can't run this company," Zimmer said.
The next morning, the directors asked Zimmer to resign and offered him a figurehead chairman emeritus position. He told them he'd have to think it over. Later that day, he turned them down. At that point, the board told Zimmer he was fired--and that his office had been packed up. That's Zimmer's version. The company declined to comment for this story beyond a pat statement wishing Zimmer success. But reacting to a wave of terrible press after the firing, the board released an unusual statement detailing its inner workings. Zimmer "had difficulty accepting the fact that Men's Wearhouse is a public company," it read. Zimmer "refused to support the team unless they acquiesced to his demands" and "expected veto power over significant corporate decisions," including executive pay. "The board was left with no choice but to terminate him."
One important detail doesn't quite add up. Zimmer chose the board members over many years to reflect his eccentric leadership style--such as Chopra and lead director Bill Sechrest, a colleague of Zimmer's on the board of the Institute of Noetic Sciences. Why would such a group unanimously turn against him so swiftly?
Several sources close to the situation suggest that Zimmer was simply much more estranged from the leadership than it appeared. Another explanation is that, in trying to take the company private, Zimmer not only betrayed the board's confidence but essentially put the company up for sale. Months after Zimmer's firing, Jos. A. Bank attempted a hostile takeover of Men's Wearhouse, which was forced to buy Jos. A. Bank at a price many considered inflated. That deal is precisely what's put the company in peril today.
The offices of zTailors and Generation Tux occupy the second floor of a former department store in central Oakland, across from where Uber is constructing its new headquarters, and look like those of other young startups. There's a lounge area with red bubble chairs and a big swoop lamp, and a kitchen full of good snacks. Zimmer took up Ping-Pong, and recently offered staff members $100 if they could beat him (many promptly did). His corner office is large but unassuming, with chalky white walls and mismatched chairs. Aside from the framed pictures of Zimmer with various luminaries (Bill Clinton, Nancy Pelosi, Reggie Jackson), it could be your insurance guy's office.
To hear Zimmer tell it, he bounced right back after his dismissal, but Hemmeter suspects it was a lot worse. "I was side by side with him for much of the next couple of weeks," he says. "It was so sad. It's his life's work, his identity, just going ..."--he makes an exploding noise. "George has a sort of metaphysical worldview that helped him not get caught up too much, but I know that inside it took a terrible toll."
For a few weeks, Zimmer and Hemmeter talked with lawyers and PR people and private equity groups about attempting a takeover. They didn't. The two considered franchising a popular local ice-cream-sandwich shop and expanding it across the Sunbelt. They talked about starting a Warby Parker-style eyeglasses company. They tried to buy K&G, but the deal fell apart because they tried to hide Zimmer's involvement, and Men's Wearhouse balked when it found out.
Then they heard about a startup called the Black Tux that rented tuxedos online. "You could just see the light bulb go on over George's head," Hemmeter says. " 'Tuxedo rental online? I'm probably the only guy in the world who knows that business at scale.' " He says they offered to buy a controlling stake from the 20-something founders, who told Zimmer he could invest $250,000 for 2.5 percent, which he considered pointless. (The Black Tux denies it ever discussed numbers.)
Shortly thereafter, Zimmer found himself on the beach in Hawaii on New Year's Day 2014, alongside his pal Marc Benioff, the Salesforce founder. Benioff had initially counseled Zimmer not to go back into business after the firing, because the outpouring of support had been such a powerful way to cement his legacy. Now Zimmer was telling him he wanted to create an online tux company, and Benioff, a bear of a man not known for being emotive, slowly turned to him with an ear-to-ear grin. "Man, George. That is a killer idea," he said. Benioff's investment arm put in a seven-figure sum, and Generation Tux launched, amid much media buzz, at Salesforce's 2015 Dreamforce convention.
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Several months later, after Zimmer had started building his new company, he and a few key lieutenants went to Benioff's house for a meeting. It became clear they were flailing on some technical issues and missing internal deadlines, and lacked the expertise to fix the situation. "George, do you have a product manager?" Benioff asked.
"You mean someone who purchases the tuxedos?" Zimmer rumbled back.
Benioff, realizing his friend needed help with the basics, explained he meant someone who defines site features and shepherds team members to build them. "Understand that you're running a technology business, not a tuxedo business," he said--pointing out that Salesforce had more engineers working on the site than Zimmer did.
"George didn't understand what it took to scale the tech side of things," says Matt Howland, the experienced CTO Zimmer eventually hired. "It was like going into bricks and mortar and not having anyone to set up the actual stores. But what George brings to the table--it's so different from what you typically get in Silicon Valley."
When Zimmer started planning Generation Tux, for example, he knew that delivering a proper fit is the biggest challenge in formalwear rental, so he devised a solution before launching. Men's Wearhouse solved that problem by having a tailor in every store. By creating his online tailor network zTailors, Zimmer figured Generation Tux could have greater geographic reach than Men's Wearhouse, and could dispatch a tailor for touchups on the day of an event.
Generation Tux's revenue, while growing, is still small. (Inc. estimates it's less than $1 million per month.) Zimmer says he doesn't expect it to turn a profit for at least another year. The task for now is figuring out ways to re-create all the in-person sales tactics that push up order size--for instance, getting a bride and groom's dads and granddads to order suits alongside the groomsmen. At Men's Wearhouse, the average number of tuxes rented for a typical event was eight, Zimmer says; at Generation Tux, he told me, it's fewer than five.
Zimmer had thought zTailors might take off as a consumer brand, because it stitches together an industry consisting almost entirely of mom-and-pop shops. Instead, it's showing more promise as a business-to-business operation. A deal with Macy's offers house-call tailoring for Macys.com purchases, and Zimmer says the company is testing similar ideas with the likes of Amazon and J. Crew.
It's easy to see why. The ever-rising cost of shipping, coupled with the increasingly standard e-commerce practice of free returns, can devastate online retailers. What if, rather than returning or exchanging an item that doesn't fit, a customer could just summon a tailor to adjust it? Retailers could keep the sale as well as save on shipping. For zTailors, it's a perfect way to acquire customers and push up revenue, because once a tailor is in someone's house, other items that need fixing almost always come out of the closet. "We'll send someone in to hem a pair of khakis, and they walk out with nine or 12 garments," says Hemmeter, who's now CFO of both companies.
When he heard Zimmer's pitch, Salesforce founder Marc Benioff beamed. "Man, George. That is a killer idea."
And yet, as Zimmer and Hemmeter home in on their customers, Men's Wearhouse continues to dog them. Shortly after zTailors launched last spring, Men's Wearhouse prohibited its in-house tailors from moonlighting for Zimmer, despite its being common practice for them to work freelance for other retailers. Zimmer had leaned on his former Men's Wearhouse talent to build his initial roster of 600 tailors--and in one move, Men's Wearhouse eliminated around 150 of them. Then a deal Generation Tux had made with Macy's to offer tux rental online and via in-store kiosks evaporated while in legal review. The business ended up going to--of course--Men's Wearhouse. Zimmer can't contain his sense of persecution about losing out so late in that game: "The deal makes no sense. It has to be just to block me."
Those battles aren't over. After Men's Wearhouse's stock collapsed, the company's tailors, fearing layoffs, reached out to zTailors again. "So I decided we're going to start hiring Men's Wearhouse tailors," Zimmer tells me. "We're working with lawyers. If [Men's Wearhouse] wants to raise a stink, we're prepared."
Hemmeter thinks he knows why Zimmer is so fixated on Men's Wearhouse. "If it were me, I'd see it as an opportunity to do a great transaction and create a lot of shareholder value and get the last laugh," he says. "But he just feels terrible about all the people he left behind. He wants to go back and help them. And it would so energize the company."
"Let's just say it would be wise to explore it," says NPD analyst Cohen. "The company has lost its personality."
But Goldman sees nothing but revenge in Zimmer's second act. "He could have gone and been on the board of any public company," he says. "He could teach. He could start a retail company in any other field. Why start two companies that go directly at Men's Wearhouse?"
They're all right, of course. Zimmer is self-righteous and vengeful. He's idealistic and heartbroken. He's a father watching his baby suffer. He's a born entrepreneur who sees an opportunity.
One evening in Oakland, en route to a Golden State Warriors game, Zimmer pulls a folded-up sheet of notebook paper from his pocket as we stop at a red light. Over the past three days, he's told me in a dozen ways that, although he's been fielding calls from private equity and making a few himself, he has yet to sketch out how a Men's Wearhouse deal would add up. He's been trying to protect himself from getting too attached to the idea, he explained.
But now, he says, "I sat down last night and tried to work it all out." He peers at his columns of hand-scrawled numbers and runs down some basic figures from the different Men's Wearhouse brands, the contributions of his new businesses, some estimates about a potential new model that he's fond of: subscription suit rental. Then he points out the company's market cap, the premium he'd have to pay shareholders, the $1.7 billion in debt. It's a $3 billion transaction. "I just don't know if it's going to make sense," he says as the light turns green. "It's hard to see it working."
But that's his head talking. His heart knows exactly what he should do.
Zimmer: The Highs and Lows
After graduating from Washington University in St. Louis, Zimmer joins his dad's raincoat company as a traveling salesman.
The first Men's Wearhouse opens, in Houston. The cash register is a cigar box, and Zimmer puts the store's logo on his van.
Zimmer stars in his first commercial and later debuts his full catch phrase, "You're gonna like the way you look. I guarantee it."
Men's Wearhouse's IPO raises $13 million. For the next eight years, it averages one new store per week.
Men's Wearhouse becomes one of the country's largest men's apparel retailers, with 1,278 stores.
After clashing with his handpicked successor, Doug Ewert, Zimmer explores taking Men's Wearhouse private; the board fires him.
Zimmer launches two startups, Generation Tux and zTailors, that compete with Men's Wearhouse.
Men's Wearhouse's stock tanks.
Zimmer tells Inc. he's exploring buying back Men's Wearhouse.