While there is no mention of KNOT, this article will give you a good idea as to strategic importance of May's investment in KNOT:
chicagotribune.com
May sees bliss in tuxedo tie-ins
3 chains become 1 under retailer
By Bob Brown
Tribune staff reporter
February 27, 2004
As owner of the largest bridal store chain in the nation, May Department Stores Co. knows a bit about weddings.
So when the St. Louis-based retailer spied the fragmented men's formalwear market in the Chicago area, the company was smitten. May viewed it as a match made in heaven for its After Hours tuxedo unit, the industry's largest.
May walked down the aisle in June with Modern Tuxedo, a 26-store chain in Chicago with $12 million in annual sales, then followed that up with the acquisition in September of Desmonds Formalwear, a LaCrosse, Wis.-based firm with 66 outlets in the Midwest and $20 million in sales yearly.
Finally, in December, May purchased 125 Gingiss stores out of bankruptcy. Gingiss is the area's oldest and best-known name, founded by two brothers in Chicago 80 years ago.
May's winning bid didn't include another 111 Gingiss franchise stores; those owners have until September to drop the Gingiss name.
The swift rollup of Chicago's formalwear business has gone pretty much unnoticed, with few outward changes. But industry watchers are waiting to see if May can leverage the power of its sector-leading David's Bridal chain and After Hours unit to dominate the Chicago market.
"The synergy there is very obvious," said Jack Springer, executive director of the International Formalwear Association based in Chicago. "One could help the other."
Robert Huth, the former chairman of David's Bridal and now president and chief executive of May's bridal group, said the company set its sights on Chicago soon after acquiring After Hours, and the three deals gave it "an instant presence."
"We were very interested in expanding and were looking for ways to grow," Huth said. "It's a big market."
Springer said men's formalwear was an estimated $1 billion business in 2003. It is hard, though, to come up with a precise figure, he cautioned, because independent companies are famously close-mouthed about sales.
What is certain is the tuxedo industry survives off two events: proms and weddings.
The short but lucrative prom season runs for about six weeks from mid-April into June, Springer said, accounting for 20 percent to 25 percent of revenue.
The wedding season is the bread and butter of the industry, with tuxes rented in about 90 percent of the estimated 2.3 million weddings in the U.S. last year, Springer said. Costs range from $65 for generic brands to more than $125 for designer models, he added.
That's where the importance of the link between David's Bridal and After Hours comes in.
Brides typically exert a strong influence on where the tux is rented and what it looks like. So nearly all tuxedo stores try to partner with a bridal shop or buy bridal lists to use in direct advertisement mailings.
"What you want is the bridal leads," Springer said. "Certainly, it gives [May] an advantage. Once they've got the bride in there, that's their customer."
After Hours is a newer name in the formalwear universe. The franchise started when an Atlanta-based tuxedo shop, Mitchell's, began consolidating competitors in that region, then bought properties in Philadelphia and Michigan, Huth said.
The operation caught the eye of May, which in August 2000 had purchased David's Bridal for $420 million. May acquired the After Hours business in December 2001 for $121 million, which also included 10 Priscilla's of Boston bridal shops.
Big plans, plenty of sellers
Since then May has continued the expansion, with more than 330 stores in 30 states and Washington, D.C. The goal is to put After Hours stores in all 50 states within the next five to six years and "be a dominant player in the industry," Huth said.
He has found no shortage of willing sellers.
"I think the industry today is such that a lot of players are wondering what their future in the business will be," he said.
For the next two years, however, the company will concentrate on absorbing and integrating the businesses it has, Huth said.
Plans call for closing 8 to 10 of the 15 Desmonds stores in the Chicago area, Huth said, with the remaining outlets converted to Modern Tuxedo stores, a process already under way. That change won't last long, as the Modern Tuxedo brand will be scrapped within 18 months and the stores will be turned into After Hours outlets "so we have a national name," he said.
But the Gingiss brand, which includes 28 Chicago stores, will be kept, Huth said, with some different styles and lines to give the chain a separate identity.
Springer said the tuxedo business shakeout has captured everyone's attention.
"Consolidation is the big question the whole industry has," he said. "Certainly it has small independents thinking about joining up with other independents."
Rather than strike fear, that size and corporate structure give some Chicago-area independents confidence that they can successfully compete with After Hours.
"We couldn't be happier," said Sam Carlson, owner and president of Black Tie formalwear shops. "This is a huge opportunity. They've taken our three most formidable competitors and turned them into one."
Carlson, who operates three stores in the south suburbs, recently teamed with a former manager at Modern Tuxedo on three additional Black Tie stores. The pair have formed an affiliation with House of Brides, a leading Chicago-area competitor in the bridal industry that touts its 50,000-square-foot Schaumburg showroom as "the world's largest wedding store."
For the past 10 years, House of Brides had a tie-in with Modern Tuxedo, including stores-within-stores at several of its five locations. The takeover by After Hours ended that association, said Dale Buziecki, the company's general manager.
Further expansion, possibly with some former Gingiss franchisees, is in the planning stage, Carlson said.
Personal touch a priority
The situation is comparable to what happened when the banking industry was in the throes of consolidation: Customer service suffered, Carlson said.
In the formalwear business, competitors pretty much have the same products, he said, which leaves service and price to differentiate themselves.
"We're small enough to service them the way they want to be serviced. They're too big for the personal touch," Carlson said of May's venture.
Nevertheless, another giant competitor worries Carlson and fellow independents.
Men's Wearhouse Inc. entered the tuxedo rental market in 1999 and now offers rental tuxes in 494 of its 511 locations, said Jeffrey Fript, the firm's vice president of operations.
Tuxedo rental volume last year was $50 million, he said.
The tuxedo business complements Men's Wearhouse's regular apparel sales by getting new customers into the store three times: the first to select a tuxedo, the second to pick it up and the third to return it, Fript said. On those occasions, salespeople suggest other items that might be needed, such as clothes for the honeymoon.
Huth acknowledged that Men's Wearhouse has built a formidable operation but said it lacks a vital component.
"We have that one big advantage," Huth said. "We have the first shot on the bride because of David's."
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