Cost Synergies Ill-Suited for Long-Term Growth for Men’s Wearhouse

After battling for six months, Men’s Wearhouse and Jos. A. Bank finally came to an acquisition agreement on March 11 for $1.8 billion, forming the country’s fourth-largest men’s retailer.

Men’s Wearhouse expects cost synergies of $100-150 million over the next three years to result from the deal, including the benefit of better purchasing power. While I understand the value of cost savings, this makes me a bit nervous strategically. You can only generate savings from closing a store one time. What we haven’t heard is how the newly combined company will grow revenue for Men’s Wearhouse. After the costs savings over the next three years, what comes next?

Perhaps their advisors will be able to help with this question. Men’s Warehouse has hired AlixPartners to assist with integration. I’m curious to see how they will merge company cultures and maintain two distinct brands under one roof without losing any customers. Hopefully with AlixPartners, Men’s Wearhouse can smooth over any issues that arose from the public hostilities displayed by both companies and find a way to generate revenue.

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