K&G Men's Center makes off-price inroads

Discount Store News, Feb 3, 1997 by James Mammarella

ATLANTA - K&G Men's Center, a 17-unit menswear off-price chain, doubled in size in 1996 and plans to expand by 50% this year. But what has really grabbed Wall Street's attention is the ascent of its stock price, from an IPO value of $10 per share a year ago to the current level of $25 per share.

K&G drove its sales from $60 million in 1995 to a projected $87 million '96.

This kind of growth in the men's tailored superstore segment guarantees comparison with the national star of the field, 325-store The Men's Wearhouse, with 1995 sales of $406 million.

The chains have starkly different operating philosophies. but they are in direct confrontation in a growing number of major markets. While the price range of the assortment at the Men's Wearhouse is above that of K&G, The Men's Wearhouse is developing a subsidiary chain to compete against the heart of K&G's price structure.

The Men's Wearhouse will operate its recent acquisition, C&R Clothiers, as a separate chain in the eyes of the consumer. Men's Wearhouse bought the remaining 16 units of C&R (presumably at the best locations), which had enjoyed good popularity with menswear shoppers in Los Angeles. While K&G has yet to reach the West Coast. The Men's Wearhouse will convert its three existing, outlet-style operations in Atlanta, Dallas and Houston to C&R stores -- setting the stage for head-on competition with K&G's two menswear units in Dallas and three stores in Atlanta.

K&G is focused on price. It was founded in 1989 by Steve Greenspan, a liquidator who is now chairman, president and ceo. As department stores ground their way through bankruptcies and consolidations, creating a floodtide of surplus men's apparel, he seized the opportunity to go into retail full time.

Friday through Sunday, anyway. K&G keeps utility and payroll overhead to a strict minimum by operating only three days per week. Locations are in warehouse-type buildings.

The stores, which range from 15,000 sq. ft. to 20,000 sq. ft., are almost all selling space; backroom functions are minimized with most restocking and remerchandising accomplished during off-hours.

In contrast to the K&G focus on price, TMW has built its business on service.

TMW sends sales associates to its Suits University, where the art of multiple selling is taught along with the mysteries of assembling snazzy Fridaywear ensembles. "We are saying it's not a self-service business" executive vp Richard Goldman told DSN. "Price doesn't drive everybody."

TMW delivers convenience by operating all week and by offering multiple stores in well-trafficked retail strips. Stores average between 4,500 sq. ft. and 5,000 sq. ft. "In a given market, we might have more square feet, say 40,000 sq. ft. in nine stores, instead of 20,000 sq. ft. all in one location," Goldman said.

K&G packs a lot of merchandise into its superstores. John Dancu, senior vp and cfo, said a typical unit stocks more than 12,000 suits, 15,000 ties and 10,000 dress shirts, among other goods.

The K&G mix is 45% tailored clothing. "We carry 14% suits; 30% sportswear; 14% dress slacks, sport coats and other tailored items; 15% furnishings; and 11% shoes and accessories," Dancu said. He credited K&G execs Martin Schwartz, senior vp and gmm, and Scott Saban, vp of operations, for running a tight ship and stocking on-trend styles.

TMW, with a dressy-oriented mix of clothing and sportswear, spices its off-price branded selection by mixing in about 20% private label goods. For these house tags, the chain has exclusive use of about 30 trademarks from Vito Ruffolo to Cricketeer, as well as a Botany program.

Suits at TMW range from $200 to $600. At K&G, suits are priced from $99 to $179. Even with the obvious price difference, Goldman acknowledged that lower-priced, no-frills chains such as K&G are a challenge TMW must face.

"K&G doesn't help our business" said Goldman. "They've siphoned off the bottom end." He asserted that TMW's new C&R Clothiers vehicle will appeal to the consumer directly on price points in advertising and merchandising. Suits at C&R start at $100 and top out at $225.

By giving a distinct offering to a more price-driven clientele, the company wants to keep the core TMW customer secure.

Goldman said few margin dollars came easily in 1996.

"Today's Man is still kicking, and Kuppenheimer promoted like crazy before going into Chapter 11," he said. He does not expect that the environment will change markedly in 1997.

TMW will expand by its usual 50 units in 1997, entering the Virginia markets of Richmond and Norfolk for the first time. The chain will also continue to grow its budding presence in the Washington, D.C., Baltimore and Boston metro areas.

This year K&G will open eight stores. (The chain is likely to go forward under fewer nameplates but now does business under four trade names. K&G Men's Center, K&G MenSmart, T&C Men's Center and T&C MenSmart.) It will enter the new markets of Columbus, Ohio; Farmingdale, N.Y.; Washington, D.C. (2); and Baltimore, and will add a third Atlanta location. The chain already operates units in Boston (2); Rahway, N.J.; Cincinnati, Indianapolis; Kansas City, Mo.; Denver; and Dallas (2).