Jos. A. Bank and the Folly of Quantitative Easing

A few years back I wrote an article comparing buy-one-suit-get-three-free sales by Jos. A. Bank to the Federal Reserve’s quantitative easing program. Then Jos. A. Bank’s management did something absolutely brilliant: In March 2014 it sold the company for $1.8 billion to Men’s Wearhouse, its closest competitor (and twice its outfit’s size). Earlier this month…

A few years back I wrote an article comparing buy-one-suit-get-three-free sales by Jos. A. Bank to the Federal Reserve’s quantitative easing program. Then Jos. A. Bank’s management did something absolutely brilliant: In March 2014 it sold the company for $1.8 billion to Men’s Wearhouse, its closest competitor (and twice its outfit’s size).

Earlier this month Men’s Wearhouse — which in February changed its name to Tailored Brands — owned up to the reality that Jos. A. Bank would have faced on its own if it had not been acquired: that the Jos. A. Bank brand is basically worthless. It was destroyed by endless sales. Any suit-wearing man who was going to buy clothing from Jos. A. Bank already had at least four suits in his closet. Almost two years to the day since it bought Jos. A. Bank, Tailored Brands announced that it is writing down nearly two thirds of the value of the purchase and shutting down a quarter of Jos. A. Bank stores. Tailored Brands’ stock has collapsed, and the Jos. A. Bank story is coming to an unpleasant but predictable finale (especially for Tailored Brands shareholders).

The irony of QE or of Jos. A. Bank’s marketing strategy is that neither started out as an indefinite adventure. QE 1 was launched as a way to restore liquidity and prevent a run on the banks in the midst of the financial crisis. QE 2 and the rest that followed were the Fed’s attempt to engineer greater economic growth. I remember talking to Jos. A. Bank’s CFO in the late 2000s, and he was telling me how its “buy-one-get-X-free” strategy was temporary. However, then the crisis arrived, and slowly, one month at a time, its marketing campaign became permanent. Just as people who try heroin for the first time never intend to become drug addicts, neither the Fed nor Jos. A. Bank management wanted to become QE and “buy-one-get-X-free” junkies.

What do we learn from Jos. A. Bank’s sad story? Temporary-turned-permanent solutions may postpone the inevitable for a long time — to the point where observers like yours truly turn into boring, broken records. (I might shoot myself if I have to write another article about the Fed and QE.)

But eventually, temporary-turned-permanent solutions lose their potency, as they are just papering over a core problem that they were never designed to solve, and that ugly reality comes to the surface. Ben Bernanke skillfully passed the Fed chair baton to Janet Yellen in 2014, but, as we learned with Jos. A. Bank, ownership of an unresolved problem doesn’t change the problem.

Please read the following important disclosure here.

Related Articles

The Hidden Advantages of Investing from NOT New York City

The Hidden Advantages of Investing from NOT New York City

What are the hidden advantages of living away from “noisy” investing centers like New York? 

Money Managers Are Not Factory Workers

One of the biggest hazards of being a professional money manager is that you are expected to behave in a certain way: You have to come to the office every day, work long hours, slog through countless emails, be on top of your portfolio, watch business TV and consume news continuously, and dress well and conservatively, wearing a rope around the only part of your body that lets air get to your brain.

DeepSeek Breaks the AI Paradigm

I’ve received emails from readers asking my thoughts on DeepSeek. I need to start with two warnings. First, the usual one: I’m a generalist value investor, not a technology specialist, so my knowledge of AI models is superficial. Second, and more unusually, we don’t have all the facts yet.

Escaping Stock Market Double Hell

Over the last few years, our portfolio has skewed more international. Today, if you only invest in the US, you're experiencing two stock market hells.

Leave a Comment