FOR DEAL MAKERS, WHAT NOT TO WEAR TO WOO MEN'S WEARHOUSE

Original Story: WSJ.com

Mergers and acquisitions pros like their pricey duds: $5,000 suits, $200 Hermès silk ties and $1,300 John Lobb shoes.

But a deal's a deal, and sometimes that means shopping at Men's Wearhouse.

The attorneys at Willkie Farr & Gallagher LLP, which advised Men's Wearhouse on its recent deal to purchase rival Jos. A. Bank, shrugged off Armani and Zegna in favor of $600 suits by Joseph Abboud —a once-prestigious brand now owned by Men's Wearhouse.  Some of these lawyers are considering investing in Philadelphia Apartments to have some real estate property.

They were "custom-made," points out partner Steven Seidman, who says he donned a light blue number with a subtle plaid pattern to several meetings during the six-month negotiation period.

"If you're coming in to make a pitch to a client that you're going to be charging a lot of money to, you should understand their product," says David Edwab, vice chairman of the board of directors for Men's Wearhouse.

In the hypercompetitive world of mergers, acquisitions and initial public offerings, you really do need to dress to impress. And it helps to have a flexible definition of what that means.

Consider the IPO of yogawear maker Lululemon Athletica Inc. LULU -0.64%  seven years ago. Anxious bankers were prepared to strike a brand-appropriate pose to win the company's business.

Ditching their pressed shirts, suits and dress shoes, deal teams at several banks showed up at meetings wearing form-fitting yoga pants, track suit tops and sneakers to convince Lululemon's management that they would be committed to the underwriting assignment—and to the spirit of the brand.

But yoga isn't for everyone. The stretchy bottoms were tight, remembers one banker who pitched the company. "It was pretty embarrassing, actually," says the banker, who remembers leaving his hotel the morning of the pitch and feeling goofy as people in business suits walked by. Even though they were determined to wear the pants, the bank didn't get a piece of the deal.

In uptown Manhattan, UBS AG's bankers were planning an elaborate stunt of their own for the Lululemon pitch. The bank outfitted around 75 of its employees in Lululemon gear and had them descend upon Central Park for a "flash mob" yoga session. They photographed the event and presented it to Lululemon's management during their pitch. UBS was named as one of the deal's underwriters.

"Our sales went down when we stopped interviewing investment banks," jokes Robert Meers, Lululemon's CEO at the time, who was stunned by the number of bankers who loped into meetings sporting his product.

While bankers may resort to gimmickry for all manner of pitches, deal makers agree that retail clients require particularly special handling.

To woo a food company, for instance, bankers might arrange to have nibbles from the brand's pantry at the pitch. Tech bankers often dress down to be in sync with the relaxed vibe of Silicon Valley.

But fashion CEOs tend to have a discerning eye for detail and an obsession with who wears what.

True Religion founder and former CEO Jeffrey Lubell remembers one banker's entire outfit from when the two met in 2005.

"At the time, Peter Comisar appeared in my newest Big T Cords, a great shirt and blazer," recalls Mr. Lubell. "His fashion was a stand out in a sea of dark suits and ties."

Even the banker can recite his outfit for that crucial day: The corduroy pants were olive green with white stitching around the pockets.

The deal didn't materialize. But Mr. Comisar made such an impression that, years later, Mr. Lubell hired him to represent the brand in its sale to a private-equity firm.

The tradition of playing dress-up for a pitch extends back decades. Gilbert Harrison, founder of retail investment bank Financo LLC, remembers learning the lesson the hard way. In the 1970s, Mr. Harrison showed up to a meeting in St. Louis with the chairman of Interco Inc. wearing his go-to shoe: black Gucci loafers. Interco owned a number of shoe brands at the time, including Florsheim.

"Young man if you're coming here to sell a Camel, don't smoke a Lucky Strike," Mr. Harrison recalls being told by Maurice Chambers, an Interco executive who is now deceased. Later on, Mr. Chambers gave him a catalog and told him to order a few pairs. Mr. Harrison chose dress shoes in black and brown, and never got off on the wrong foot with Interco again, he says.

Fashion faux pas can be costly. Karen Goodman, a managing director at Financo, recalls driving to a pitch to sell a business for a different shoe retailer. Ms. Goodman says she usually wears the products of the client she is pitching. But on her drive over to the meeting, she realized she had on a competitor's kicks.

"It was 8 a.m. and stores weren't open," she laments. Financo lost the deal to a competitor and later learned, from a board member, that the snub had to do with the not-so-fancy footwork.

All the wardrobe changes can add up. Bankers are typically expected to pay for outfits and accessories out of pocket, which can get pricey when it comes to pitching luxury clients.

Jane DeFlorio, a former retail investment banker at Deutsche Bank, still grits her teeth when she opens her jewelry box and finds two cheap-looking necklaces she bought for a meeting with the founder of an accessories brand. The opera-length cream and gold plastic disk necklaces set her back $500 each, plus expedited shipping, she recalls.

"It just killed me to buy them," she says. To make matters worse, spending big bucks didn't work. The company chose a different bank.

Sometimes, the sartorial solicitation makes for delicate business. When Ms. DeFlorio worked on bra and panty maker Maidenform's initial public offering, she was often the only woman in the room, she says. Whenever the management team or other bankers would talk about the fit or comfort of the bras, they'd motion to her and ask her opinion, she remembers. Intimately familiar with the product, she obliged.

During a roadshow presentation in New York, Ms. DeFlorio remembers addressing a room full of men. To add a bit of levity to the session, she introduced Maidenform's management team with a tacit product endorsement that elicited laughs.

"I can speak to the quality of this company, the quality of its management team," she said, jutting out her hips for the punch line. "And most of all, I can speak to the quality of the product."

Worse Than Expected Sales At Hennes And Mauritz

Wall Street Journal

STOCKHOLM -- Hennes & Mauritz AB on Monday reported worse-than-expected sales in October, fueling concerns the Swedish fashion retailer is losing market share in key markets, with turnover particularly hit in France, Spain and the U.S.

Sales in stores open for at least a year fell 3% in October, its sixth straight month of falling sales, confounding expectations for a 3% rise and triggering a selloff in the retailer's shares. The stock lost 4.7% to 415.40 Swedish kronor ($60.86) on a broadly flat Stockholm market.

H&M, which launched a limited line of Jimmy Choo-designed shoes and accessories on Saturday, is known for its low-priced, fashionable clothes, selling limited collections from established designers including Karl Lagerfeld, Stella McCartney and Matthew Williamson.

"We're incredibly satisfied with the [Jimmy Choo] campaign," said Nils Vinge, head of H&M investor relations. "There is enormous interest all over the world and most of the collection sold out in the opening days," he said, noting that the campaign helps attract customers to the stores and position the brand, while also boosting sales.

Total sales, which include sales in new stores, rose 7% in October, but missed forecasts for a 13% rise. The company, which reports only percentage changes for its monthly sales, said it had 1,925 stores at the end of October compared with 1,702 stores a year earlier.

H&M has recorded falling same-store sales in 14 of the last 15 months, but said the global recession was affecting its customers differently. "Sales in Scandinavia, Central Europe and Asia were very satisfactory, while most other markets, primarily France, Spain and the U.S., had a continued weak sales development," the retailer said.

H&M is the world's third-largest fashion chain by revenue, behind Gap Inc. in the U.S., which recently posted a 4% increase in same-store sales for October, and Spain's Inditex SA, so tough competition was expected in those respective markets.

"It's a big disappointment," Credit Suisse said in a note, adding that October was at least better than the 11% and 8% declines seen in August and September, respectively. "September and October are the core months for the outerwear season and as such the season has been lost so far as H&M is concerned."

H&M doesn't give sales data for individual markets on a monthly basis, but Evli Bank analyst Anders Wiklund said the October sales figures could imply H&M is losing market share in the U.S., given the monthly figures from Gap. "They haven't had problems with collections for a long time, but one begins to ask if that could be it," Mr. Wiklund said.

Boutiques Get Squeezed

Independent fashion boutiques flourished in recent years as young women snapped up the latest designer apparel, no matter the price. But now, in the current crunch, they are among the retail industry's hardest hit.

The credit crisis and the sharp downturn in consumer spending have left many boutique owners as cash-strapped as their customers. Factoring firms that normally keep goods flowing to stores by buying designers' accounts receivable have stopped approving shipments to some boutiques. That has forced the owners of these stores to pay cash on delivery -- or to use their own personal credit cards -- so they can stock their stores with womens clothes for the all-important holiday season.

Paying by credit card "is a game that will take you down" because of the high interest rates, says David Katzav, co-owner of New York-based Big Drop, a four-store chain that sells high-end denim and contemporary women's clothing in Manhattan and Miami. But Mr. Katzav says he has no choice. About 20% of his vendors won't ship to his 18-year-old chain unless he pays up front or provides a credit-card number, he says.

Factoring firms typically buy accounts receivable from designers and other apparel makers to help them finance production and make payroll rather than have to wait the typical 30 to 60 days it takes for retailers to pay their bills. Since summer, however, Hilldun, a factoring firm that extends credit to such designers as Peter Som and Derek Lam, has stopped approving shipments to about 40% of the 5,000 retailers it deals with, up from 25% to 30% previously, according to Gary Wassner, president and chief executive,

He says the increase is mostly a result of boutiques being cut off. Young boutique consumers are no longer "behaving like Sarah Jessica Parker" in "Sex and the City," he adds.

The boutiques' problems are being exacerbated by competition from Neiman Marcus, Saks Fifth Avenue and other high-end chains, which have been slashing prices to attract shoppers.

"Boutiques don't have the same breadth of assortment" as those chains and can't use apparel as a loss leader to attract consumers who might also buy higher-margin items like cosmetics, says Melanie Cox, chief executive of Scoop NYC, a New York-based chain of 14 upscale boutiques.

Scoop has had "no significant changes in our factoring situation," Ms. Cox says. But she adds that she been proactive, calling meetings with lenders and factoring firms to present worst-case-scenario cash-flow projections and to manage expectations.

Information about boutiques' finances is hard to come by because they're mostly small and privately held. So far this year, sales at privately held women's clothing stores -- which include boutiques -- have fallen below last year's levels, according to market researcher Sageworks Inc. From 2002 to 2007, by contrast, sales at these stores strongly outpaced those of department stores, Sageworks says.

Designer Tracy Reese, who makes dresses priced between $400 and $1,000, notes that factors have long been wary of independent boutiques but that "the numbers are even greater this season." As a result, she says, she has been asking small retailers to provide credit-card numbers in advance of shipments.

The situation is affecting her production plans, she adds, requiring her to delay production as long as possible to ensure that she doesn't get stuck with merchandise that retailers can't pay for.

Rather than cut prices to compete with high-end department stores, some boutiques are persuading designers to swap unsold merchandise for new designs, according to one owner who claims success with this strategy but declines to be named. Their hope is to freshen up their sales floors for the holidays as well as to preserve their profit margins.

Designers don't want the boutiques to cut prices. Many of them share the burden by reimbursing retailers for some of their markdowns at the end of the season, and they worry that markdowns will tarnish the image of their brands.Linda Dresner, who owns designer-apparel boutiques in New York and Michigan, says she got an email from a vendor last week "begging me to please hold prices until after Thanksgiving." Ms. Dresner, who has prepared for a difficult season by cutting winter orders 25% compared with last year, says, "I am going to hold off for as long as we feel comfortable."