MENS WEARHOUSE INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-16097
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THE MEN'S WEARHOUSE, INC.
(Exact name of Registrant as Specified in its Charter)

TEXAS 74-1790172
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)

5803 GLENMONT DRIVE 77081-1701
HOUSTON, TEXAS (Zip Code)
(Address of Principal Executive Offices)

(713) 592-7200
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of shares of common stock on the New
York Stock Exchange on April 19, 2002, was approximately $800.3 million.

The number of shares of common stock of the Registrant outstanding on April
19, 2002 was 41,110,861, excluding 1,365,364 shares classified as Treasury
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

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FORM 10-K REPORT INDEX

PART I

ITEM 1. BUSINESS

GENERAL

The Men's Wearhouse began operations in 1973 as a partnership and was
incorporated as The Men's Wearhouse, Inc. (the "Company") under the laws of
Texas in May 1974. Our principal corporate and executive offices are located at
5803 Glenmont Drive, Houston, Texas 77081-1701 (telephone number 713/592-7200),
and at 40650 Encyclopedia Circle, Fremont, California 94538-2453 (telephone
number 510/657-9821), respectively.

THE COMPANY

We are one of the largest specialty retailers of menswear in the United
States and Canada. At February 2, 2002, our U.S. operations included 567 stores
in 43 states and the District of Columbia, primarily operating under the brand
names of Men's Wearhouse and K&G, with approximately 26% of our locations in
Texas and California. At February 2, 2002, our Canadian operations included 113
stores in 10 provinces operating under the brand name of Moores.

MEN'S WEARHOUSE

Under the Men's Wearhouse brand, we target middle and upper-middle income
men by offering quality merchandise at everyday low prices. In addition to
value, we believe we provide a superior level of customer service. Men's
Wearhouse stores offer a broad selection of designer, brand name and private
label merchandise at prices we believe are typically 20% to 30% below the
regular prices found at traditional department and specialty stores. Our
merchandise includes suits, sport coats, slacks, business casual, sportswear,
outerwear, dress shirts, shoes and accessories. We concentrate on business
attire that is characterized by infrequent and more predictable fashion changes.
Therefore, we believe we are not as exposed to trends typical of more
fashion-forward apparel retailers, where significant markdowns and promotional
pricing are more common. At February 2, 2002, we operated 497 Men's Wearhouse
stores in 43 states and the District of Columbia. These stores are referred to
as "Men's Wearhouse stores" or "traditional stores".

We also began a tuxedo rental program in selected Men's Wearhouse stores
during 1999. We believe this program generates incremental business for us
without significant incremental personnel or real estate costs and broadens our
customer base by drawing first-time and younger customers into our stores. At
the end of fiscal 2001, we offered tuxedo rentals in 373 Men's Wearhouse stores.

K&G

Under the K&G brand, we target the more price sensitive customer. The K&G
brand was acquired as a result of our combination with K&G Men's Center, Inc. in
June 1999 in a transaction accounted for as a pooling of interests (see Note 2
of Notes to Consolidated Financial Statements). Prior to the combination, our
Value Priced Clothing ("VPC") subsidiary targeted the market for the more price
sensitive customer. During 2001, VPC merged into K&G, with the five former VPC
stores continuing operations under the name The Suit Warehouse ("TSW"). At
February 2, 2002, we operated 65 K&G stores in 23 states and four TSW stores in
metropolitan Detroit and one in Ohio. Nineteen of the K&G stores offer ladies'
career apparel that is also targeted to the more price sensitive customer.

We believe that K&G's more basic, value-oriented superstore approach
appeals to certain customers in the apparel market. K&G offers first-quality,
current-season apparel and accessories comparable in quality to that of
traditional department and specialty stores, at everyday low prices we believe
are typically 30% to 70% below the regular prices charged by such stores. K&G's
merchandising strategy emphasizes broad and deep assortments across all major
categories, including tailored clothing, casual sportswear, dress furnishings,
footwear and accessories. This merchandise selection, which includes brand name
as well as private label merchandise, positions K&G to attract a wide range of
customers in each of its markets. As with the Men's

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Wearhouse brand, K&G's philosophy of delivering everyday value distinguishes K&G
from other retailers that adopt a more promotional pricing strategy.

MOORES

On February 10, 1999, we combined with Moores Retail Group Inc. ("Moores"),
a privately owned Canadian corporation, in a transaction accounted for as a
pooling of interests (see Note 2 of Notes to Consolidated Financial Statements).
Moores is one of Canada's leading specialty retailers of menswear, with 113
stores in 10 Canadian provinces at February 2, 2002. Moores focuses on
conservative, basic tailored apparel. This limits exposure to changes in fashion
trends and the need for significant markdowns. Moores' merchandise consists of
suits, sport coats, slacks, business casual, dress shirts, sportswear,
outerwear, shoes and accessories. Moores typically offers a full assortment of
suits and sport coats with prices of suits generally ranging from Can$149 to
Can$349.

Moores distinguishes itself from other Canadian retailers of menswear by
manufacturing a significant portion of the tailored clothing for sale in its
stores. Moores conducts its manufacturing operations through its wholly owned
subsidiary, Golden Brand Clothing (Canada) Ltd. ("Golden Brand"), which is the
second largest manufacturer of men's suits and sport coats in Canada. Golden
Brand's manufacturing facility in Montreal, Quebec, includes a cutting room,
fusing department, pant shop and coat shop. At full capacity, the coat shop can
produce 13,000 units per week and the pant shop can produce 23,000 units per
week. As a result of the vertical integration and the related cost savings,
Moores is able to provide greater value to its customer by offering a broad
selection of quality merchandise at everyday low prices, which the Company
believes typically range from 20% to 30% below the regular prices charged by
traditional Canadian department and specialty stores. Beginning in 1999, Golden
Brand also manufactures product for Men's Wearhouse stores.

EXPANSION STRATEGY

Our expansion strategy includes:

- opening additional Men's Wearhouse and K&G stores in new and existing
markets,

- increasing the size of certain existing Men's Wearhouse stores,

- expanding our tuxedo rental program to additional Men's Wearhouse stores,

- identifying strategic acquisition opportunities, including but not
limited to international opportunities, and

- testing expanded merchandise categories in selected stores.

In general terms, we consider a geographic area served by a common group of
television stations as a single market.

On a limited basis, we have acquired store locations, inventories, customer
lists, trademarks and tradenames from existing menswear retailers in both new
and existing markets. We may do so again in the future. At present, we plan to
open an additional 20 new Men's Wearhouse stores and five new K&G stores in
2002, to close three Men's Wearhouse stores and one K&G store, to expand and
relocate up to 24 existing Men's Wearhouse stores and up to five existing K&G
stores and to continue expansion in subsequent years. We believe that our
ability to increase the number of traditional stores in the United States above
550 will be limited. However, we believe that additional growth opportunities
exist through selectively expanding existing stores, improving and diversifying
the merchandise mix, relocating stores and expanding our K&G brand.

MERCHANDISING

Our stores offer a broad selection of designer, brand name and private
label men's business attire, including a consistent stock of core items (such as
navy blazers, tuxedos and basic suits). Although basic styles are emphasized,
each season's merchandise reflects current fabric and color trends, and a small
percentage of inventory, accessories in particular, are usually more fashion
oriented. The broad merchandise

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selection creates increased sales opportunities by permitting a customer to
purchase substantially all of his tailored wardrobe and accessory requirements,
including shoes, at our stores. Within our tailored clothing, we offer an
assortment of styles from a variety of manufacturers and maintain a broad
selection of fabrics, colors and sizes. We believe that the depth of selection
offered provides us with an advantage over most of our competitors.

The Company's inventory mix includes "business casual" merchandise designed
to meet increased demand for such products resulting from the trend toward more
relaxed dress codes in the workplace. This merchandise consists of tailored and
non-tailored clothing (sport coats, casual slacks, knits and woven sports
shirts, sweaters and casual shoes) that complements the existing product mix and
provides opportunity for enhanced sales without significant inventory risk.

We do not purchase significant quantities of merchandise overruns or
close-outs. We provide recognizable quality merchandise at consistent prices
that assist the customer in identifying the value available at our stores. We
believe that the merchandise at Men's Wearhouse and Moores stores is generally
offered 20% to 30% below traditional department and specialty store regular
prices and that merchandise at K&G stores is generally 30% to 70% below regular
retail prices charged by such stores. A ticket is affixed to each item, which
displays our selling price alongside the price we regard as the regular price of
the item at traditional department and specialty stores.

By targeting men's business attire, a category of men's clothing
characterized by infrequent and more predictable fashion changes, we believe we
are not as exposed to trends typical of more fashion-forward apparel retailers.
This allows us to carry basic merchandise over to the following season and
reduces the need for markdowns; for example, a navy blazer or gray business suit
may be carried over to the next season. Our Men's Wearhouse and Moores stores
have an annual sale after Christmas that runs through the month of January,
during which prices on many items are reduced 20% to 50% off the everyday low
prices. This sale reduces stock at year-end and prepares for the arrival of the
new season's merchandise. In 2001, we had a similar event in mid-summer;
however, the level of advertising for promotion of the summer event was lower
than that for the year-end event.

During 1999, 2000 and 2001, 62.2%, 59.3% and 56.8%, respectively, of our
total net merchandise sales were attributable to tailored clothing (suits, sport
coats and slacks) and 37.8%, 40.7% and 43.2%, respectively, were attributable to
casual attire, sportswear, shoes, shirts, ties, outerwear and other.

In addition to accepting cash, checks or nationally recognized credit
cards, we offer our own private label credit card to Men's Wearhouse customers.
We have contracted with a third-party vendor to provide all necessary servicing
and processing and to assume all credit risks associated with our private label
credit card program. We believe that the private label credit card provides us
with an important tool for targeted marketing and presents an excellent
opportunity to communicate with our customers. During 2001, our customers used
the private label credit card for approximately 13% of our sales. During 2002,
we plan to introduce the private label credit card to our Moores customers.

CUSTOMER SERVICE AND MARKETING

The Men's Wearhouse and Moores sales personnel are trained as clothing
consultants to provide customers with assistance and advice on their apparel
needs, including product style, color coordination, fabric and garment fit. For
example, clothing consultants at Men's Wearhouse stores attend an intensive
training program at our training facility in Fremont, California, which is
further supplemented with weekly store meetings, periodic merchandise meetings
and frequent interaction with multi-unit managers and merchandise managers.

We encourage our clothing consultants to be friendly and knowledgeable and
to promptly greet each customer entering the store. Consultants are encouraged
to offer guidance to the customer at each stage of the decision-making process,
making every effort to earn the customer's confidence and to create a
professional relationship that will continue beyond the initial visit. Clothing
consultants are also encouraged to contact customers after the purchase or
pick-up of tailored clothing to determine whether customers are satisfied with

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their purchases and, if necessary, to take corrective action. Store personnel
have full authority to respond to customer complaints and reasonable requests,
including the approval of returns, exchanges, refunds, re-alterations and other
special requests, all of which we believe helps promote customer satisfaction
and loyalty.

K&G stores are designed to allow customers to select and purchase apparel
by themselves. For example, each merchandise category is clearly marked and
organized by size, and suits are specifically tagged "Athletic Fit,"
"Double-Breasted," "Three Button," etc., as a means of further assisting
customers to easily select their styles and sizes. K&G employees assist
customers with merchandise selection, including correct sizing.

Each of our stores provides on-site tailoring services to facilitate timely
alterations at a reasonable cost to customers. Tailored clothing purchased at a
Men's Wearhouse store will be pressed and re-altered (if the alterations were
performed at a Men's Wearhouse store) free of charge for the life of the
garment.

Because management believes that men prefer direct and easy store access,
we attempt to locate our stores in neighborhood strip and specialty retail
centers or in freestanding buildings to enable customers to park near the
entrance of the store.

Our total annual advertising expenditures, which were $64.5 million, $69.7
million and $61.2 million in 1999, 2000 and 2001, respectively, are significant.
The Company advertises principally on television and radio, which we consider
the most effective means of attracting and reaching potential customers, and our
advertising campaign is designed to reinforce our various brands.

PURCHASING AND DISTRIBUTION

We purchase merchandise from approximately 700 vendors. In 2001, no vendor
accounted for 10% or more of purchases. Management does not believe that the
loss of any vendor would significantly impact us. While we have no material
long-term contracts with our vendors, we believe that we have developed an
excellent relationship with our vendors, which is supported by consistent
purchasing practices.

We believe we obtain favorable buying opportunities relative to many of our
competitors. We do not request cooperative advertising support from
manufacturers, which reduces the manufacturers' costs of doing business with us
and enables them to offer us lower prices. Further, we believe we obtain better
discounts by entering into purchase arrangements that provide for limited return
policies, although we always retain the right to return goods that are damaged
upon receipt or determined to be improperly manufactured. Finally, volume
purchasing of specifically planned quantities purchased well in advance of the
season enables more efficient production runs by manufacturers who, in turn,
generally pass some of the cost savings back to us.

We purchase a significant portion of our inventory through a direct
sourcing program. In addition to finished product, we purchase fabric from mills
and contract with certain factories for the assembly of the finished product to
be sold in our U.S. and Canadian stores. Arrangements for fabric and assembly
have been with both domestic and foreign mills and factories. During 1999, 2000
and 2001, product procured through the direct sourcing program represented
approximately 26%, 28% and 28%, respectively, of total inventory purchases for
stores operating in the U.S. We expect that purchases through the direct
sourcing program will represent approximately 23% of total purchases in 2002.
During 1999, 2000 and 2001, our manufacturing operations at Golden Brand
provided 56%, 45% and 47%, respectively, of inventory purchases for Moores
stores and 2%, 6% and 5% during 1999, 2000 and 2001, respectively, of inventory
purchases for Men's Wearhouse stores.

To protect against currency exchange risks associated with certain firmly
committed and certain other probable, but not firmly committed, inventory
transactions denominated in a foreign currency (primarily the Euro), we enter
into forward exchange contracts. In addition, many of the purchases from foreign
vendors are financed by letters of credit.

We have entered into license agreements with a limited number of parties
under which we are entitled to use designer labels, such as "Gary Player(R)",
"Principe(R)" and nationally recognized brand labels such as "Botany(R)" and
"Botany 500(R)", in return for royalties paid to the licensor based on the costs
of the relevant product. These license agreements generally limit the use of the
individual label to products of a specific

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nature (such as men's suits, men's formal wear or men's shirts). The labels
licensed under these agreements will continue to be used in connection with a
portion of the purchases under the direct sourcing program described above, as
well as purchases from other vendors. We monitor the performance of these
licensed labels compared to their cost and may elect to selectively terminate
any license, as provided in the respective agreement. We have also purchased
several trademarks, including "Cricketeer(R)," "Joseph & Feiss(R),"
"Baracuta(R)," and "Pronto Uomo(R)," which are used similarly to our licensed
labels. Because of the continued consolidation in the men's tailored clothing
industry, we may be presented with opportunities to acquire or license other
designer or nationally recognized brand labels.

All merchandise for Men's Wearhouse stores is received into our central
warehouse located in Houston, Texas. Merchandise for a store is picked and then
moved to the appropriate staging area for shipping. In addition to the central
distribution center in Houston, we have space within certain Men's Wearhouse
stores in the majority of our markets, which function as redistribution
facilities for their respective areas. Most merchandise for Moores and K&G
stores is direct shipped by vendors to the stores.

We lease and operate 30 long-haul tractors and 61 trailers, which, together
with common carriers, are used to transport merchandise from the vendors to our
distribution facilities and from the distribution facilities to Men's Wearhouse
stores within each market. We also lease or own 67 smaller van-like trucks,
which are used to deliver merchandise locally or within a given geographic
region.

COMPETITION

We believe that the unit demand for men's tailored clothing has declined.
Our primary competitors include specialty men's clothing stores, traditional
department stores, off-price retailers, manufacturer-owned and independently
owned outlet stores and three-day stores. Over the past several years market
conditions have resulted in consolidation of the industry. We believe that the
principal competitive factors in the menswear market are merchandise assortment,
quality, price, garment fit, merchandise presentation, store location and
customer service.

We believe that strong vendor relationships, our direct sourcing program
and our buying power are the principal factors enabling us to obtain quality
merchandise at attractive prices. We believe that our vendors rely on our
predictable payment record and history of honoring promises, including our
promise not to advertise names of labeled and unlabeled designer merchandise
when requested. Certain of our competitors (principally department stores) may
be larger and may have substantially greater financial, marketing and other
resources than we have and therefore may have certain competitive advantages.

SEASONALITY

Like most retailers, our business is subject to seasonal fluctuations.
Historically, over 30% of our net sales and over 45% of our net earnings have
been generated during the fourth quarter of each year. Because of the
seasonality of our business, results for any quarter are not necessarily
indicative of the results that may be achieved for the full year (see Note 9 of
Notes to Consolidated Financial Statements).

TRADEMARKS AND SERVICEMARKS

We are the owner in the United States of the trademark and servicemark,
"The Men's Wearhouse(R)", and of federal registrations therefor expiring in
2010, 2009 and 2012, respectively, subject to renewal. We have also been granted
registrations for that trademark and servicemark in 42 states (including Texas
and California) of the 44 states in which we currently do business and have used
those marks. Applications for the remaining two states are in process. We are
also the owner of "Men's Wearhouse (and design)(R)". Our rights in the "The
Men's Wearhouse(R)" mark are a significant part of our business, as the mark has
become well known through our television and radio advertising campaigns.
Accordingly, we intend to maintain our mark and the related registrations.

We are also the owner in the United States of the servicemarks "The Suit
Warehouse" and "The Suit Warehouse and logo," which are tradenames used by
certain of the stores in Michigan operated by K&G, and

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"K&G", which is a tradename used by K&G stores. K&G stores also operate under
the tradenames K&G Men's Superstore, K&G Men's Center, K&G MenSmart, and K&G
Ladies. We own the registrations for "K&G(R)" and "K&G (stylized)(R)". The
applications for the servicemarks "K&G Men's Superstore" and K&G Men's
Superstore (and design) and K&G Ladies are in process. In addition, we own or
license other trademarks/servicemarks used in the business, principally in
connection with the labeling of product purchased through the direct sourcing
program.

We own Canadian trademark registrations for the marks "Moores The Suit
People(R)", "Moores Vetements Pour Hommes(R)" and "Moores Vetements Pour Hommes
(and design)(R)". Moores stores operate under the tradenames Moores The Suit
People and Moores Clothing for Men. The applications for the servicemarks for
"Moores Clothing for Men" and "Moores Clothing for Men (and design)" have also
been filed.

EMPLOYEES

At February 2, 2002, we had approximately 10,800 employees, of whom
approximately 8,300 were full-time and approximately 2,500 were part-time
employees. Seasonality affects the number of part-time employees as well as the
number of hours worked by full-time and part-time personnel. Approximately 939
of our employees at Golden Brand belong to the Union of Needletrades, Industrial
and Textile Employees. Golden Brand is part of a collective bargaining unit, of
which it is the largest company. The current union contract expires in November
2005.

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ITEM 2. PROPERTIES

As of February 2, 2002, we operated 567 stores in 43 states and the
District of Columbia and 113 stores in 10 Canadian provinces. The following
table sets forth the location, by state or province, of these stores:

7

Men's Wearhouse and Moores stores vary in size from approximately 2,850 to
15,100 total square feet (average square footage at February 2, 2002 was 5,501
square feet). Men's Wearhouse and Moores stores are primarily located in middle
and upper-middle income neighborhood strip and specialty retail shopping
centers. We believe our customers generally prefer to limit the amount of time
they spend shopping for menswear and seek easily accessible store sites.

Men's Wearhouse and Moores stores are designed to further our strategy of
facilitating sales while making the shopping experience pleasurable. We attempt
to create a specialty store atmosphere through effective merchandise
presentation and sizing, attractive in-store signs and efficient checkout
procedures. Most of these stores have similar floor plans and merchandise
presentation to facilitate the shopping experience and sales process. Designer,
brand name and private label garments are intermixed, and emphasis is placed on
the fit of the garment rather than on a particular label or manufacturer. Each
store is staffed with clothing consultants and sales associates and has a
tailoring facility with at least one tailor.

K&G stores vary in size from approximately 5,400 to 50,000 total square
feet (average square footage at February 2, 2002 was 20,509 square feet). K&G
stores are "destination" stores located primarily in low-cost warehouses and
secondary strip shopping centers that are easily accessible from major highways
and thoroughfares. K&G has created a 25,000 square foot prototype men's and
ladies' superstore with fitting rooms and convenient check-out, customer service
and tailoring areas. K&G stores are organized to convey the impression of a
dominant assortment of first-quality merchandise and to project a no-frills,
value-oriented warehouse atmosphere. Each element of store layout and
merchandise presentation is designed to reinforce K&G's strategy of providing a
large selection and assortment in each category. We seek to make K&G stores
"customer friendly" by utilizing store signage and grouping merchandise by
categories and sizes, with brand name and private label merchandise intermixed.
We also seek to instill a sense of urgency for the customer to purchase by
opening K&G stores for business on Fridays, Saturdays and Sundays only, except
for a limited number of Monday holidays and an expanded schedule for the holiday
season when stores are open every day. Each store is typically staffed with a
manager, assistant manager and other employees who serve as customer service and
sales personnel and cashiers. Each store also has a tailoring facility with at
least one tailor.

We lease our stores on terms generally from five to ten years with renewal
options at higher fixed rates in most cases. Leases typically provide for
percentage rent over sales break points. Additionally, most leases provide for a
base rent as well as "triple net charges", including but not limited to common
area and maintenance expenses, property taxes, utilities, center promotions and
insurance. In certain markets, we lease between 1,000 and 5,000 additional
square feet in a Men's Wearhouse store to be utilized as a redistribution
facility in that geographic area.

We own a 240,000 square foot facility situated on approximately seven acres
of land in Houston, Texas which serves as our principal office, warehouse and
distribution facility. Approximately 65,000 square feet of this facility is used
as office space for our financial, information technology and merchandising
departments with the remaining 175,000 square feet serving as a warehouse and
distribution center. We also own a 150,000 square foot facility, situated on an
adjacent six acres, comprised of approximately 9,000 square feet of office space
and 141,000 square feet serving as a warehouse and distribution center. During
1999, we purchased a 46-acre site in Houston on which we plan to develop
additional new distribution facilities. The first phase of development, an
approximately 385,000 square foot distribution center to support our tuxedo
rental program and our flat-packed merchandise, became operational during the
first and second quarters of 2001. No further development is currently planned
for 2002.

Our executive offices in Fremont, California are housed in a 35,500 square
foot facility that we own. This facility serves as an office and training
facility.

K&G leases a 100,000 square foot facility in Atlanta, Georgia which serves
as an office, distribution and store facility. Approximately 47,000 square feet
of this facility is used as office space for financial, information technology
and merchandising personnel, 23,000 square feet is used as a distribution center
for store fixtures and supplies and the remaining 30,000 square feet is used as
a store.

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Moores leases a 37,700 square foot facility in Toronto, Ontario, comprised
of approximately 17,900 square feet of office space and 19,800 square feet used
as a warehouse and distribution center. Moores also leases a 94,700 square foot
warehouse facility in Montreal, Quebec, and a 230,000 square foot facility in
Montreal, Quebec comprised of approximately 13,000 square feet of office space,
37,600 square feet of warehouse space and 179,400 square feet of manufacturing
space.

ITEM 3. LEGAL PROCEEDINGS

On May 11, 2001, a lawsuit was filed against the Company in the Superior
Court of California for the County of San Diego, Cause No. GIC 767223 (the
"Suit"). The Suit, which was brought as a purported class action, alleges
several causes of action, each based on the factual allegation that the Company
advertised and sold men's slacks at a marked price that was exclusive of a
hemming fee for the pants. The Suit seeks: (i) permanent and preliminary
injunctions against advertising slacks at prices which do not include hemming;
(ii) restitution of all funds allegedly acquired by means of any act or practice
declared by the Court to be unlawful or fraudulent or to constitute unfair
competition under certain California statutes, (iii) prejudgment interest; (iv)
compensatory and punitive damages; (v) attorney's fees; and (vi) costs of suit.
The Company believes that the Suit is without merit and the allegations are
contrary to customary and well recognized and accepted practices in the sale of
men's tailored clothing. The complaint in the Suit was subsequently amended to
add similar causes of action and requests for relief based upon allegations that
the Company's alleged "claims that [it] sell[s] the same garments as department
stores at 20% to 30% less" are false and misleading. The Company believes that
such added causes of action are also without merit. The court has not yet
decided whether the action may proceed as a class action. The Company intends to
vigorously defend the Suit.

In addition, we are involved in various routine legal proceedings,
including ongoing litigation, incidental to the conduct of our business.
Management believes that none of these matters will have a material adverse
effect on our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 2, 2002.

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PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the New York Stock Exchange under the symbol
"MW." Prior to October 2, 2000, the Company's stock was traded on the NASDAQ
National Market System under the symbol "MENS." Prior to April 3, 2000, the
Company's stock was traded on the NASDAQ National Market System under the symbol
"SUIT". The following table sets forth, on a per share basis for the periods
indicated, the high and low sale prices per share for our common stock as
reported by the New York Stock Exchange and the NASDAQ National Market System.

On April 19, 2002, there were approximately 1,280 holders of record and
approximately 7,100 beneficial holders of our common stock.

We have not paid cash dividends on our common stock and for the foreseeable
future we intend to retain all of our earnings for the future operation and
expansion of our business. Our credit agreement prohibits the payment of cash
dividends on our common stock (see Note 4 of Notes to Consolidated Financial
Statements).

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ITEM 6. SELECTED FINANCIAL DATA

The following selected statement of earnings and balance sheet information
for the fiscal years indicated has been derived from The Men's Wearhouse, Inc.
(the "Company") audited consolidated financial statements. The Selected
Financial Data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and notes thereto. References herein to years are to the
Company's 52-week or 53-week fiscal year, which ends on the Saturday nearest
January 31 in the following calendar year. For example, references to "2001"
mean the fiscal year ended February 2, 2002. All fiscal years for which
financial information is included herein had 52 weeks, except 2000 which had 53
weeks.

Financial and operating data for all periods presented reflect the
retroactive effect of the February 1999 combination with Moores Retail Group
Inc. ("Moores") and the June 1999 combination with K&G Men's Center, Inc.
("K&G"), both accounted for as a pooling of interests (see Note 2 of Notes to
Consolidated Financial Statements). The pro forma 1999 statement of earnings
data excludes the non-recurring charges related to these combinations.

- ---------------

(1) Adjusted to give effect to a 50% stock dividend effected on June 19, 1998.

(2) Comparable store sales data is calculated by excluding the net sales of a
store for any month of one period if the store was not open throughout the
same month of the prior period. Fiscal year 2000 is calculated on a 52-week
basis.

(3) Average square footage -- all stores is calculated by dividing the total
square footage for all stores open at the end of the period by the number of
stores open at the end of such period.

(4) Average sales per square foot of selling space is calculated by dividing
total selling square footage for all stores open the entire year into total
sales for those stores.

(5) January 31, 1998 balances include the 5 1/4% Convertible Subordinated Notes
Due 2003. In August 1998, the Company gave notice to the holders of its
outstanding 5 1/4% Convertible Subordinated Notes (the "Notes") that the
Company would redeem the Notes on September 14, 1998. As a result, $36.8
million principal amount of the Notes was converted into 1.6 million shares
of the Company's common stock and $20.7 million principal amount was
redeemed for an aggregate of $21.5 million. An extraordinary charge of $0.7
million, net of tax benefit of $0.5 million, related to the early retirement
of the Notes in fiscal 1998 was recognized.

11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Men's Wearhouse opened its first store in Houston, Texas in August
1973. The Company combined with Moores Retail Group Inc. ("Moores") in February
1999 and with K&G Men's Center, Inc. ("K&G") in June 1999, with both
combinations accounted for as a pooling of interests (see Note 2 of Notes to
Consolidated Financial Statements). At February 2, 2002, we operated 567 stores
in the United States and 113 stores in Canada. We opened 54 stores in 1999, 39
stores in 2000 and 32 stores in 2001; in addition, we acquired one store in
2000. Expansion is generally continued within a market as long as management
believes it will provide profitable incremental sales volume. Historically, this
growth has resulted in significant increases in net sales and has also
contributed to increased net earnings. However, in 2001, we experienced
decreases in net sales and net earnings as a result of the declining US economy
and the effects of the events of September 11, 2001 (see "Results of Operations"
discussion herein).

Like most retailers, our business is subject to seasonal fluctuations.
Historically, more than 30% of our net sales and more than 45% of our net
earnings have been generated during the fourth quarter of each year. Because of
the seasonality of our business, results for any quarter are not necessarily
indicative of the results that may be achieved for the full year.

We intend to continue our expansion in new and existing markets. We plan to
open approximately 20 new Men's Wearhouse stores and five new K&G stores in 2002
and to expand and relocate approximately 24 existing Men's Wearhouse stores and
up to five existing K&G stores. The average cost (excluding telecommunications
and point-of-sale equipment and inventory) of opening a new store is expected to
be approximately $0.3 million for a Men's Wearhouse store and approximately $0.6
million for a K&G store in 2002.

We have closed 25 stores in the three years ended February 2, 2002.
Generally, in determining whether to close a store, we consider the store's
historical and projected performance and the continued desirability of the
store's location. In determining store contribution, the Company considers net
sales, cost of sales and other direct store costs, but excludes buying costs,
corporate overhead, depreciation and amortization, financing costs and
advertising. Store performance is continually monitored and, occasionally, as
neighborhoods and shopping areas change, management may determine that it is in
our best interest to close or relocate a store. In 1999, four of the stores
closed were stores acquired in January 1997 that were closed as part of our
efforts to integrate and develop our operations that target the more price
sensitive clothing customer. Of the remaining 15 stores closed in 1999, two were
closed due to substandard performance or lease expiration and 13 were closed to
eliminate duplicate store sites following the combinations with Moores and K&G.
In 2000, three stores were closed due to substandard performance. In 2001, three
stores were closed due to substandard performance or lease termination.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements requires the
appropriate application of accounting policies in accordance with generally
accepted accounting principles. In many instances, this also requires management
to make estimates and assumptions about future events that affect the amounts
and disclosures included in our financial statements. We base our estimates on
historical experience and various assumptions that we believe are reasonable
under the circumstances. However, since future events and conditions and their
effects cannot be determined with certainty, actual results will differ from our
estimates, and such differences could be material to our financial statements.

Our accounting policies are described in Note 1 of Notes to Consolidated
Financial Statements. We consistently apply these policies and continuously
evaluate the reasonableness of our estimates in light of actual events.
Historically, we have found our accounting policies to be appropriate and our
estimates and assumptions reasonable. We believe our critical accounting
policies and our most significant estimates are those that relate to inventories
and our estimated liabilities for the self-insured portions of our workers'
compensation and employee health benefit costs.

12

Our inventory is carried at the lower of cost or market. Cost is determined
on the first-in, first-out method for approximately 74% of our inventory and on
the retail inventory method for the remaining 26%. Our inventory cost also
includes estimated procurement and distribution costs (warehousing, freight,
hangers and merchandising costs) associated with the inventory, with the balance
of such costs included in cost of sales. We make assumptions, based primarily on
historical experience, as to items in our inventory that may be damaged,
obsolete or salable only at marked down prices and reduce the cost of inventory
to reflect the market value of these items. If actual damages, obsolescence or
market demand is significantly different from our estimates, additional
inventory write-downs could be required. In addition, procurement and
distribution costs are allocated to inventory based on the ratio of annual
product purchases to average inventory cost. If this ratio were to change
significantly, it could materially affect the amount of procurement and
distribution costs included in cost of sales.

We self-insure portions of our workers' compensation and employee medical
costs. We estimate our liability for future payments under these programs based
on historical experience and various assumptions as to participating employees,
health care costs, number of claims and other factors. We also use actuarial
estimates with respect to workers' compensation. If the number of claims or the
costs associated with those claims were to increase significantly over our
estimates, additional charges to earnings could be necessary to cover required
payments.

RESULTS OF OPERATIONS

The following table sets forth the Company's results of operations
expressed as a percentage of net sales for the periods indicated:

2001 COMPARED WITH 2000

The following table presents a breakdown of 2000 and 2001 net sales of the
Company by stores open in each of these periods (in millions):

The Company's net sales decreased $60.3 million, or 4.5%, to $1,273.2
million for 2001 due primarily to decreased sales in US stores open prior to
fiscal year 2000, offset by increased sales from stores opened in 2000

13

and 2001. Comparable store sales (which are calculated by excluding the net
sales of a store for any month of one period if the store was not open
throughout the same month of the prior period) for 2001 decreased 10.2% in the
US and increased 4.2% in Canada from 2000. The decrease in comparable sales for
the US stores was due mainly to the declining US economy. Sales of men's
tailored apparel are particularly affected since buying patterns for men are
considered to be more discretionary than those in other apparel areas. The
negative effect of the terrorist events of September 11, 2001 on retail and
numerous other business sectors also contributed to the decline.

Gross margin decreased $63.6 million, or 12.3%, to $451.1 million in 2001.
As a percentage of sales, gross margin decreased from 38.6% in 2000 to 35.4% in
2001. This decrease in gross margin predominately resulted from an increase in
occupancy cost (which is relatively constant on a per store basis) as a
percentage of sales and a larger percentage of the sales mix being contributed
by our lower margin K&G brand.

Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 29.6% in 2001 compared to 28.0% in 2000, with SG&A expenditures
increasing by $3.8 million or 1.0% to $377.3 million. On an absolute dollar
basis, the principal components of SG&A expenses increased primarily due to our
growth in number of stores and increased infrastructure support costs. As a
percentage of sales, advertising expense decreased from 5.2% to 4.8%, store
salaries increased from 11.1% to 11.4% and other SG&A expenses increased from
11.7% to 13.4%.

Interest expense, net of interest income, increased from $0.8 million in
2000 to $2.9 million in 2001. Weighted average borrowings outstanding increased
$15.4 million from the prior year to $65.3 million in 2001, and the weighted
average interest rate on outstanding indebtedness decreased from 7.1% to 5.4%.
The increase in the weighted average borrowings resulted primarily from
increased short-term borrowings under our credit facilities. The decrease in the
weighted average interest rate was due primarily to decreases during 2001 in the
LIBOR rate. Interest expense was offset by interest income from the investment
of excess cash of $2.8 million in 2000 and $0.8 million in 2001. See "Liquidity
and Capital Resources" discussion herein.

Our effective income tax rate for the year ended February 2, 2002 was 39.0%
compared to 39.7% for the prior year. The effective tax rate was higher than the
statutory federal rate of 35% primarily due to the effect of state income taxes.

These factors resulted in 2001 net earnings of $43.3 million or 3.4% of net
sales, compared with 2000 net earnings of $84.7 million or 6.3% of net sales.

2000 COMPARED WITH 1999

The following table presents a breakdown of 1999 and 2000 net sales of the
Company by stores open in each of these periods (in millions):

Our net sales increased $146.8 million, or 12.4%, to $1,333.5 million for
2000 due primarily to sales resulting from the increased number of stores and
increased sales at existing stores. Sales also increased as a result of the
additional week in 2000, a 53-week year. Comparable store sales for 2000,
calculated on a 52-week to 52-week basis, increased 3.3% in the US and 8.3% in
Canada from 1999.

Gross margin increased $75.7 million, or 17.2%, to $514.7 million in 2000.
As a percentage of sales, gross margin increased from 37.0% in 1999 to 38.6% in
2000. This increase in gross margin resulted mainly from a decrease in product
costs as a percentage of sales, offset partially by an increase in occupancy
costs.

14

Selling, general and administrative ("SG&A") expenses, as a percentage of
sales, were 28.0% in 2000, a 0.8% increase from the prior year, while SG&A
expenditures increased by $50.2 million to $373.5 million. On an absolute dollar
basis, the principal components of SG&A expenses increased primarily due to our
growth. As a percentage of net sales, advertising expense decreased from 5.4% to
5.2%, store salaries increased from 10.6% to 11.1% and other SG&A expenses
increased from 11.2% to 11.7%.

Interest expense, net of interest income, decreased from $2.6 million in
1999 to $0.8 million in 2000. Weighted average borrowings outstanding decreased
$11.1 million from the prior year to $49.9 million in 2000, and the weighted
average interest rate on outstanding indebtedness increased from 6.8% to 7.1%.
The decrease in the weighted average borrowings resulted primarily from payments
on long-term debt and reduced short-term borrowings under our credit facilities.
The increase in the weighted average interest rate was due primarily to
increases during 2000 in the LIBOR rate. Interest expense was offset by interest
income from the investment of excess cash of $1.6 million in 1999 and $2.8
million in 2000. See "Liquidity and Capital Resources" discussion herein.

Our effective income tax rate for the year ended February 3, 2001 was 39.7%
and 43.1% for the prior year. The effective tax rate was higher than the
statutory federal rate of 35% primarily due to the effect of state income taxes,
the nondeductibility of a portion of meal and entertainment expenses and, in
1999, nondeductible transaction costs.

These factors resulted in 2000 earnings before extraordinary item of $84.7
million or 6.3% of net sales, compared with 1999 earnings before extraordinary
item of $56.0 million or 4.7% of net sales. Our earnings before extraordinary
item, as reported and after the effect of non-recurring charges related to the
combinations with Moores and K&G in 1999, were as follows (in thousands, except
per share amounts):

LIQUIDITY AND CAPITAL RESOURCES

We have a revolving credit agreement with a group of banks (the "Credit
Agreement") that provides for borrowing of up to $125 million through February
5, 2004. Advances under the Credit Agreement bear interest at a rate per annum
equal to, at our option, the agent's prime rate or the reserve adjusted LIBOR
rate plus a varying interest rate margin. The Credit Agreement also provides for
fees applicable to unused commitments. As of February 3, 2001 and February 2,
2002, there was no indebtedness outstanding under the Credit Agreement.

The Credit Agreement contains various restrictive and financial covenants,
including the requirement to maintain a minimum level of net worth and certain
financial ratios. The Credit Agreement also prohibits payment of cash dividends
on our common stock. We are in compliance with the covenants in the Credit
Agreement.

In addition, we have two Canadian credit facilities: a revolving credit
agreement which provides for borrowings up to Can$30 million (US$19 million)
through February 5, 2004 and a term credit agreement

15

under which we borrowed Can$75 million (US$47 million) in February 1999. The
term borrowing is payable in quarterly installments of Can$0.9 million (US$0.6
million) beginning May 1999, with the remaining unpaid principal payable on
February 5, 2004. The effective interest rate for the term borrowing was 6.3%
and 2.8% at February 3, 2001 and February 2, 2002, respectively. Covenants and
interest rates are substantially similar to those contained in our Credit
Agreement. As of February 3, 2001 and February 2, 2002, there was US$45.2
million and US$40.1 million outstanding under these credit agreements,
respectively.

Our primary sources of working capital are cash flow from operations and
borrowings under the Credit Agreement. We had working capital of $280.3 million,
$316.2 million and $301.9 million at the end of 1999, 2000 and 2001,
respectively. Historically, our working capital has been at its lowest level in
January and February, and has increased through November as inventory buildup is
financed with both short-term and long-term borrowings in preparation for the
fourth quarter selling season.

Our operating activities provided net cash of $101.3 million, $94.7 million
and $52.3 million in 1999, 2000 and 2001, respectively. These amounts resulted
mainly from net earnings plus depreciation and amortization and increases in
liabilities, offset by increases in inventories and other assets and, in 2001, a
decrease in income taxes payable. The increase in inventories of $15.7 million
in 1999, $36.6 million in 2000 and $22.8 million in 2001 resulted from the
addition of inventory for new and acquired stores and stores expected to be
opened shortly after the year-end, backstocking and the purchase of fabric used
in the direct sourcing of inventory. Other assets increased primarily due to
increased investment in tuxedo rental merchandise, while income taxes payable
decreased in 2001 mainly due to reduced earnings.

Our investing activities used net cash of $43.9 million, $83.4 million and
$66.4 million in 1999, 2000 and 2001, respectively, due mainly to capital
expenditures of $47.5 million, $79.4 million and $64.8 million in 1999, 2000 and
2001, respectively. The following table details our capital expenditures (in
millions):

Property additions relating to new stores include stores in various stages
of completion at the end of the fiscal year (one store at the end of 1999, two
stores at the end of 2000 and three stores at the end of 2001). Our expenditures
for the relocation and remodeling of existing stores have increased as we have
opened fewer new stores.

In addition, in 1999 the Company purchased the minority interests in
certain K&G stores for $2.1 million. We also had $6.0 million cash provided from
investing activities in 1999 from net maturities of short-term investments.

In March 2002, we entered into agreements for the license, implementation
and maintenance of several software applications developed and owned by a third
party. The applications subject to the agreements relate to transaction
processing associated with purchasing, distributing and retail sales of
merchandise, as well as tools necessary to plan those activities and evaluate
actual performance. We expect the phased implementation of these software
applications to take place over the next 36 months and ultimately lead to a
common system across all of our brands.

During 2002, we expect to incur approximately $6 million for software and
related implementation costs and similar amounts in each of the subsequent two
years. The timetable with respect to this implementation is within our
discretion.

16

We used net cash in financing activities of $10.5 million in 1999, $4.7
million in 2000 and $30.7 million in 2001 mainly for net payments of long-term
debt and purchases of treasury stock. In January 2000, the Board of Directors
authorized the repurchase of up to one million shares in the open market or in
private transactions, dependent on the market price and other considerations. On
January 31, 2001, the Board of Directors authorized an expansion of the stock
repurchase program for up to an additional two million shares of our common
stock. During 2000 and 2001, we repurchased 335,000 and 1,185,000 shares of our
common stock under this program at a cost of $7.9 million and $30.4 million,
respectively.

During 2000, in connection with the share repurchase program, we issued
three separate option contracts under which the contract counterparties had the
option to require us to purchase 650,000 shares of our common stock at specific
strike prices per share. We received premiums of $0.9 million for issuing these
contracts, all of which expired unexercised.

Our primary cash requirements are to finance working capital increases as
well as to fund capital expenditure requirements which are anticipated to be
approximately $36.0 million for 2002. This amount includes the anticipated costs
of opening approximately 20 new Men's Wearhouse stores and five new K&G stores
in 2002 at an expected average cost per store of approximately $0.3 million for
the Men's Wearhouse stores and approximately $0.6 million for the K&G stores
(excluding telecommunications and point-of-sale equipment and inventory). The
balance of the capital expenditures for 2002 will be used for
telecommunications, point-of-sale and other computer equipment and systems and
store relocations, remodeling and expansion. The Company anticipates that each
of the approximately 20 new Men's Wearhouse stores and each of the approximately
five new K&G stores will require, on average, an initial inventory costing
approximately $0.5 million and $1.0 million, respectively (subject to the same
seasonal patterns affecting inventory at all stores), which will be funded by
our revolving credit facility, trade credit and cash from operations. The actual
amount of future capital expenditures and inventory purchases will depend in
part on the number of new stores opened and the terms on which new stores are
leased. Additionally, the continuing consolidation of the men's tailored
clothing industry and recent financial difficulties of significant menswear
retailers may present us with opportunities to acquire retail chains
significantly larger than our past acquisitions. Any such acquisitions may be
undertaken as an alternative to opening new stores. We may use cash on hand,
together with cash flow from operations, borrowings under the Credit Agreement
and issuances of equity securities, to take advantage of significant acquisition
opportunities.

We anticipate that our existing cash and cash flow from operations,
supplemented by borrowings under our various credit agreements, will be
sufficient to fund planned store openings, other capital expenditures and
operating cash requirements for at least the next 12 months.

In connection with our direct sourcing program, we may enter into purchase
commitments that are denominated in a foreign currency (primarily the Euro). We
generally enter into forward exchange contracts to reduce the risk of currency
fluctuations related to such commitments. As the majority of the forward
exchange contracts are with five financial institutions, we are exposed to
credit risk in the event of nonperformance by these parties. However, due to the
creditworthiness of these major financial institutions, full performance is
anticipated. We may also be exposed to market risk as a result of changes in
foreign exchange rates. This market risk should be substantially offset by
changes in the valuation of the underlying transactions.

OTHER MATTERS

In January 2000, we formed a joint venture company ("Chelsea") for the
purpose of developing a new point-of-sale software system for the Company and
after successful implementation, exploring the possibility of marketing the
system to third parties. Under the terms of the agreement forming Chelsea, we
owned 50% of Chelsea and a director and officer owned 50% with the understanding
that the officer would assign, either directly or indirectly, some of his
interest in Chelsea to other persons involved in the project. The point-of-sale
system was developed and successfully deployed by the Company during 2000 and
2001. From January 2000 though March 2002, we funded and recognized as expense
all of the operating costs of Chelsea, which aggregated $4.5 million. On March
31, 2002, Chelsea sold substantially all of its assets to an unrelated

17

company regularly engaged in the development and licensing of software to the
retail industry. In connection with the sale, a former employee of Chelsea filed
suit attempting to enjoin the sale and alleging that he owned or was otherwise
entitled to part of the officer's interest in Chelsea and alleging that the
Company conspired with the officer to deprive him of such interest. This suit
was settled in connection with the sale by paying the claimant a portion of the
sale proceeds; concurrently, in connection with the settlement, the officer
assigned his remaining interest in Chelsea to us and received none of the
proceeds. As a result of the sale by Chelsea, and after giving effect to the
settlement of the lawsuit, the Company received a net amount of $7.0 million.
Approximately $4.5 million of this amount will be recognized as a pretax gain by
the Company pending the resolution over the next 12 months of certain
indemnification provisions related to the assets sold.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued two
new pronouncements: Statements of Financial Accounting Standards No. 141,
"Business Combinations" ("SFAS 141"), and No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations
completed after June 30, 2001 to be accounted for using the purchase method and
eliminates the pooling of interests method. SFAS 142 eliminates the amortization
of goodwill and indefinite-lived intangible assets and is effective for fiscal
years beginning after December 15, 2001. We will adopt SFAS 142 at the beginning
of fiscal 2002, which will eliminate approximately $2.8 million of amortization
expense related to the $35.6 million unamortized cost of such assets as of
February 2, 2002. Amortization expense recognized in fiscal 2000 and 2001 for
these assets was $3.2 million and $2.8 million, respectively. Based on the
results of our preliminary evaluation of the impairment testing provisions of
SFAS 142, we do not expect the adoption of this statement to have a material
effect on our financial position or results of operations in the foreseeable
future.

In June and August 2001, the FASB issued Statement No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), and Statement No. 144, "Impairment
or Disposal of Long-lived Assets" ("SFAS 144"). SFAS 143 addresses the
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs and is effective
for fiscal years beginning after June 15, 2002. SFAS 144 provides a single
accounting model for the impairment or disposal of long-lived assets and is
effective for fiscal years beginning after December 15, 2001. Our adoption of
these statements is not expected to have a material impact on our financial
position or results of operations.

INFLATION

The impact of inflation on the Company has been minimal.

FORWARD-LOOKING STATEMENTS

Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
capital expenditures, acquisitions (including the amount and nature thereof),
future sales, earnings, margins, costs, number and costs of store openings,
demand for clothing, market trends in the retail clothing business, currency
fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including, but not limited to, this Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of our
filings with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and the Securities Act of 1933.

Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, domestic and international
economic activity and inflation, our successful execution of internal operating
plans and new store and new market expansion plans, performance issues with key
suppliers, severe weather, foreign currency fluctuations, government export and
import policies and legal proceedings.

18

Future results will also be dependent upon our ability to continue to identify
and complete successful expansions and penetrations into existing and new
markets and our ability to integrate such expansions with our existing
operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to exposure from fluctuations in U.S. dollar/Euro exchange
rates. As further described in Note 8 of Notes to Consolidated Financial
Statements, we utilize foreign currency forward exchange contracts to limit
exposure to changes in currency exchange rates. At February 2, 2002, we had 20
contracts maturing in varying increments to purchase an aggregate notional
amount of $16.9 million in foreign currency, maturing at various dates through
January 2003. At February 3, 2001, we had 30 contracts maturing in varying
increments to purchase an aggregate notional amount of $26.5 million in foreign
currency. Unrealized pretax losses on these forward contracts totaled
approximately $1.2 million at February 2, 2002 and approximately $0.6 million at
February 3, 2001. A hypothetical 10% change in applicable February 2, 2002
forward rates would increase or decrease this pretax loss by approximately $1.6
million related to these positions. However, it should be noted that any change
in the value of these contracts, whether real or hypothetical, would be
significantly offset by an inverse change in the value of the underlying hedged
item.

Moores conducts its business in Canadian dollars. The exchange rate between
Canadian dollars and U.S. dollars has fluctuated over the last ten years. If the
value of the Canadian dollar against the U.S. dollar weakens, then the revenues
and earnings of our Canadian operations will be reduced when they are translated
to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may
decline.

We are also subject to market risk due to our long-term floating rate term
loan of $40.1 million at February 2, 2002 (see Note 4 of Notes to Consolidated
Financial Statements). An increase in market interest rates would increase our
interest expense and our cash requirements for interest payments. For example,
an average increase of 0.5% in the variable interest rate would increase our
interest expense and payments by approximately $0.2 million.

19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
The Men's Wearhouse, Inc.
Houston, Texas

We have audited the accompanying consolidated balance sheets of The Men's
Wearhouse, Inc. and its subsidiaries (the "Company") as of February 2, 2002 and
February 3, 2001, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period
ended February 2, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of February 2,
2002 and February 3, 2001, and the results of its operations and its cash flows
for each of the three years in the period ended February 2, 2002 in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for its foreign currency forward
exchange contracts effective February 4, 2001, to conform with Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended.

DELOITTE & TOUCHE LLP

Houston, Texas
February 25, 2002

20

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)

The accompanying notes are an integral part of these consolidated financial
statements.

21

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED
JANUARY 29, 2000, FEBRUARY 3, 2001 AND FEBRUARY 2, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these consolidated financial
statements.

22

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 29, 2000,
FEBRUARY 3, 2001 AND FEBRUARY 2, 2002
(IN THOUSANDS, EXCEPT SHARES)

The accompanying notes are an integral part of these consolidated financial
statements.

23

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JANUARY 29, 2000, FEBRUARY 3, 2001 AND FEBRUARY 2, 2002
(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.

24

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 29, 2000
FEBRUARY 3, 2001 AND FEBRUARY 2, 2002

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business -- The Men's Wearhouse, Inc. and its subsidiaries
(the "Company") is a specialty retailer of menswear. We operate throughout the
United States primarily under the brand names of Men's Wearhouse and K&G and
under the brand name of Moores in Canada. We follow the standard fiscal year of
the retail industry, which is a 52-week or 53-week period ending on the Saturday
closest to January 31. Fiscal year 1999 ended on January 29, 2000, fiscal year
2000 ended on February 3, 2001 and fiscal year 2001 ended on February 2, 2002.
Both fiscal years 1999 and 2001 included 52 weeks. Fiscal year 2000 included 53
weeks.

Principles of Consolidation -- The consolidated financial statements
include the accounts of The Men's Wearhouse, Inc. and its wholly owned or
controlled subsidiaries. Intercompany accounts and transactions have been
eliminated in the consolidated financial statements. Financial data for all
periods presented reflect the retroactive effect of the February 1999
combination with Moores Retail Group Inc. ("Moores") and the June 1999
combination with K&G Men's Center, Inc. ("K&G"), both accounted for as a pooling
of interests (see Note 2).

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Reclassifications -- Certain prior years' balances have been reclassified
to conform with classifications used in the current year.

Cash -- Cash includes all cash in banks, cash on hand and all highly liquid
investments with an original maturity of three months or less.

Inventories -- Inventories are valued at the lower of cost or market, with
cost determined on the first-in, first-out method and the retail cost method.
Inventory cost includes procurement and distribution costs (warehousing,
freight, hangers and merchandising costs) associated with ending inventory.

Property and Equipment -- Property and equipment are stated at cost. Normal
repairs and maintenance costs are charged to earnings as incurred and additions
and major improvements are capitalized. The cost of assets retired or otherwise
disposed of and the related allowances for depreciation are eliminated from the
accounts in the year of disposal and the resulting gain or loss is credited or
charged to earnings.

Buildings are depreciated using the straight-line method over their
estimated useful lives of 20 to 25 years. Depreciation of leasehold improvements
is computed on the straight-line method over the term of the lease or useful
life of the assets, whichever is shorter. Furniture, fixtures and equipment are
depreciated using primarily the straight-line method over their estimated useful
lives of three to ten years.

Other Assets -- Other assets consist primarily of goodwill and the cost of
trademarks, tradenames and other intangibles acquired. These assets are being
amortized over estimated useful lives of 15 to 30 years using the straight-line
method (see "New Accounting Pronouncements" herein).

Impairment of Long-Lived Assets -- We evaluate the carrying value of
long-lived assets, such as property and equipment and amortizable intangibles,
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If it is determined, based
on estimated undiscounted future cash flows, that an impairment has occurred, a
loss is recognized currently for the impairment (see "New Accounting
Pronouncements" herein).

25

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Fair Value of Financial Instruments -- As of February 3, 2001 and February
2, 2002, management estimates that the fair value of cash, receivables, accounts
payable, accrued expenses and long-term debt are carried at amounts that
reasonably approximate their fair value.

New Store Costs -- Promotion and other costs associated with the opening of
new stores are expensed as incurred.

Advertising -- Advertising costs are expensed as incurred or, in the case
of media production costs, when the commercial first airs. Advertising expenses
were $64.5 million, $69.7 million, and $61.2 million in fiscal 1999, 2000 and
2001, respectively.

Revenue Recognition -- Revenue is recognized at the time of sale and
delivery, net of a provision for estimated sales returns.

Stock Based Compensation -- As permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), we account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." The disclosures required by SFAS No. 123 are
included in Note 7.

Derivative Financial Instruments -- We enter into foreign currency forward
exchange contracts to hedge against foreign exchange risks associated with
certain firmly committed, and certain other probable, but not firmly committed,
inventory purchase transactions that are denominated in a foreign currency
(primarily the Euro). Gains and losses associated with these contracts are
accounted for as part of the underlying inventory purchase transactions (see
"Accounting Change" herein).

Foreign Currency Translation -- Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at the exchange rates in effect at
each balance sheet date. Shareholders' equity is translated at applicable
historical exchange rates. Income, expense and cash flow items are translated at
average exchange rates during the year. Resulting translation adjustments are
reported as a separate component of shareholders' equity.

Comprehensive Income -- Comprehensive income includes all changes in equity
during the period presented that result from transactions and other economic
events other than transactions with shareholders.

Segment Information -- We consider our business as one operating segment
based on the similar economic characteristics of our three brands. Revenues of
Canadian retail operations were $133.2 million, $145.7 million and $144.6
million for fiscal 1999, 2000 and 2001, respectively. Long-lived assets of our
Canadian operations were $33.9 million and $32.8 million as of the end of fiscal
2000 and 2001, respectively.

Accounting Change -- We adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), as amended, on February 4, 2001. In accordance with the transition
provisions of SFAS 133, we recorded a cumulative loss adjustment of $0.5 million
($0.3 million, net of tax) in accumulated other comprehensive loss related
primarily to the unrealized losses on foreign currency exchange contracts, which
were designated as cash-flow hedging instruments. The disclosures required by
SFAS No. 133 are included in Note 8.

New Accounting Pronouncements -- In June 2001, the Financial Accounting
Standards Board ("FASB") issued two new pronouncements: Statements of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires all
business combinations completed after June 30, 2001 to be accounted for using
the purchase method and eliminates the pooling of interests method. SFAS 142
eliminates the amortization of goodwill and indefinite-lived intangible assets
and is effective for fiscal years beginning after December 15, 2001. We will
adopt SFAS 142 at the beginning of fiscal 2002, which will eliminate
approximately $2.8 million of amortization expense related to the $35.6 million
unamortized cost of such

26

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets as of February 2, 2002. Amortization expense recognized in fiscal 2000
and 2001 for these assets was $3.2 million and $2.8 million, respectively. Based
on the results of our preliminary evaluation of the impairment testing
provisions of SFAS 142, we do not expect the adoption of this statement to have
a material effect on our financial position or results of operations in the
foreseeable future.

In June and August 2001, the FASB issued Statement No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), and Statement No. 144, "Impairment
or Disposal of Long-lived Assets" ("SFAS 144"). SFAS 143 addresses the
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs and is effective
for fiscal years beginning after June 15, 2002. SFAS 144 provides a single
accounting model for the impairment or disposal of long-lived assets and is
effective for fiscal years beginning after December 15, 2001. Our adoption of
these statements is not expected to have a material impact on our financial
position or results of operations.

2. BUSINESS COMBINATIONS AND ACQUISITIONS

On February 10, 1999, we combined with Moores, a privately owned Canadian
corporation, in exchange for securities ("Exchangeable Shares") exchangeable for
2.5 million shares of our common stock. The Exchangeable Shares were issued to
the shareholders and option holders of Moores in exchange for all of the
outstanding shares of capital stock and options of Moores because of Canadian
tax law considerations. As of February 3, 2001, all Exchangeable Shares, which
had substantially identical economic and legal rights as shares of our common
stock, had been converted on a one-on-one basis to our common stock As of
January 29, 2000, there were 1.0 million Exchangeable Shares that had not yet
been converted but were reflected as common stock outstanding for financial
reporting purposes by the Company. The combination with Moores has been
accounted for as a pooling of interests.

On June 1, 1999, we combined with K&G, a superstore retailer of men's
apparel and accessories operating 34 stores in 16 states. We issued
approximately 4.4 million shares of our common stock to K&G shareholders based
on an exchange ratio of 0.43 of a share of our common stock for each share of
K&G common stock outstanding. In addition, we converted the outstanding options
to purchase K&G common stock, whether vested or unvested, into options to
purchase 228,000 shares of our common stock based on the exchange ratio of 0.43.
The combination has been accounted for as a pooling of interests.

In conjunction with the Moores and K&G combinations, we recorded
transaction costs of $7.7 million, duplicative store closing costs of $6.1
million and litigation costs of $0.9 million. The transaction costs were
composed primarily of investment banking fees, professional fees and contract
termination payments, while the duplicative store closing costs consisted
primarily of lease termination payments and the write-off of fixed assets
associated with the closing of duplicate store sites in existing markets. The
litigation charge resulted from the settlement of a lawsuit filed by a former
K&G employee related to his employment relationship with K&G. In addition, we
recorded an extraordinary charge of $2.9 million, net of a $1.4 million tax
benefit, related to the write-off of deferred financing costs and prepayment
penalties for the refinancing of approximately US$57 million of Moores'
indebtedness.

3. EARNINGS PER SHARE

Basic EPS is computed using the weighted average number of common shares
outstanding during the period and net earnings. Diluted EPS gives effect to the
potential dilution which would have occurred if additional shares were issued
for stock options exercised under the treasury stock method. The following table

27

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reconciles the earnings and shares used in the basic and diluted EPS
computations (in thousands, except per share amounts):

4. LONG-TERM DEBT

We have a revolving credit agreement with a group of banks (the "Credit
Agreement") that provides for borrowing of up to $125 million through February
5, 2004. Advances under the Credit Agreement bear interest at a rate per annum
equal to, at our option, the agent's prime rate or the reserve adjusted LIBOR
rate plus a varying interest rate margin. The Credit Agreement also provides for
fees applicable to unused commitments. As of February 3, 2001 and February 2,
2002, there was no indebtedness outstanding under the Credit Agreement.

The Credit Agreement contains various restrictive and financial covenants,
including the requirement to maintain a minimum level of net worth and certain
financial ratios. The Credit Agreement also prohibits payment of cash dividends
on our common stock. We are in compliance with the covenants in the Credit
Agreement.

In addition, we have two Canadian credit facilities: a revolving credit
agreement which provides for borrowings up to Can$30 million (US$19 million)
through February 5, 2004 and a term credit agreement under which we borrowed
Can$75 million (US$47 million) in February 1999. The term credit borrowing is
payable in quarterly installments of Can$0.9 million (US$0.6 million) beginning
May 1999, with the remaining unpaid principal payable on February 5, 2004. The
effective interest rate for the term credit borrowing was 6.3% and 2.8% at
February 3, 2001 and February 2, 2002, respectively. Covenants and interest
rates are substantially similar to those contained in our Credit Agreement. As
of February 3, 2001 and February 2, 2002, there was US$45.2 million and US$40.1
million outstanding under these credit agreements, respectively.

28

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of our long-term debt are as follows: 2002 -- $2.4 million;
2003 -- $2.4 million; 2004 -- $35.3 million.

We utilize letters of credit primarily for inventory purchases. At February
2, 2002, letters of credit totaling approximately $7.7 million were issued and
outstanding.

5. INCOME TAXES

The provision for income taxes consists of the following (in thousands):

The table above does not include the tax benefit of $1.4 million in fiscal
1999 related to extraordinary items. In addition, no provision for U.S. income
taxes or Canadian withholding taxes has been made on the cumulative
undistributed earnings of Moores (approximately $33.3 million at February 2,
2002) since such earnings are considered to be permanently invested in Canada.
The determination of any unrecognized deferred tax liability for the cumulative
undistributed earnings of Moores is not considered practicable since such
liability, if any, will depend on a number of factors that cannot be known until
such time as a decision to repatriate the earnings might be made by management.

A reconciliation of the statutory federal income tax rate to our effective
tax rate is as follows:

At February 3, 2001, we had net deferred tax liabilities of $0.3 million
with $10.4 million classified as other current assets and $10.7 million
classified as other liabilities (noncurrent). At February 2, 2002, we had net
deferred tax liabilities of $3.7 million with $8.4 million classified as other
current assets and $12.1 million classified as other liabilities (noncurrent).
No valuation allowance was required for the deferred tax assets.

29

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total deferred tax assets and liabilities and the related temporary differences
as of February 3, 2001 and February 2, 2002 were as follows (in thousands):

6. OTHER ASSETS AND ACCRUED EXPENSES

Other assets consist of the following (in thousands):

Accrued expenses consist of the following (in thousands):

Sales, payroll and property taxes payable................... $ 10,343 $ 6,795
Accrued salary, bonus and vacation.......................... 14,131 16,132
Accrued workers compensation and medical costs.............. 5,418 4,167
Unredeemed gift certificates................................ 5,866 8,072
Other....................................................... 14,136 8,867
-------- --------
Total..................................................... $ 49,894 $ 44,033
======== ========

7. CAPITAL STOCK, STOCK OPTIONS AND BENEFIT PLANS

As a result of the June 1999 merger (see Note 2), the shares of K&G common
stock issued were converted into 37,953 shares of our common stock based upon an
Exchange Ratio of 0.43. In January 2000, the Board of Directors authorized the
repurchase of up to one million shares in the open market or in private

30

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

transactions, dependent on the market price and other considerations. On January
31, 2001, the Board of Directors authorized an expansion of the stock repurchase
program for up to an additional two million shares of our common stock. During
2000 and 2001, we repurchased 335,000 and 1,185,000 shares of our common stock
under this program at a cost of $7.9 million and $30.4 million, respectively.

We have adopted the 1992 Stock Option Plan ("1992 Plan") which, as amended,
provides for the grant of options to purchase up to 1,071,507 shares of our
common stock to full-time key employees (excluding certain officers), the 1996
Stock Option Plan ("1996 Plan") which, as amended, provides for the grant of
options to purchase up to 1,850,000 shares of our common stock to full-time key
employees (excluding certain officers), and the 1998 Key Employee Stock Option
Plan ("1998 Plan") which, as amended, provides for the grant of options to
purchase up to 2,100,000 shares of our common stock to full-time key employees
(excluding certain officers). The 1992 Plan expired in February 2002 and each of
the other plans will expire at the end of ten years; no option may be granted
pursuant to the plans after the expiration date. In fiscal 1992, we also adopted
a Non-Employee Director Stock Option Plan ("Director Plan") which, as amended,
provides for the grant of options to purchase up to 167,500 shares of our common
stock to non-employee directors of the Company. In 2001, the Director Plan's
termination date was extended to February 23, 2012. Options granted under these
plans must be exercised within ten years of the date of grant.

Generally, options granted under the 1992 Plan, 1996 Plan and 1998 Plan
vest at the rate of 1/3 of the shares covered by the grant on each of the first
three anniversaries of the date of grant and may not be issued at a price less
than 50% of the fair market value of our stock on the date of grant. However, a
significant portion of options granted under these Plans vest annually in
varying increments over a period from one to ten years. Options granted under
the Director Plan vest one year after the date of grant and are issued at a
price equal to the fair market value of our stock on the date of grant.

As discussed in Note 2, we converted options to purchase K&G common stock
into options to purchase shares of our common stock in connection with the
combination with K&G. The following table is a summary of our stock option
activity:

31

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Grants of stock options outstanding as of February 2, 2002 are summarized
as follows:

As of February 2, 2002, 1,639,033 options were available for grant under
existing plans and 4,433,472 shares of common stock were reserved for future
issuance under these plans.

The difference between the option price and the fair market value of our
common stock on the dates that options for 67,201, 248,653 and 79,479 shares of
common stock were exercised during 1999, 2000 and 2001, respectively, resulted
in a tax benefit to us of $0.4 million in 1999, $1.4 million in 2000 and $0.3
million in 2001, which has been recognized as capital in excess of par. In
addition, we withheld 11,368 shares and 3,890 shares during 1999 and 2000,
respectively, of such common stock for withholding payments made to satisfy the
optionees' income tax liabilities resulting from the exercises.

We have a profit sharing plan, in the form of an employee stock plan, which
covers all eligible employees, and an employee tax-deferred savings plan.
Contributions to the profit sharing plan are made at the discretion of the Board
of Directors. During 1999, 2000 and 2001, contributions charged to operations
were $2.8 million, $2.9 million and $0.4 million, respectively, for the plans.

In 1998, we adopted an Employee Stock Discount Plan ("ESDP") which allows
employees to authorize after-tax payroll deductions to be used for the purchase
of up to 1,425,000 shares of our common stock at 85% of the lesser of the fair
market value on the first day of the offering period or the fair market value on
the last day of the offering period. We make no contributions to this plan but
pay all brokerage, service and other costs incurred. A participant may not
purchase more than $2,500 in value of shares during any calendar quarter. During
2000 and 2001 employees purchased 44,713 and 56,617 shares, respectively, under
the ESDP, the weighted-average fair value of which was $22.82 and $16.63 per
share, respectively. As of February 2, 2002, 1,254,601 shares were reserved for
future issuance under the ESDP.

We have adopted the disclosure-only provisions of SFAS No. 123 and continue
to apply APB Opinion 25 and related interpretations in accounting for the stock
option plans and the employee stock purchase plan. Had

32

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

we elected to apply the accounting standards of SFAS No. 123, our net earnings
and net earnings per share would have approximated the pro forma amounts
indicated below (in thousands, except per share data):

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model, which resulted in a weighted-average
fair value of $14.61, $13.82 and $11.47 for grants made during fiscal 1999, 2000
and 2001, respectively. The following assumptions were used for option grants in
1999, 2000 and 2001, respectively: expected volatility of 52.92%, 54.71% and
54.01%, risk-free interest rates (U.S. Treasury five year notes) of 5.31%, 6.67%
and 4.57%, and an expected life of six years.

8. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

We lease retail business locations, office and warehouse facilities,
computer equipment and automotive equipment under operating leases expiring in
various years through 2016. Rent expense for fiscal 1999, 2000 and 2001 was
$61.5 million, $71.8 million and $78.3 million, respectively, and includes
contingent rentals of $0.4 million, $0.4 million and $0.3 million, respectively.
Minimum future rental payments under noncancelable operating leases as of
February 2, 2002 for each of the next five years and in the aggregate are as
follows (in thousands):

Leases on retail business locations specify minimum rentals plus common
area maintenance charges and possible additional rentals based upon percentages
of sales. Most of the retail business location leases provide for renewal
options at rates specified in the leases. In the normal course of business,
these leases are generally renewed or replaced by other leases.

33

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LEGAL MATTERS

On May 11, 2001, a lawsuit was filed against the Company in the Superior
Court of California for the County of San Diego, Cause No. GIC 767223 (the
"Suit"). The Suit, which was brought as a purported class action, alleges
several causes of action, each based on the factual allegation that we
advertised and sold men's slacks at a marked price that was exclusive of a
hemming fee for the pants. The Suit seeks: (i) permanent and preliminary
injunctions against advertising slacks at prices which do not include hemming;
(ii) restitution of all funds allegedly acquired by means of any act or practice
declared by the Court to be unlawful or fraudulent or to constitute unfair
competition under certain California statutes, (iii) prejudgment interest; (iv)
compensatory and punitive damages; (v) attorney's fees; and (vi) costs of suit.
We believe that the Suit is without merit and the allegations are contrary to
customary and well recognized and accepted practices in the sale of men's
tailored clothing. The complaint in the Suit was subsequently amended to add
similar causes of action and requests for relief based upon allegations that our
alleged "claims that [it] sell[s] the same garments as department stores at 20%
to 30% less" are false and misleading. We believe that such added causes of
action are also without merit. The court has not yet decided whether the action
may proceed as a class action. The Company intends to vigorously defend the
Suit.

In addition, we are a defendant in various lawsuits and subject to various
claims and proceedings encountered in the normal conduct of our business. In the
opinion of management, any uninsured losses that might arise from these lawsuits
and proceedings would not have a material adverse effect on our business or
consolidated financial position or results of operations.

CURRENCY CONTRACTS

In connection with our direct sourcing program, we may enter into purchase
commitments that are denominated in a foreign currency (primarily the Euro). Our
policy is to enter into foreign currency forward exchange contracts to minimize
foreign currency exposure related to forecasted purchases of certain
inventories. Under SFAS 133, such contracts have been designated as and
accounted for as cash flow hedges. The settlement terms of the forward
contracts, including amount, currency and maturity, correspond with payment
terms for the merchandise inventories. As a result, there is no hedge
ineffectiveness to be reflected in earnings. At February 2, 2002, the Company
had 20 contracts maturing in varying increments to purchase an aggregate
notional amount of $16.9 million in foreign currency, maturing at various dates
through January 2003.

The changes in the fair value of the foreign currency forward exchange
contracts are matched to inventory purchases by period and are recognized in
earnings as such inventory is sold. The fair value of the forward exchange
contracts is estimated by comparing the cost of the foreign currency to be
purchased under the contracts using the exchange rates obtained under the
contracts (adjusted for forward points) to the hypothetical cost using the spot
rate at year end. We expect to recognize in earnings through February 1, 2003
approximately $0.7 million, net of tax, of existing net losses presently
deferred in accumulated other comprehensive loss.

OPTION CONTRACTS

During 2000, we issued three separate option contracts under which the
contract counterparties had the option to require us to purchase 650,000 shares
of our common stock at specific strike prices per share. We received premiums of
$0.9 million for issuing these contracts, all of which expired unexercised.

9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Our quarterly results of operations reflect all adjustments, consisting
only of normal, recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of the results for the interim

34

THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

periods presented. The consolidated results of operations by quarter for the
2000 and 2001 fiscal years are presented below (in thousands, except per share
amounts):

Due to the method of calculating weighted average common shares
outstanding, the sum of the quarterly per share amounts may not equal earnings
per share for the respective years.

35

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The information required by this Item is incorporated herein by reference
from the Company's Proxy Statement for its Annual Meeting of Shareholders to be
held June 25, 2002.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference
from the Company's Proxy Statement for its Annual Meeting of Shareholders to be
held June 25, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by reference
from the Company's Proxy Statement for its Annual Meeting of Shareholders to be
held June 25, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by reference
from the Company's Proxy Statement for its Annual Meeting of Shareholders to be
held June 25, 2002.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The following consolidated financial statements of the Company are included
in Part II, Item 8.

Independent Auditors' Report

Consolidated Balance Sheets as of February 3, 2001 and February 2, 2002

Consolidated Statements of Earnings for the years ended January 29, 2000,
February 3, 2001 and February 2, 2002

Consolidated Statements of Shareholders' Equity for the years ended January
29, 2000, February 3, 2001 and February 2, 2002

Consolidated Statements of Cash Flows for the years ended January 29, 2000,
February 3, 2001 and February 2, 2002

Notes to Consolidated Financial Statements

36

2. Financial Statement Schedules

All such schedules are omitted because they are not applicable or because
the required information is included in the Consolidated Financial Statements or
Notes thereto.

3. Exhibits

- ---------------

* Management Compensation or Incentive Plan

The Company will furnish a copy of any exhibit described above to any
beneficial holder of its securities upon receipt of a written request therefor,
provided that such request sets forth a good faith representation that, as of
the record date for the Company's 2002 Annual Meeting of Shareholders, such
beneficial holder is entitled to vote at such meeting, and provided further that
such holder pays to the Company a fee compensating the Company for its
reasonable expenses in furnishing such exhibits.

(b) Reports on Form 8-K

None.

40

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

THE MEN'S WEARHOUSE, INC.

By /s/ GEORGE ZIMMER
------------------------------------
George Zimmer
Chairman of the Board and
Chief Executive Officer

Dated: April 26, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.

42

EXHIBIT INDEX

- ---------------

* Management Compensation or Incentive Plan