You could call it a plus-sized legal victory for Casual Male (Nasdaq: CMRG), the leading retailer for big and tall men. Massachusetts awarded the clothier $1.5 million in damages stemming from a non-compete clause it had with a former employee.
Casual Male alleged that Robert Yarborough, an employee of its Rochester Big & Tall store, which it acquired in 2004, had been maintaining its call center and Internet service operations through his company RKC Mail. It was charged that he helped Westport Big & Tall establish the Alpharetta, Ga.-based company's Internet and catalog business in violation of his non-compete employment contract.
A very similar lawsuit was filed last year against Yarborough and Cutter & Buck, a retailer and supplier to Casual Male. In that case, Yarborough is accused of taking several employees with him to establish the golf apparel retailer's online catalog, while also destroying Casual Male data.
The plus-size clothier has been the premier men's retailer in the big-and-tall category, outpacing Men's Wearhouse (NYSE: MW) and Jos. A. Bank (Nasdaq: JOSB), though it's really the only big player in the niche market. Net income more than doubled last quarter, while operating income has been benefiting from an equally impressive double-digit growth rate.
The plus-size industry is, um, big business. While Casual Male has the men's side of the aisle locked up, Charming Shoppes (Nasdaq: CHRS) is a leading retailer catering to women with curves. Between its Lane Bryant brand, Fashion Bug, and Catherine's stores, it generated some $2.2 billion in sales. From 2001 to 2006, the plus-size and big and tall markets each grew by 40% or so with similar projected growth through 2012. It's estimated to become as big as $107 billion for the market as a whole.
The jury found that Yarborough was liable for $1.1 million in damages, while Westport Big & Tall would have to pony up $400,000 in penalties. While these awards will undoubtedly be appealed, Cutter & Buck no doubt has to be looking hard at the verdict here. It was recently acquired by Swedish clothing and corporate gifts and accessories retailer New Wave Group for $156.5 million.
I'd expect Cutter & Buck might opt for a settlement with Casual Male rather than risk facing another plus-sized windfall.
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Fool contributor Rich Duprey owns shares of Casual Male but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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