Independents
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Some jewelers downsize as bankruptcies mount
By Michelle Graff
January 21, 2009
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| Closing this under-performing Bernie Robbins Fine Jewelers store in Short Hills, N.J., was just one measure the jeweler undertook in order to cut costs. |
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New York--The economic crisis began to envelop the jewelry industry in earnest late last year, as bankruptcy filings ticked up sharply for 2008 and retail stalwarts shut down stores, including some that had been open for centuries.
And while one might hope for some good news as we move into 2009, industry analysts don’t seem to be banking on it. Dione Kenyon, president of the Jewelers Board of Trade (JBT), an industry organization that tracks the financial well-being of its 70,000 retailer, manufacturer and wholesaler members, said she expects to see bankruptcies rise again in 2009.
"I think people are on fumes right now, hoping for that big surge of male shoppers at the last minute, that kind of last-minute rush before Christmas," Kenyon said in an interview just before the 2008 holidays.
She predicted that for many, if that rush did not come--or if it was not enough to save their sinking businesses--additional jewelers would join the growing ranks of jewelers forced to close up shop. Her prediction proved true for Christian Bernard Jewelers, a Secaucus, N.J.-based jewelry chain that closed its 15 stores and filed for Chapter 7 bankruptcy on Dec. 26. It has since reopened its doors to liquidate merchandise and to try to pay its bills.
Centennial, Colo.-based jewelry chain Shane Co. filed for Chapter 11 bankruptcy protection in January, with Shane Co. Chief Executive Officer Tom Shane explaining that the retailer was forced to do so amid disappointing holiday sales and a lack of liquidity, but that his plan was to have the jeweler emerge from bankruptcy as a stronger company.
A look back at JBT statistics for 2008 shows that the number of bankruptcies among retail jewelers/repair shops sank to the year's lowest point in June before beginning a slow and steady climb as U.S. economic woes began mounting to historic proportions in the fall.
In June, according to JBT statistics, only one retailer filed for bankruptcy, and the bankruptcies year-to-date were down 16.7 percent from 2007.
That number rose to four in July, followed by three in August and two in September. That is when news came that the growing economic crisis had felled big financial players such as Merrill Lynch and Lehman Brothers. It's also when the jewelry business, from Kenyon's perspective, came to a grinding halt.
"From that moment on...it was like the garage door slammed down," she says.
Bankruptcies jumped to six in October, and by November, two months after the start of the global economic meltdown, bankruptcies were up 10.8 percent from the previous year.
A jeweler's dream falls apart
Few experienced the meltdown to the same degree as Virginia jeweler David Nygaard, who filed for bankruptcy and shuttered his seven Virginia jewelry stores at the end of June. It now seems like a harbinger of what would happen to the luxury retail industry at large in the fall, as the sinking U.S. economy began to have a domino effect worldwide.
"We were very much a precursor," says Nygaard, a high-profile member of the jewelry industry who won business awards in his community.
Nygaard says the banks aggressively recruited his business, loaning him the money to expand his four-store chain to seven.
"[The bank] had encouraged the growth, they had actively solicited our business," Nygaard says. "They were very aggressive in loaning money to us for different projects."
In retrospect, Nygaard says, the fourth store should have been "a natural resting place" for his burgeoning regional chain.
It was at this point that he lost five key employees to personal crises but moved forward anyway, sans suitable replacements, he says.
"I probably should have stopped at four [stores], retooled my organization and then gone to five, six, seven and eight," he says.
Today, Nygaard remains in the jewelry business, but is limiting his operations to just one store, Nygaard Fine Jewelers in Chesapeake, Va. The single shop has allowed him to reconnect with customers, whom he had lost touch with while realizing his dream of owning a regional chain.
"I kind of had that dream," he says. "[Now], I'm kind of dreaming something else."
Down but not out
Kenyon says some retailers are skipping the bankruptcy route because either they don't feel they have the time to turn their business around or they don't want to face the costs of filing, especially now that banks are less willing to provide debtor-in-possession financing to help Chapter 11 filers get back on their feet.
Another telling statistic tracked by the JBT, Kenyon says, is business discontinuances, a new category that the JBT began tracking in April 2008. The discontinuances data counts retail jewelers, wholesalers and manufacturers that are either ceasing operations or consolidating in the form of a sale or merger.
Since April, the number of businesses that ceased operations hovered between 60 and 80 monthly (except for an unexplained increase to 142 in July) before spiking to 133 in October and 85 in November, JBT data shows.
Meanwhile, consolidations sank from a high of 24 in May to just five in November, a trend Kenyon attributes to general economic weakness and banks holding back on credit to finance deals.
While telling, business discontinuances exclude multi-store retailers that choose to shutter one location, a trend that started late in the year.
In early November, news surfaced that Bixler's Jewelers was holding inventory-clearance sales and closing its downtown Easton, Pa., location in early 2009 after an astounding 223 years in business earned the store the right to brand itself as "America's Oldest Jewelers and Silversmiths."
While it's not the end of the long-standing Bixler brand--another Bixler's location exists in nearby Whitehall Township, Pa.--Mark Maurer, president and owner, says decreased downtown foot traffic forced the closing. But his other store does well, he says, and the jeweler plans to open a new store sometime in 2010.
"Bixler's...is going to continue," he says. "We're not ceasing operation."
About a month later, in early December, Harvey Rovinsky announced the closing of the Bernie Robbins Fine Jewelers store in Short Hills, N.J. a bedroom community for Wall Street workers who seemed to have limitless spending money when the store opened two years ago, long before the big bank shake-ups.
"It was a new market for us," says Rovinsky, who owns nine other jewelry stores. "Our business plan was to use that as a springboard to move north...Everything fell into place until everything fell apart."
The store does not have the client base necessary to survive the severe downturn affecting Short Hills, and Rovinsky opted to cut his losses and close, a strategy he is employing company-wide.
Once a week, Rovinsky meets with his executive committee--composed of the seven highest-ranking people in the company--to guide the direction of his stores. Smaller jewelry stores, he suggests, can do the same by holding weekly meetings between the owner and store manager.
Rovinsky says his committee determined the company could save $270,000 by cutting out store security guards. It also slashed 15 percent of its overall staff.
"Good salespeople could last forever, but the way a company grows and flourishes is with great salespeople," he says. "In a different world, you can overlook it. We respect the fact that people are nice people and they work hard but, at some point, performance is really what counts."
Also in early December, renowned Shreve, Crump and Low, a Boston brand that dates back to 1796 (when the first store opened across the street from Paul Revere's silversmith shop), announced it was shuttering its mall store in Chestnut Hill, Mass., although its Boston store will remain open.
Owner David Walker says he closed the store because he wants to streamline costs in light of the economic crisis and because the mall raised its rents.
"Obviously, we're in a tough economy and sales have compressed a bit," he says.
Walker, who owns the boutique David and Co. jewelry store, a standalone store also in Chestnut Hill, is taking advantage of the tough times to streamline operations and position his business model to be more competitive.
He says future growth lies in building more freestanding boutique stores, like his David and Co. store, and staying out of the malls.
"I believe in owning my own real estate and controlling my own destiny," he says. "It'll probably be a tough '09 for a lot of people, but we'll be ready."
Weathering the storm
Jewelers who have made it through rough spots suggest that now is the time to build a better business model by figuring out what is, and isn't, working in your store.
--Get out of debt and stay out of debt, if at all possible. Rely on your own capital, rather than the bank's money.
--Figure out where you can save money. Do you really need store security guards? Are all of your staff members necessary?
--Don't let personal relationships get in the way of business. Just because employees are nice people doesn't mean they are up to the task at hand.
--Shift marketing spend. Consider holding more personal events for customers and running fewer radio, television and print ads.
--Remember to push jewelry's investment value. Says the Jewelers Board of Trade's Dione Kenyon, "De Beers isn't dumb about the [ad] campaign that's going now. I actually think that's a great message and that's planting a positive seed for our industry."
Editor's Note: This story first appeared in the January 2009 print edition of National Jeweler, and was updated for NationalJeweler.com on Jan. 21.
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