Majors
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'The Source' to close its doors
By Michelle Graff
April 29, 2009
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| Unable to survive its second turn in bankruptcy court, Fortunoff Fine Jewelry and Silverware LLC began conducting going-out-of-business sales on Feb. 26 |
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New York--Sometime around the end of May, New York will say goodbye to yet another piece of its storied retail history.
Unable to survive its second turn in bankruptcy court, Fortunoff Fine Jewelry and Silverware LLC began conducting going-out-of-business sales on Feb. 26, dragged down by the telltale factors at the heart of the current recession: limited access to credit, lack of liquidity and slumping sales.
The retailer, which billed itself as "The Source," is shutting down amid several lawsuits and bitter feelings from creditors who continued to do business with the chain after its first bankruptcy.
Attorneys for Fortunoff did not respond to National Jeweler's request for comment, but, according to liquidators, the target end date for the store-closing sales is May 24. The final closing will mean the end of 87 years of retail history.
"From a jewelry standpoint, it shocks me that those stores would be closing," says Rick Hayes of Wilkerson and Associates, a liquidation firm working on the closing. "To me, the Fortunoff name in jewelry was a wonderful name."
Though the bankruptcy has saddened many who regard Fortunoff as an East Coast institution, it's not the first mid-size chain to file Chapter 11 in 2009. Others include: 25-store Shane Co., based in Centennial, Colo.; 16-store West Coast chain Robbins Bros., and 15-store Christian Bernard Stores Corp., in Secaucus, N.J. But only Christian Bernard announced plans to liquidate, with the other two chains vowing to restructure.
Under the 'L' line
Max and Clara Fortunoff opened the first Fortunoff store, which carried housewares and small appliances, in the East New York section of Brooklyn, N.Y., in 1922.
The chain didn't get into the jewelry industry until the mid 1950s, when Helene Fortunoff married into the family.
Brooklyn native Renee Kopel, who has worked at Wall Street fixture William Barthman Jewelers for 19 years, remembers visiting the original Fortunoff store on a shady side of Livonia Avenue under the "L" subway line.
"I remember not loving the block of the neighborhood because it was dark," she says.
But Kopel does remember treasuring visits to Fortunoff, where her mother would buy crystal and silver for weddings and anniversaries, and where her parents bought Kopel's first two pieces of fine jewelry: an amethyst birthstone ring and a pave diamond necklace.
"It is very, very sad," Kopel says of Fortunoff's filing. "It's something we all need to concern ourselves with. We can't think 'glad it's not me.' What happens to one could happen to another, and it's a very ominous sign."
In the mid 1960s, when its customers started leaving New York City for the Long Island suburbs, Fortunoff followed and eventually grew to include 20 stores in New York, New Jersey, Connecticut and Pennsylvania, including a mix of full-service locations, outdoor furniture centers and jewelry-only stores.
Changing of the guard
After 83 years as a family-owned business, things began to shift at Fortunoff around 2005, when members of the Mayrock and Fortunoff families sold a majority stake to two private equity firms, Trimaran Fund Management LLC and Kier Group Holdings LLC.
Jeff Gordon, chief executive officer of The Gordon Co., another of Fortunoff's liquidation firms, says equity firms often bring a Wall Street mentality into the retail business, a merger that is not always successful.
Fortunoff got "really impersonal," he says, adding that other investor-owned jewelers--Friedman's, Crescent Jewelers and Whitehall Jewelers--each suffered the same fate--bankruptcy.
Kopel agrees, saying it is best when family businesses stay in the family.
"When it's not family, it changes," Kopel says. "If you're going to be in retail, you have to be hands-on. It has to be family. When it's just spreadsheets and bottom line and there's no passion for it, something goes wrong."
Family members completely washed their hands of the business on Dec. 31, 2007, when they sold the remainder of their equity in Fortunoff to Trimaran for a "nominal sum," according to court papers.
A few months later, in February 2008, Fortunoff filed for Chapter 11 bankruptcy protection for the first time, citing in court papers that the company's losses were "attributable to a number of factors," including increased competition for furniture sales from companies such as Bed Bath and Beyond and Crate and Barrel, the large investment made in Fortunoff's underperforming 180,000-square-foot White Plains, N.Y., store, and declining economic conditions.
At the time of its first filing in February 2008, court papers specifically state that the "ongoing housing market decline has been particularly damaging to the debtors' housewares and indoor furniture sales."
NRDC days
Though the chain had its share of problems, it seemingly found a savior when another private equity firm, NRDC Equity Partners, owners of the Lord and Taylor department store chain, bought it out of bankruptcy.
NRDC's original plan called for integrating Fortunoff's jewelry departments and bridal registry into Lord and Taylor, and pouring money into Fortunoff's freestanding Fortunoff locations. This plan, for whatever reason, never seemed to get off the ground, and Fortunoff struggled throughout 2008.
Fortunoff supplier Bruce Novell, of bridal jewelry manufacturer Novell Design Studio, says NRDC was requesting product as late as Jan. 7, one month before the bankruptcy filing. Like so many other suppliers, Novell's stock--a total of about $250,000 intended to fill the display cases at Lord and Taylor--is part of the liquidation sales.
Novell will not speculate on why NRDC was requesting product when the company was in trouble, but he did say he believes the retailer's situation wouldn't be the same if the Fortunoff family was still involved.
"They understand the jewelry industry," he says. "When your name's on something, there's a pride, there's a value. I know how I feel about my company. This is my baby."
NRDC has repeatedly denied requests for comments on Fortunoff.
In the end, the private equity firm couldn't save Fortunoff, and in February, the chain filed for Chapter 11 bankruptcy protection. This time, no buyers stepped forward to try to come to the rescue.
"I would have thought Fortunoff would have been around for a long time," Hayes says. "I would have thought somebody would have bought Fortunoff as a going concern."
But, he acknowledges, in today's economic climate, it is difficult to pull together the amount of cash needed for a Fortunoff-level deal.
"That saddens me," Hayes says. "It does not say good things, not at all."
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Majors
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