Market Developments
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Who will replace Finlay at department stores?
By Michelle Graff
June 29, 2009
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| Macy's confirmed that it will sell its own fine jewelry, replacing Finlay's leased departments. |
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New York--Since the 1960s, Finlay Enterprises has made a business out of running the fine-jewelry show at department stores all over the United States. Come this fall, the longtime player will bow out of the department store game altogether, and it is unclear which companies will or can take Finlay's place.
As retail analyst Jeff Taraschi, president of Interactive Group Ltd., points out, leased jewelry departments are a niche that Finlay has filled quite nicely for a long time.
"Finlay has made this their business," he says. "They owned this retail space, and they were good at it. There really wasn't enough size or scale for anybody to compete with them."
According to a recent Securities and Exchange Commission 10-K filing by Finlay, as of Jan. 31, the company ran the licensed fine-jewelry departments in 566 department stores nationwide, with some of those relationships dating as far back as 1969.
As of press time, however, Finlay's relationship with Lord and Taylor, where Finlay had 36 doors, was already extinct.
According to the filing, Finlay closed its Lord and Taylor departments in the first quarter of 2009.
A spokeswoman for Lord and Taylor says the department store is still carrying jewelry (whether it is fine or costume was unclear), but she says the store has no comment on its future plans for fine jewelry.
Fresno, Calif.-based Gottschalks, where Finlay operated 36 departments, filed for bankruptcy in January and is in the process of liquidating. Dillard's, another Finlay partner, declined comment, while The Bon-Ton Stores, which operates seven retail nameplates that lease fine jewelry space to Finlay, also remained tight-lipped.
Mary Kerr, vice president of investor and public relations for The Bon-Ton Stores, said in an e-mailed statement to National Jeweler that the York, Pa.-based chain is "reviewing different options and [has] nothing definite to report at this time."
She would not elaborate on whether or not those options included abandoning fine jewelry altogether.
Seemingly, the only department store chain to emerge from Finlay's shadow with its fine-jewelry department intact is Macy's, long a big player in jewelry sales.
Operation of the fine-jewelry departments for Macy's Central--which includes stores in the Southeast and Midwest--are being taken in-house.
"We'll be operating those ourselves," Macy's spokesman Jim Sluzewski says.
The shift will not be monumental for the retailer, which is already running the fine-jewelry departments for the stores in its East, West and Florida divisions out of a centralized office in New York.
Asked for further details about the business, Sluzewski says the company does not elaborate on strategy or trends.
In addition, Bloomingdale's, which is owned by Macy's, paid Finlay $33.4 million for "certain assets," including inventory and fixed assets for the fine-jewelry departments it operated for the chain, according to the 10-K filing.
That deal was finalized on March 22 but, like Macy's, Bloomingdale's did not comment on its strategy for fine jewelry going forward.
Taraschi says at this point, with Finlay's final curtain call a few months out, department store chains might still be weighing their options when it comes to fine jewelry.
"They're probably not sure," he says. "Right now, they're coming out of the worst fine-jewelry season in memory."
Fine-jewelry retreat?
A number of distinct possibilities--including backing out of fine jewelry altogether--exist, and might be the best option for some of the more financially challenged department store chains, such as Little Rock, Ark.-based Dillard's, Taraschi says.
"Given the amount of dollars that are needed to support a fine-jewelry business and, looking at the slow turn you get on the fine-jewelry category, I think it's possible," he says.
But what is more likely to happen is that department stores will scale back on the amount of fine jewelry they carry, and fill out the balance with costume pieces or bridge jewelry, such as sterling silver pieces with small diamonds.
Another likely scenario Taraschi sees is a large, well-financed international manufacturer taking over some of these licensed fine-jewelry departments and filling them with its products.
One example of such a manufacturer that already has made waves in the U.S. market is Indian retailer and manufacturer the Tata Group, which opened two stores under the brand Tanishq last year.
Though tough times have Tata looking for a local partner to run its U.S. Tanishq stores, Taraschi says running the fine-jewelry department of a well-established store is a different game entirely.
"It's absolutely easier to run a business that's established in a brand or retailer," he says.
Taraschi says he wouldn't rule out any of these possibilities, and adds that some department stores might be waiting until the Las Vegas jewelry shows, when the bulk of the industry converges on Sin City, to make a decision about their futures with fine jewelry.
"I think the possibility is that a mix could absolutely occur here," Taraschi says. "The retailers are a little flat-footed right now. Business has been difficult. I think everything is on the table today."
Editor's note: This story first appeared in the June 2009 print edition of National Jeweler.
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