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Hedge Funds and Jewelry
February 6, 2008
Last week, I linked to a post which argued hedge funds have been a "complete failure" in the jewelry industry, noting their track record with Friedmans, Fabrikant, and now Zale.
That post was written before all the problems with Fortunoff, which went Chapter 11 this week after three years of being owned by a hedge fund. If all goes according to plan, Fortunoff will be sold to Lord and Taylor, which is owned by … another hedge fund.
I spoke with one creditor of Fortunoff who is, needless to say, quiting worried about this, arguing these outside investors are hurting the business:
The hedge funds aren’t taking a long-term view. We are used to people in the industry for a lifetime. For these guys it’s just a deal …
This industry is more of a long-term business. It is not one that lends itself to quick profits. Styles don’t change and people don’t buy jewelry every day. The hedge funds want faster returns than is possible …
The Fortunoff family has an excellent reputation. It’s a shame they have to go through this. Maybe the hedge funds are right. They make a lot more money than us. But I think if they weren’t here, there would be less cash but we would be better off.
Perhaps. Clearly, there is something about the insular nature of the business that makes it less suited for people who just parachute in and out -- and I'm not just talking about investors. Over the years, I've watched as various industry entities spent money on marketing gurus, turnaround consultants, damage control experts, etc. Most of the people didn't last very long or do very much good. This industry seems to work best with people who really stick with and care about it.
By the way, it’s interesting that Fortunoff’s likely new owner is talking about making it a “national chain.” That’s very similar to what its current owner said three years ago.
In related Fortunoff news, the Diamond Manufacturers and Importers Association (DMIA) just sent out a notice saying that, if you delivered goods to Fortunoff in the 20-day period prior to the date on which it filed for Chapter 11, there is now a procedure to reclaim those goods. It advises those looking for “reclamation claims” to consult an attorney.
Posted by Rob Bates on February 6, 2008 | Comments (1)
