Ultra Letter to Vendors
Ultra Diamonds, a Chicago-based chain with over 150 locations (profile), just sent out a note to its vendors, suspending payments on asset purchases. It also plans to close some stores. The company had recently refinanced its debt. Here are some of the main points of the letter, signed by its CEO:
Dear Vendor Partner:
As I am sure you have observed, the U.S. retail jewelry industry suffered through one of the worst holiday selling seasons in memory. While Ultra was able to fare better than most, we saw a dramatic drop-off in sales during the Holiday Selling Season. This market weakness comes at a time when our industry faces unprecedented shortages of liquidity from lending institutions and virtually no interest in the sector from investors outside of the industry. Ultra’s results were certainly impacted by these macroeconomic conditions and we have seen continuous tightening of our availability under our credit facility based on industry and economic performance. Based on this we are taking immediate steps with our Bank group to address our financial condition.
Our banks have determined that we need to preserve all of the cash we can until we better understand our liquidity options. As such, we are suspending payments to our vendor partners on asset purchases for the time being. The banks will, however, let us continue making payments on consigned goods sold every two weeks as we have done in the past. Going forward any special order merchandise including any items currently in the pipeline will be paid for on a C.O.D. basis (after Q.C.) …
We believe in the long-term sustainability of our business model, and as a result, we are taking proactive steps to position our business to continue to survive the economic turmoil we expect to be with us throughout 2009. We have cut a great deal of operating expenses and will continue to aggressively reduce costs going forward. We have deferred or eliminated virtually all non-essential capital expenditures and plan to close underperforming stores. We feel our off-price, value proposition positions us well now and into the future …
CuriousJewel commented:
16 to 1, thinking out side the box is a wonderful concept if you
can actually execute it correctly. Unfortunately Ultra like most
other small mom&
16-1 commented:
Fun analogies. My two key suppliers selected to move into
consignment to keep the inventory they had on hand in our display
shelves. We still purchase key items that move well whereas the
memo items are purely at the descretion of the supplier. We have
had long and successful relationships with both suppliers we have
made this arrangement with, relationships which we all hope to keep
active long after this current ordeal. These times require out of
the box thinking. If suppliers and retailers can put their heads
together for inovative and creative ways to keep stock moving, we
all benefit. These were proposals presented to us over some fun and
inovative meetings together on how to weather the current
situation. We all hope it is short term, but are ready with even
more off the wall ideas if it turns into a much longer affair. You
probably won't approve much of those ideas either, but, our
suppliers and our retail shop all plan on living through this
crisis in fairly good shape. All the traditional thinking must go
the way side until things settle. And who knows what wild and crazy
ideas will be generated from these brain storming meetings between
suppliers and retailers. Let me add that this type of working
together and colaborating on inovative ideas might not be sutable
for everyone. The retailer and suppiers must have a historically
successful working relationship and be willing to go out of the box
for each other. Trust is a key element with inplimentation of
inovative ideas and procedures from both sides.
KAT commented:
I'm thinking of sending a similar letter to my credit card
companies, my mortgage company, and also trying to negotiate memo
terms with the electric, gas, and water companies, as well as my
favorite grocery store. I'm thinking that hanging on to my cash is
a good idea too, so I don't want to pay my bills or pay for
anything going forward. Yep, I'm thinking this is the best way for
me to survive too!! Maybe Obama will help bail me out too!!!
Jules de Gem commented:
Dear 16-1, I'm sure the retailers' customers love being overwhelmed
with miniature pictures of your capital on display - another
example of too much indiscriminate choice (just super size me !).
But the fundamental problems remain that: the retailers absolve
themselves of marketing responsibility by not taking responsibility
for the goods that they (ahem) "order"; there is far too much of
your and your fellow consignors' capital tied up in long inventory
turns and admittedly poor profits. Remove large scale consignment
from the d&j business & total bank financing falls by 50%
or more - now that's a savings we all share.
SixteentoOne commented:
As we all are well aware, this is a time unlike any in our working
history. I can't dissagree more with the observations that working
with memo is not responsible business practive. We have developed
great working relationships with our key suppliers over that past
15+ years. They have come to us with the request of moving more of
their merchandise to memo therefor placing more product in our
cases on display giving the consumer more options and opening the
door for sales that might not exist if our cases were slimmed down
and more restricted. Yes, we work on Memo with these suppliers, on
their request as we had begun to scale down purchases in response
to the economy. We have found this has worked well for all of us
including our customers who are most appreciative that we still
carry a full compliment of jewelry they can browse through.
deb roseman commented:
KQ ---It is finally time for the retail sector to bare the
responsibility for their purchases and also expect concessions to
lengthy payment terms and returns. This is a time to survive not to
be taken advantage of from clients. Both retail and manufacturers
need to finally understand their businesses and act like
responsible bussiness people. Lower inventories and less expensive
materials to comprise a manufacturers line. And retailers must pay
closes attention to turn if they are going to be able to survive in
what I anticipate to be a new era in our business's. Retail must
focus and downsize inventory levels, institute more aggressive
reorder programs that will work on an as need basis, and improve
product training for everytone at the store levels. Drop the BS and
create service policies that are meaningful and memorable. I have
seen it all during the past thirty years and have often wondered
when the fan would be overloaded and fall.
jewelgal commented:
Any updates with regard to Finlay/BB&
Crescent Belgian Star commented:
Another company to closely watch for bankruptcy...are they sending
this letter in an effort to beg their vendors to not start legal
action on them like what happened with Friedman's? Ultra is
EXTREMELY similar to Friedman's in target customer, merchandise
mix, and (lackluster) stores. The Ultra store in a local outlet
mall that competed directly with Crescent is hurting from a new Kay
Outlet and aggressive prices at the Zales Outlet...plus the
liquidation of the (formerly top-performing for Friedman's)
Crescent/Whitehall.
Jules de Gem commented:
We've seen this episode before. Why do "smart" businessmen continue
to believe in fairy tales ? Retailers who continue to rely on memo,
and vendors who continue to "lend" or sell to under-capitalized
companies will (a) continue to devalue the value chain, (b) lose
money, (c) excuse the retailer from his responsibility managing
owned and paid for inventory and (d) ultimately damage the
livelihood of all of us who work in this industry. Who's next? Oh,
not polite to mention names, but we all know at least three other
problematic retailers & others ? The banks, especially one gold
bank with foreign ownership, are reportedly leaving the industry.
Who will remain to finance the gold (memo) inventory as other gold
lenders circle the wagon ? Is this the last hurrah for memo for
retailers - finally ? We can only hope.
