The Fallout from Fortunoff

Unanswered questions from today’s Fortunoff announcement:

- Will someone else bid for Fortunoff, or is the Lord and Taylor purchase basically a done deal?

- If Lord and Taylor takes the company over, what will happen to Finlay’s leased departments in those stores?

- How will the Fortunoff brand mesh with Lord and Taylor’s? As one emailer writes in: “To my eye,  Fortunoff was always better fashionable fine jewelry and decent "branded" lines, whereas L&T was really good at generic gold and silver jewelry and just OK with diamond accent.   L&T’s sales’ practices (50 less 20 less 10 less five with this week’s coupon, you get the idea…) must have driven Finlay NUTS.”

Here is what can be gleaned from Fortunoff’s Chapter 11 filing:

- Trade creditors include Kama Jewelry (owed $842,228), Movado ($793,755), Martin Flyer ($745,050), Michael Werdiger ($713,062), and Rama Manufacturing ($636,044.) It’s interesting that many of the non-trade creditors seem advertising related.

- The company lists total assets as $267 million, and total liabilities as $305 million.  Its Chapter 11 filing says sales have fallen from $482 million in 2004 to $442 million in 2007.

The papers blame the company’s "liquidity crisis" on "a number of factors.” First, Fortunoff has “faced increased competition from department stores and retailers specializing in jewelry, housewares, and furniture, including Macy’s, Bloomingdale’s, Bed Bath and Beyond, Crate & Barrel, and Raymour & Flanigan.” Interestingly, that list is mostly furniture retailers.

This competition led to “increased marketing expense and promotional discounting in the last few years. These strategies have proven unsuccessful in boosting sales and have caused significant margin erosion over the past few years,” the papers say.

In addition, its new White Plains store lost money; its interest expenses have increased; and it was restricted by its Revolving Facility with Bank of America. All of which was exacerbated, the papers say, by the “national economic downturn.”

In any case, this is a very unfortunate situation, but hopefully there is some light at the end of the tunnel here. For more on this, the head of L and T’s parent company talked with Newsday (and I’m hoping to get an interview soon.)