Friedman's: A "Change of Thinking"?
I spoke to a banker the other day who said the Friedman’s case showed "a change of thinking" at the wholesale level.
"It shows the trade is saying we’ve had enough, that we’re not going to just take [BS] from the retailers anymore," this banker said.
Before Christmas, Friedman’s execs were said to be talking with their vendors, trying to make a deal. Instead, the company’s major vendors tried to force it into Chapter 7. That has been converted to a Chapter 11 filling.
I should note that another banker I spoke to said that, if Friedman’s offered them a good enough deal, the vendors probably would have taken it. But it’s an interesting development. The fact that Friedman’s had gone Chapter 11 before possibly played a role in the vendors’ state of mind. It will be interesting to see if more vendors play this kind of hardball.
FYI, top Friedmans’ creditors include: Sumit ($7.5 million), Rosy Blue ($6.2 million), Masterpiece Diamond ($3.6 million), NEW Customer Service ($2.5 million), Verigold ($2.2 million), Paul Winston/Eurostar ($1.8 million), and Andin ($1.5 million.)
Regarding Whitehall, another widely watched company which has also had a prior brush with Chapter 11, the company just announced new funding. Before Christmas it was actively seeking financing.
This article provides an interesting (if opinionated) outlook for jewelry chains in 2008.
Mall Jewelry Boy commented:
And since Whitehall is brought up here too...I don't really like or
approve of Dayoob turning Whitehall into a carbon copy of Fred
Meyer, right down to the way the catalog looks. Granted, the
company was going downhill when he came, and he's doing what he
knows how to do: run Fred Meyer Jewelers. But he's also lost some
of Whitehall's brand power by changing not only the advertising,
but the store logo and even the spelling/wording ("Whitehall Co.
Jewellers" to "Whitehall Jewelers"). I had this fantastic
argument/rant about the new dark reddish-colored store remodel
they're using too, but looks like they realized it really was bad,
as they've posted a grudgingly beautiful and well-lit new store
concept on their store locator page on their website (though they
took the cases off the leaseline, one of the main things they used
to call out as an advantage, along with their small size of
~800sqft). The biggest change is the gigantic change in merchandise
mix and pricepoints. Whitehall was trying to be one of the more
upscale mall jewelers, not a guild store but comfortably between
Zales/Kay and Ben Bridge/Baileys. That position is now far behind
the company, and even the one remaining program from the heydays
(their "White Star" branded diamond cut) has been phased down to a
small collection of a handful of solitaire rings. Inexpensive color
jewelry abounds. Dayoob may be doing his best, but customers are
probably confused with the store's brand message, plus it's
definitely hurt whatever unique cachet the company had.
Mall Jewelry Boy commented:
I tried posting this a few days ago and it didn't go through.
Anyways, Friedman's doesn't look too bad at first glance. They're
really built up their diamonds under Pam Romano, and their newest
collection (Belgian Star) is quite nice (it looks very sellable).
They seem to be catering well to their clientele (low to middle
income). With higher quality than discount department stores and
more of a selection that mid-range department stores, Friedman's
should have a niche. Friedman's main competition for their
demographic is changing (Samuels going more upscale) or weakening
(Sears especially), leaving only a few hardier players (JC Penney,
Kohl's). The only chain that I can think of that seems to have
somewhat the same customer profile as Friedman's is Fred Meyer,
whose pricepoints and merchandise mix seem to be going higher
market (at least at the mall stores I've seen). So why isn't
Friedman's cornering their market? Or if they are, why aren't they
doing it profitably? It really does look like it's the back-end and
behind-the scenes of the company that needs to be worked on. Each
Friedman's/Crescent location should be doing about a million
dollars in sales, so where is all the money going? It's difficult
for me to make a call having only seen and shopped two Crescent
locations (one being in an outlet mall), but it really does seem
extremely strange that they list debt at "over $100 million" and
assets "between $100 and $500 million". How in the world do they
arrive at such a crazy range? Are they just saying that to
discourage those who want to liquidate the company? I just don't
understand Friedman's since they went private.
