Samuels Acquired by Indian Sightholder

In another sign of vertical integration in the jewelry industry, 97-store chain Samuels Jewelers, based in Austin, Texas, was recently acquired by Indian jewelry manufacturer Gitanjali for $45 million.

Gitanjali, a DTC sightholder and one of India’s largest exporters, owns 750 retail outlets in India.

Nahal Modi, CEO of Gitanjali’s U.S. division, says his company is looking at two other possible takeover targets in the United States, and he expects to announce at least one this year.

“We view Samuels as our entry point for U.S. retail,” Modi says. “We think we need to get 400 to 500 other stores fast to get to the economies of scale that the majors have.”

Samuels CEO and president Randy McCullough says that, under its new ownership, the chain will be “much more aggressive” than it had been.

“We will see expansion through acquisition and some very well thought-out growth,” he says. “We will be more focused on creating new product that differentiates us from the competition. An earring is an earring is an earring. We want to create unique brands and unique styles.”

Modi expects most of the chain’s expansion to be in its stand-alone Samuels Diamond Galleries, rather than its mall stores.

“The [Gallery] is where we see the biggest growth opportunity,” he says. “It is modeled after Sterling’s Jared, which is doing tremendously well and is a good business model.”

The previous owner of the chain was an investment fund, DDJ Capital Management. As a result of the transaction, Gitanjali will own 86 percent of the chain, but that will expand to 97 percent. McCullough will own the other 3 percent.

McCullough says Gitanjali was a good fit for Samuels. “They have experience in retail and are smart enough not to make the same mistakes others have in vertical integration,” he explains.

But Moti notes that Gitanjali is still a newcomer to the U.S. market.

“We are not going to pretend for a moment we understand U.S. retail,” he says. “We want to let Samuels function as a stand-alone entity. We have immense confidence in the current management.”

Gitanjali will be a prime supplier to Samuels, although Moti doesn’t think the company will supply more than 30 to 40 per-cent of the chain’s inventory.

McCullough says the arrangement has already yielded savings “much greater than I expected.”

McCullough also sees the deal as a harbinger of the future.

“All of us in the industry have long known that eventually [consolidation] has to happen,” he says. “This [deal] won’t be the last.”

Moti agrees but adds, “I don’t think everyone should view this as a business model until it’s proven. It shouldn’t be acquisition just for acquisition’s sake. It should make sense for both parties.

Gitanjali’s parent company, Digico, is best known in the United States for purchasing Leading Jewelers of the World and as owner of the Jewelry Marketing Co.

Samuels, the former Barry Jewelers, is the 10th-largest jewelry retailer in the United States. Formerly a public company, it went private after emerging from Chapter 11 bankruptcy protection in 2004.