Can Daniel’s Jewelers Revive the National Credit Jeweler?

Since the demise of Friedman’s, we haven’t heard much about national credit jewelers. And that is where Daniel’s Jewelers, the California chain that was just snatched up by a private equity firm with an eye on expansion, smells an opportunity.

Following yesterday’s announcement of the purchase, new owner Palladium Equity Partners CEO David Sherwood, vice president Justin Green, and managing director Luis Zaldivar spoke to me about future plans.

JCK: When you talk about expansion, where do you expect to expand? 

David Sherwood: One of the first places we are looking is within California. We have always been somewhat confined to Southern California. We are now making an aggressive push into Northern California. We are looking at three, four, maybe five new properties.

We have always looked to pursue opportunities outside the state. We haven’t defined where that would be. We are looking for places where our customers are. We are going to seek them out. 

JCK: When you talk about your customer, who would that be?

Sherwood: We have a very middle-market customer base. We aren’t looking at the top end of the jewelry market. We do a tremendous amount of our business with our own in-house credit. That type of outlet—a real legitimate credit jeweler—has been lost in the market. There is a vacuum. 

JCK: Do you think you can revive that credit jeweler concept? 

Sherwood: It never went away in California or with our customer base. The national players went away. The market is still there, and it’s always been there. 

JCK: So you hope to become a national credit jeweler? 

Sherwood: That is the part of the thinking, yes.

JCK: Will your business change in any other way, besides the expansion?

Sherwood: We are pretty happy with our business model. There is nothing broken with how we are doing business. The business had the ability to grow on its own, and through the years we have continued to grow. But it was at a very conservative pace, and it was a pace defined by the capital structure. We had family owners that didn’t want to put too much at risk. With the partnership with Palladium we are willing to let the business grow and flourish in a way it wasn’t able to do before. 

JCK: When you talk about expansion, are you looking to acquire single stores or chains or both?

Justin Green, vice president, Palladium Equity Partners: Both.

JCK: What attracted Palladium to Daniel’s? 

Green: We as an investment firm really seek to invest in founder-owned businesses, and we want to take them to the next level. In Daniel’s, we found an attractive platform, attractive market, and compelling market position. We did a lot of surveys, and the customer feedback was extremely positive.

JCK: Is there still some family ownership of the company? 

Green: There is still some family involvement. The two Sherwoods who were the owners prior to the transaction reinvested, as did David.

JCK: When you as outsiders look at the jewelry industry, what made it attractive to you? 

Luis Zaldivar, managing director, Palladium Equity Partners: We see a fragmented industry, a large industry that has some sustained growth ahead of it. The economy is getting healthier, and the economic backdrop could be favorable. Within the overall industry, Daniel’s has less than 80 stores. We think the opportunity could be significant to increase that number.

JCK: Do you have any growth targets you see? How many stores do you foresee having this time next year? 

Sherwood: We don’t have any solid growth targets that we are willing to share. We are in the process of working through all our plans for next year and beyond. And as you can imagine, we are 150 percent focused on executing for the holiday season.

 

JCK News Director