Whitehall Jewellers Inc. said Thursday that Beryl Raff—who agreed only weeks ago to join the jewelry chain as chief executive—resigned before ever starting work, according to a company statement and media reports.
Whitehall also disclosed that it is running short of cash and is having trouble paying its bills. It asked for extra time to pay its suppliers.
In addition, the company said it would not file its second-quarter results “on a timely basis.” It said the results would show a net loss, but would not say when they would be reported. This is the second time Whitehall said it is delaying its second-quarter filing—with the first being on Aug. 26.
Investors didn’t react well to the news. In New York Stock Exchange trading Thursday, Whitehall’s stock lost 68 percent of its value to close at $1.26.
The Chicago retail chain did not offer any explanation for Raff’s defection. However, the company did say in a statement that it “is currently assessing its legal and other alternatives in light of Ms. Raff’s letter.”
Raff, whose appointment as CEO was effective Aug. 10 and who was scheduled to start work in a few weeks, was also set to become a member of the board of directors once her active employment began. The company said that Raff indicated in her letter of resignation on Wednesday that she will be returning compensation previously paid to her. Raff had been a fine-jewelry executive at J.C. Penney Co. and before that, the CEO and chairman of Zale Corp. The company’s former chairman and CEO, Hugh Patinkin, died in March.
Whitehall said it is in talks with its bank lenders and may try to raise new debt or equity financing but said it may be forced to restructure its obligations if it cannot gain additional financing.
The New York Stock Exchange had already contacted Whitehall on Tuesday after its shares plummeted nearly 22 percent to their lowest level since 2000 on no evident news. The company refused to comment on the unusual trading activity.
Declining sales at its shopping mall-based Whitehall, Lundstrom, and Marks Bros. jewelry stores led to a loss in the first quarter.
Whitehall’s difficulties began in 2003, when the company first disclosed it was under investigation by federal authorities for its possible role in large-scale fraud. In late September 2004 the company agreed to pay approximately $13 million to resolve the government case and to settle an associated civil lawsuit.
In addition, Jon Browne, its former chief financial officer, pleaded guilty to felony bank and wire fraud conspiracy charges in New York in connection with the case. Browne reportedly helped executives at a Manhattan jewelry supplier defraud a lender out of $20 million by overstating the value of certain accounts receivable.
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