Ultra Letter to Vendors

Ultra Diamonds
, a Chicago-based chain with over 150 locations (profile), just sent out a note to its vendors, suspending payments on asset purchases. It also plans to close some stores. The company had recently refinanced its debt. Here are some of the main points of the letter, signed by its CEO:

Dear Vendor Partner:

As I am sure you have observed, the U.S. retail jewelry industry suffered through one of the worst holiday selling seasons in memory. While Ultra was able to fare better than most, we saw a dramatic drop-off in sales during the Holiday Selling Season. This market weakness comes at a time when our industry faces unprecedented shortages of liquidity from lending institutions and virtually no interest in the sector from investors outside of the industry. Ultra’s results were certainly impacted by these macroeconomic conditions and we have seen continuous tightening of our availability under our credit facility based on industry and economic performance. Based on this we are taking immediate steps with our Bank group to address our financial condition.

Our banks have determined that we need to preserve all of the cash we can until we better understand our liquidity options. As such, we are suspending payments to our vendor partners on asset purchases for the time being. The banks will, however, let us continue making payments on consigned goods sold every two weeks  as we have done in the past. Going forward any special order merchandise including any items currently in the pipeline will be paid for on a C.O.D. basis (after Q.C.) …

We believe in the long-term sustainability of our business model, and as a result, we are taking proactive steps to position our business to continue to survive the economic turmoil we expect to be with us throughout 2009. We have cut a great deal of operating expenses and will continue to aggressively reduce costs going forward. We have deferred or eliminated virtually all non-essential capital expenditures and plan to close underperforming stores. We feel our off-price, value proposition positions us well now and into the future …

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JCK News Director

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