Whitehall Jewelers, Chicago, which is struggling to make a profit and is undergoing federal investigations, is changing direction from a mass market retailer to one that will target luxury shoppers, the Chicago Sun-Times reports.
Whitehall Jewellers’ new direction was prompted by its June 2 hiring of Debbie Nicodemus-Volker, a veteran of Donna Karan International, a division of Louis Vuitton Moet Hennessey, as Whitehall’s executive vice president of merchandise, the newspaper reports. However, Whitehall will stay away from name-brand designer jewelry as expensive as Bailey Banks & Biddle, Whitehall Chairman and CEO Hugh M. Patinkin reportedly said on a conference call with analysts Thursday.
Instead, Whitehall will reduce its store inventories to focus on the kind of jewelry “you’d see in fashion magazines today,” Patinkin reportedly said.
For example, Whitehall will introduce a diamond pendant that appears to show more “movement” than the ones Whitehall now stocks, he reportedly said. The jeweler will showcase its new jewelry offerings with an expanded array of the merchandise at 50 of its 386 stores.
Locally, the retailer’s stores, which operate under the Whitehall Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers brands, can be found at malls in many blue-collar markets. The stores are in geographic areas as diverse as Water Tower Place on the Magnificent Mile; Ford City Shopping Center on Chicago’s Southwest Side; River Oaks Center in south suburban Calumet City, and Westfield Shoppingtown Old Orchard in north suburban Skokie.
Patinkin reportedly said the company’s review of its real estate showed that “we have a niche we can go after” because many of the jewelry stores are in upscale and upper-moderate malls.
Whitehall is quickly getting rid of the products it no longer intends to sell, even though that may hurt its profit in the short term. It sold $3.1 million worth of the old merchandise “at cost” in July, and expects that the outdated stuff will account for one-quarter of its sales this month.
The strategy announcement coincided with the Chicago-based retailer’s report Thursday that its net loss worsened in the second quarter, to $3.2 million, compared with $2.8 million in the same period a year ago.
Same-store sales at the Whitehall chain declined 0.6% from a year ago. Sales during the second quartered dipped to $72.3 million from $72.7 million in the year-ago quarter.
Whitehall has also suffered continuing expenses related to a fraud investigation. Federal investigators are looking into whether Whitehall and 13 other retailers misrepresented their former gem supplier’s accounts receivable. The allegations are part of a lawsuit filed in August 2003 by Capital Factors Inc., which purchased for cash the accounts receivable of Cosmopolitan Gem Corp., based upon the allegedly bogus and inflated financial reports.
The retailer has said in the past that it is cooperating with federal authorities and will defend itself against lawsuits seeking class action.
Whitehall set aside $310,000 for expenses and paid $370,000 in professional fees in the second quarter in connection with the lawsuit and the investigations. It had already recorded $8.9 million in what it called “litigation accrual” during both the fourth quarter of 2003 and this year’s first quarter.
The retailer’s history in Chicago dates back 99 years, when the founding family opened a jewelry store on State Street.