A Tale of Two Silvermans

If you peruse trade magazines’ classified sections, you’ve probably noticed an ad for Silverman Jewelers Consultants, offering help with retirement, store closing, and promotional sales. Depending on where you live, you also may have seen Silverman’s factory showrooms, advertising jewelry sales directly from the manufacturer to the consumer. And you might have heard through the industry grapevine that Henry Silverman Jewelers is looking to acquire guild stores.

You may have wondered if all these Silvermans are related to each other. The answer: They’re two different Silvermans, but they are related.

In June 1997, Silverman Jewelers Consultants of Mount Pleasant, S.C., purchased a controlling interest in the privately held, previously unrelated Henry Silverman Jewelers, a chain of factory showroom stores headquartered in El Paso, Texas. It was a coincidence that both businesses had the same name, says Stuart Fetter, chairman and CEO of both companies, who prior to the acquisition headed Silverman Jewelers Consultants. “The best part was that I didn’t have to change my business card,” he quips.

Under Fetter’s leadership, Henry Silverman Jewelers is aggressively acquiring independent stores – both struggling businesses and successful guild stores. Since the two Silvermans joined forces, the chain has grown from 18 stores in 10 states to 30 in 12 states, with plans to expand to 100 by 2001.

The consulting arm gives the chain a chance to scope out stores ripe for the picking. “In the consulting business, we get a lot of calls from people who want to retire,” Fetter says. “If the store fits in our parameters, we can go in and buy it.”

One name, two missions. Industry observers are watching with interest as the consulting business, factory showrooms, and guild division begin to work together. Silverman Jewelers Consultants’ “experience in the industry and all the contacts they have” make the firm well suited to pursue new acquisitions, says Cece Smith of Phillips-Smith Specialty Retail Group in Dallas, an investor in Henry Silverman Jewelers. While Fetter and his team are “experimenting with a variety of things,” such as the guild stores, “I don’t expect that the company will change its focus in terms of the factory showrooms,” she says.

Division of labor has not been a problem, according to Fetter: “We have different people that run each of the businesses.” On the other hand, the similar names of the companies make corporate identities confusing. “That may be the hardest part,” he notes. Indeed, he sometimes has to stop to clarify which Silverman he’s talking about!

On balance, however, the dichotomy is working out well for the consulting firm, Fetter says. For example, jewelers who want to close their businesses but who have years remaining on their leases “understand that we now have retail stores and we can buy their stores.” Previously, he notes, lease agreements might have made them hesitant to call for a consultation.

Poised for growth. Henry Silverman Jewelers is now the 24th largest jewelry chain in the United States. Its stores’ average volume is more than $1.5 million each, according to Fetter. In March, the company posted an 18.5% comparative store increase, the biggest monthly increase in its history. Fetter declines to release figures for the consulting firm.

“Silverman Consultants certainly positioned [Henry] Silverman Jewelers for rapid expansion,” says Randy McCullough, the former president of Henry Silverman Jewelers. Currently, McCullough is president and CEO of Samuels Jewelers in Austin, Texas, formerly Barry’s Jewelers, which was aided by Silverman Jewelers Consultants when it filed for bankruptcy in 1991. (It filed again in 1997.) The consulting firm helped Barry’s analyze which stores to close and supplied consignment merchandise for its sales, according to Fetter.

In March, Fetter broadened the consulting firm’s reach by inking a deal with D.G. Jewellery of Canada Ltd. A new joint venture has been set up in Canada, named Silverman Retail Solutions Inc. and owned equally by Silverman and D.G. Jewellery. Under the agreement, D.G. Jewellery will supply jewelry products for Silverman’s liquidation business in Canada. (In Canada, as in many U.S. states, stringent legal limitations must be met in order for outside merchandise to be used in going-out-of-business sales.) D.G. Jewellery estimates that its revenues from the agreement would exceed $40 million over the next five years. Fetter declines to discuss the financial details of Silverman’s part of the deal.

“The best move I made.” Silverman Jewelers Consultants, founded by New York jeweler Manny Silverman, has been operating for more than 50 years. Fetter’s first relationship with the firm was as a client. Formerly executive vice president of Zale Corp., he opened his own chain of stores in Texas in 1976. In the early 1980s, he closed them with some help from Silverman. “It was the best move I made,” he recalls. “There’s a real art to closing a store. I liked it so much, I went to work for [Silverman].” He joined the company in 1982, running it with Manny Silverman and his son, Ron Silverman.

In 1986, Fetter, Ron Silverman, and other partners bought the company from Manny Silverman and Silverman’s brother Lou, co-owner of the business. Manny Silverman has since passed away; Ron Silverman has retired.

Currently, Fetter devotes most of his time to the retail stores. The consulting business is overseen largely by executive vice president Harry Aureli, who has been with the firm for more than 10 years.

The main benefit Silverman Jewelers Consultants offers to jewelers in financial straits is the counsel of experienced industry professionals who are also objective observers, says Fetter. “In a distress situation, you don’t see clearly. We’ve been able to analyze the situation.” Most often, he notes, a store’s problems are caused by excessive inventory. Fetter claims that Silverman Jewelers Consultants enables 65% of its clients to stay in business.

One satisfied client is David Felstein, owner of Hillman Jewelers in Terre Haute, Ind., who says Silverman Jewelers Consultants “did everything they said they were going to do for us” and helped him to rebound from bankruptcy. Felstein sought Silverman’s help in running a consolidation sale in 1994 and then in filing for Chapter 11 reorganization in August 1995 in the aftermath of two robberies and an expensive lease that the building owner wouldn’t negotiate. Since then, Hillman Jewelers has gotten “absolutely current with the business,” maintaining good relations with its suppliers and even picking up new lines, Felstein says. The store gave creditors the option of taking 40 cents on the dollar immediately or 100% payment over five years. “Three years are paid for, and the fourth year is in the bank,” he adds.

Felstein also sought Silverman’s assistance with in-store promotions since the bankruptcy filing and has found the company ready to continue helping him. “They made a lot of money [from working with Hillman Jewelers] – and I couldn’t care less. They didn’t just take the money and run,” he says.

Educated shoppers. The two Silverman companies first got acquainted in 1996, when Henry Silverman Jewelers called Fetter’s consulting firm for advice on closing a store in Madison, Wis. Henry Silverman Jewelers was founded in 1966 and originally manufactured jewelry for retailers and wholesalers. In 1984, it opened its first retail outlet, a factory showroom store.

In a 30-minute TV “infomercial” for the chain, actors proclaim that “At Silverman’s factory showroom, you are buying directly from the maker. There are no middlemen, no high retail markups.”

Evidently, the pitch is working. Former president Randy McCullough says that the Silverman’s stores attract a consumer with “a higher household income and higher level of education” than the typical jewelry chain store customer and that Silverman’s average sale is higher than that of competing chain stores.

According to Janice Fetter, vice president of advertising and marketing for both companies – and Stuart Fetter’s wife – the median income of Silverman’s customers is $43,000, and the average store purchase is $386. The average customer is 39 years old and married, with three people in the household. Both spouses work; they have two cars and own their own home. A third of Silverman’s customers are college graduates.

Those shoppers now have more Silverman’s outlets to choose from. Last year, the company acquired two Nathan’s Jewelers locations in San Angelo and Brownwood, Texas, and six Rey’s Jewelers locations in Greenville, Spartanburg, and Greenwood, S.C. (The Rey’s stores have changed their names to Silverman’s. The Nathan’s stores retain their names but have added the notation “A division of Silverman’s.”)

Janice Fetter says it’s difficult to determine whether the company’s main competition is chain stores or independent stores. She notes that Silverman’s stores have in-house jewelers and the ability to custom-design a piece for a client, the kind of services that independent stores provide.

Stuart Fetter says the company is currently investigating 12 more stores as potential acquisitions in the near term. He adds that he’s especially interested in free-standing stores or those in strip centers. Six Silverman’s stores are in malls.

New turf. In December, the company moved into new territory when it acquired Wayne Jewelers & Silversmiths in Wayne and Ardmore, Pa. With the acquisition, the company established a new guild division. (A planned deal to acquire another guild store, Susann’s Custom Jewelers in Corpus Christi, Texas, fell through.)

CEO Fetter, who is looking for high-end independents to acquire, says he intends to “keep the [guild] stores exactly like we buy them,” retaining store names and upscale brands while adding some items created by Silverman’s designer. The Wayne Jewelers stores aren’t yet fully integrated into Silverman’s inventory system, although changes are in the works.

One of the changes will involve the relinquishing – at least temporarily – of Wayne Jewelers’ American Gem Society membership. According to AGS executive director Robert Bridel, society policy mandates that an AGS store acquired by a non-AGS firm give up its membership for a two-year period. After the hiatus, the store will be able to reapply.

Future plans. Fetter says there’s a possibility that the Silverman jewelry stores will one day go public or merge with another company. He says, however, that at present the status quo is just fine with him, and plans include future growth: “We’re very happy with it right now.”

Should the consulting firm ever become unhappy with the retail stores, it will be in a good position to make the next move, notes jeweler Russell Korman of Russell Korman Co. in Austin, Texas. Korman, who hired Aureli of Silverman Jewelers Consultants as an expert witness in a lawsuit over property taxes, speculates that “if their intention is to try to build a major chain real quickly and sell it at a big profit, that’s the upside. If they fail, they always have the option of doing what they’re best at – liquidating.”

“They’re powerful and strong enough to walk two sides of the street,” says Felstein in Indiana. “If they can pull it off, I think it’s great.”

A well-known liquidator has teamed up with a chainof factory outlet jewelry stores to expand the company – and is even branching out into guild stores.

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