When the opportunity arose for veteran jewelry executive Ed Dayoob to take over the reins of ailing Whitehall Jewelers, Dayoob jumped at the challenge. Despite a myriad of issues facing the Chicago-based chain of 326 stores, he believed the retailer was salvageable—and his faith and efforts have started to pay off in a dramatically improved corporate performance.
Dayoob, who retired in 2005 after a successful 35-year career leading Fred Meyer Jewelers, officially became Whitehall’s chairman and chief executive officer in September 2006. However, he had been serving as a board director for Whitehall since March 2006.
When Dayoob came onto the board, he saw a shadow of the strong competitor he faced for many years while at Fred Meyer—and Whitehall still had significant hurdles to overcome if it were to survive: Whitehall was shell-shocked from several years of legal and financial problems, including investigations led by the Securities and Exchange Commission and the U.S. Attorney’s Office; a number of key executives tied to alleged financial improprieties at the company had resigned or were fired; Whitehall’s reputation had been hurt by the scandals, particularly in its Chicago home base; sales and profits had sagged in recent years, and the retailer had closed many stores in the wake of its difficulties; longtime Whitehall chairman/CEO Hugh Patinkin died of a heart attack in March 2005; the company had been through a succession of four CEOs trying to fill the leadership gap left by Patinkin’s passing; employee morale was suffering; and many of the company’s top performers had abandoned ship.
In addition, Whitehall had accepted a takeover offer from Prentice Capital Management and Holtzman Opportunity Fund, which was finalized in March 2006 after a nasty bidding war with Newcastle Capital Management. While the new owners planned to add an infusion of much-needed capital into the company, management was lacking major jewelry-chain experience and was trying to change the direction of Whitehall to appeal to more upscale customers. Vendors were skeptical of the company’s prospects and its plans to upgrade to the higher-end market, and had scaled back on merchandise and tightened terms to the retailer in the wake of its financial and legal woes.
Dayoob believed that the move upscale wouldn’t work, and when he expressed his opinions to management as a board member, they ultimately asked him to lead the company. “When I heard what they wanted to do, it didn’t sit right with me,” he says. “I just didn’t think a move to high-end fashion would work in the malls. I had competed in the same malls with Whitehall for so many years, and I knew the market. They really weren’t all that different from Fred Meyer.”
He also saw a unique opportunity to turn things around at Whitehall and do something that would give a positive jolt to the industry. Although Dayoob had started Fred Meyer’s jewelry business from scratch—and within a supermarket organization to boot—he had never faced the challenge of bringing a once-successful company back from the brink of disaster. “I saw a company that had a market capitalization of $350 million only a few years ago, and the world hasn’t changed that much since then,” Dayoob says. “I also saw 3,000 people looking for someone to save their jobs. This industry can’t afford to lose 300 more stores and 3,000 jobs. It’s been very good to me, and I wanted to give something back. Also, Hugh Patinkin and I were very good friends, and I wanted to continue his legacy.”
Dayoob’s multipronged plan to reinvigo-rate the company focused on three areas: merchandising, marketing, and operations. One of his first orders of business was to form a new management team. Dayoob brought in a number of former Fred Meyer executives, including Mike Don as chief financial officer, Mark Funasaki as chief administrative officer, Janet Vorenkamp as vice president of marketing, and Steve Seplak as vice president of merchandising. He also brought in Dean Harris from Zale as senior vice president of operations. The team was in place by December 2006.
On the merchandising side, Dayoob says he went back to basics with core product and sought to boost Whitehall’s bridal business, an area that had been his forte at Fred Meyer. He also started a color birthstone program, which had been very successful at Fred Meyer. Additionally, he focused on building sales margins by getting away from promoting the millions of dollars of clearance merchandise that Whitehall had been using as a draw—and abandoned a “disastrous” attempt at value pricing to return to a more traditional mall “better product, better pricing” model.
As for marketing, Dayoob put out a bridal ad in February, and mailed some 11 million newspaper inserts for Christmas and Valentine’s Day. The company also beefed up its direct-mail program. “We had to get back the perception that Whitehall was a good name, with a good reputation,” Dayoob says. Like at Fred Meyer, Dayoob brought Whitehall’s flyer/direct-mail production in-house, which has helped generate additional savings and synergies.
On the operations side, in addition to assembling a new management team, Dayoob also implemented a new compensation program that included a commission base, a promotion base, and an opportunity for equity sharing. “The last few years, Whitehall had lost 60 percent of its top salespeople,” he says. “There was no leadership in the stores, no direction. We needed to do something to attract these people back.” At the same time, a lot of the merchandising people Dayoob inherited were replaced.
Dayoob also made some changes on the real estate side. He has been eliminating underperforming or redundant stores, particularly where there were two in the same mall, and has instituted a major remodeling program. Due to the company’s financial problems, many of the stores had been neglected in recent years. Whitehall also has many small stores in the 800–900-square-foot range, which puts them at a disadvantage in competing against their mall competitors with locations twice as large. Dayoob says the company is working on boosting those stores to 1,350–1,400 square feet wherever possible.
These changes already are starting to yield dividends. Dayoob notes that Whitehall had a much better Christmas and Valentine’s Day than it has in several years. March and April sales were strong, and some of the revamped locations already are showing double-digit comp-store sales increases.
Meanwhile, Dayoob’s outstanding industry reputation has helped reopen doors for Whitehall with many former vendors and has given the chain opportunities with new vendors, too. The company’s consistent performance, stable veteran management team, and new compensation programs are all helping to attract better salespeople to the organization. And company attitude and morale has improved dramatically, Dayoob says.
“With the financial and legal issues behind us, the changes we’ve made, and the tremendous improvements we’ve experienced, we’ve really turned the corner,” he says. “We’re finally at a point where we can look forward, not backward.”
This means the company is ready to resume moderate growth. Dayoob saysthat Whitehall will probably open 10 new stores over the next year—and through its well-capitalized position under Prentice/Holtzman, it is looking for viable acquisitions as well.
Dayoob says there will be further tweakingand refining in numerous areas, and his goal is for Whitehall to hit double digit increases in 2007. As for his own future, Dayoob says he will continue to make the day-to-day decisions at Whitehall for as long as the company needs him. But he acknowledges that the team is in place for him to step away sooner than he originally anticipated—perhaps as early as 2008. Even then, he plans to remain active within the company as chairman and a board director.