FINLAY UNLEASHES LEASING STRATEGY
The industry leader continues to expand market share in the U.S. and Europe and is even opening its own outlets
Finlay Enterprises Inc., NewYork, N.Y., the largest leased jewelry department operator in the U.S., is strengthening its dominance of the domestic market and expanding its opportunities overseas.
Finlay’s departments sell a broad selection of moderately priced jewelry. A typical Finlay department carries items retailing for $50 to $1,000, with an average of $150 per piece. Diamond merchandise accounts for about 19% of the total business. “We’re a fine jewelry and accessory source,” says Leslie A. Philip, executive vice president of merchandising. “We focus on fashion, value and excitement.”
Created in 1942, Finlay has grown significantly in the ’90s. In 1990, it had 580 leased departments in the U.S. with sales of $368 million. This year, it has 941 departments (827 in the U.S., 114 overseas) in 26 host store groups. Sales totaled $654 million in fiscal 1995, up 18% from 1994. Net income totaled $48.3 million, up 32%.
These glowing results were obtained despite a 1995 autumn that Chairman David B. Cornstein calls “as difficult a retail environment as I ever recall seeing in the jewelry business.” This growth has spurred change at Finlay.
Changes at the top: The company’s top management team has been revamped and expanded. Arthur E. Reiner, a former chairman and chief executive officer of Macy’s East assumed the same posts at Finlay in February. (Before that, he was chairman and chief executive of Finlay Fine Jewelry Corp., the subsidiary that operates the leased jewelry departments.)
Other changes and additions include the appointment of Philip, previously senior marketing vice president at Macy’s East; Charles Leavy, vice president of merchandise planning; and Edward Stein, a former Finlay regional vice president who was named to the new post of senior vice president and director of stores. A big part of Stein’s job, says Reiner, is to “find the best practices being used in our top stores and roll them out to all.”
Reiner’s goal for Finlay over the next couple of years is simple: “Do substantially better than our [host] department stores and be the leader of the fine jewelry leased department industry.”
The internal strategy is only part of the larger picture. Changes in the department store marketplace have worked to Finlay’s advantage. The company’s external business is expanding as a result of growth and acquisitions by its host store groups.
Expansion and mergers added 144 departments between 1991 and 1995. For example, May Co. department stores – Finlay’s largest client with 343 departments – expects to add 130 locations in the next five years. May also recently bought the 27-store Strawbridge & Clothier chain in Philadelphia. “Last year, we had zero presence in Philadelphia,” says Reiner. “Next year, we’ll be in 27 stores.”
The company also is adding new host groups, either by taking over competitors’ leases or wooing store groups that operate their own fine jewelry departments. Clients Finlay would like to add, say company officials, include Dayton Hudson, now served by J.B. Rudolph, and Mercantile, now served by Zale Corp.’s Diamond Park.
Boosting sales: Within its host stores, Finlay has several strategies to boost sales, including:
Focusing on competitive pricing, marketing and customer service.
Expanding selling space at the most productive locations.
Highlighting Key Item/Best Value, a program that spotlights Finlay’s 160 best-sellers, such as diamond tennis bracelets and pearl strands. “We work with manufacturers to develop exclusive products,” says Philip.
Seeking out what Philip calls “underdeveloped categories” – such as pearl jewelry or such emerging trends as “Y” necklaces. The selected merchandise is then submitted to what Reiner calls “item intensification” – beefed-up marketing, stocking and selling initiatives.
The triangle: To support the effort, Finlay has a three-pronged attack. Aggressive advertising and promotion campaigns are scheduled in connection with the Key Item/Best Value program and during key selling periods, such as Mother’s Day, Christmas and Valentine’s Day.
The second step is “participatory merchandising strategy” between the central office in New York City, store department managers and vendors, says Reiner. This so-called “Finlay Triangle” is designed to spur sales as the main office handles vendor selection, advertising and planning; group managers concentrate on tailoring merchandise programs to their specific stores; and vendors provide input on new products, marketing, advertising, stock and pricing strategies.
The final part of the strategy is the formation of close relationships with host stores.
New channels: Finlay is exploring other retail concepts, including expanding telephone and mail order marketing efforts by making more active use of charge card lists and mailing lists gathered by host stores. Marketing via theInternet is being explored.
Finlay’s most aggressive measure, however, is a format introduced in the U.S. over the past 18 months. A new chain of outlet stores called New York Jewelry Outlet tap into a rich opportunity, says Finlay. The stores sell discontinued, close-out and other types of merchandise specifically for them. “We see the rapidly expanding outlet center [industry] as a $14 billion-a-year business without any significant jewelry presence,” says Reiner. As of June, Finlay had eight of these stores in outlet malls away from the urban centers and malls in which Finlay’s host department stores operate. The New York Jewelry Outlet store on Long Island, for example, is about 35 miles from Finlay’s nearest host department store.
International: In February, Cornstein was named chairman and chief executive officer of Finlay International, which was created to oversee Finlay’s growing foreign operations. Finlay first went international in October 1994 by acquiring the Societe Nouvelle d’Achat de Bijouterie, which now operates 104 leased jewelry departments and three free-standing stores in France. In its first full year of operations there, sales rose 38% despite a sluggish retail market and a nationwide strike in December. Finlay expects to add 20 more departments there this year and again in 1997.
In March, Finlay signed an agreement with Debenhams PLC – which operates 89 jewelry departments in the United Kingdom – to take over six departments in England and one in Scotland. Finlay has the option of opening in more Debenham stores in the future and also plans to open its first jewelry department in Germany this year, in the new Galeries Lafayette in Berlin.
FINLAY SALES GROWTH
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H. STERN CELEBRATES 50TH ANNIVERSARY
H. Stern has created a full range of fashion-forward jewelry designed to recast the internationally renowned jeweler as an avant garde designer and fashion house in this, its 50th year.
At the center of the new look is the “World Collection,” 14 lines of jewelry each featuring different aspects of contemporary design and elegance coupled with the pastel gemstones with which H. Stern is identified. Citrine, topaz, amethyst, sapphires and rubies are featured in the lines, while several feature diamonds. The inside of each piece includes a signature constellation of stars (Stern is the German word for star).
“As we turned 50, it became clear that a rebirth was in order,” says Roberto Stern, son of founder Hans Stern. The collection will be launched globally starting this fall in New York, N.Y.
To celebrate the launch of the new designs, Stern commissioned a book that contrasts color photographs of the jewelry with metallic black-and-white photographs of people from a wide variety of backgrounds.
In addition, Stern will renovate its Fifth Avenue store in New York City. Swiss architect Jorg Hysek has drawn plans for a two-story atrium with large windows within a new facade. The design will then be applied to all H. Stern stores.
The company also plans to redesign its logo, advertising and point-of sales-materials by 1999.
The company began as a colored stone dealer and developed into a jewelry house in the 1950s. Today, in addition to its headquarters in Rio de Janeiro, the company has offices and industrial facilities in Sã#-29#o Paulo, design studios in Italy, France and the U.S. and 170 stores in 14 countries, including four in the U.S. It is one of the few vertically integrated Brazilian jewelry houses, from administering its own mines in Brazil to operating its own production, design and facilities. Stern’s jewels are accompanied by a certificate of guarantee based on standards of the Gemological Institute of America.
FRIEDMAN’S REPORTS GAINS IN SALES
Friedman’s Inc., the nation’s third-largest retail jewelry chain, reported sizable sales increases in the fiscal quarter ended June 30.
Net income totaled $3 million on sales of $38.8 million. This represents increases of 56% and 36%, respectively. However, comparable-store sales (those open at least a year) rose 4%, down from 13% in the same quarter of the previous year.
These results were reduced by charges of $1.7 million from the early retirement of debt and $1.3 million relating to a long-term incentive compensation program. Accounting for these charges, the company reported break-even net income.
For the nine months, earnings totaled $14.3 million on sales of $137.3 million, up 53% and 42%, respectively. Comparable-store sales rose 5%, up from 14%.
The same charges that affected profits in the most recent quarter also reduced net income for the nine months to $11.7 million, up 22% from the same period of the previous year.
PIERCING PAGODA REPORTS RECORD EARNINGS FOR 1996
Piercing Pagoda Inc., the largest U.S. retailer of jewelry in kiosks, reported sales rose 41% to $121.6 million and profits rose 37% to $5.7 million for fiscal 1996, which ended March 31.
For the fourth quarter alone, the company reported a loss of $230,000 on sales of $27.1 million. That compares with profits of $19,000 on sales of $17.7 million the same quarter of the previous year.
“We are pleased to report record sales and earnings in our first full fiscal year as a public company and are particularly gratified with our significant earnings increase for the year,” says John F. Eureyecko, executive vice president and chief financial officer.
The company operates Piercing Pagoda and Plumb Gold kiosks in regional malls throughout the country. During fiscal 1996, the company opened 155 stores and closed eight, ending the year with 513, up from 366 at the end of fiscal 1995. The kiosks offer an extensive selection of 14k and 10k gold earrings, chains, charms and bracelets, as well as a selection of rings and silver jewelry, all in basic styles.
H.T. Stewart & Co. of Boca Raton, Fla., moves from Town Center Mall to Mizner Park downtown this month.
To celebrate its 10th anniversary, South Louisiana Coin & Jewelry of Baton Rouge, La., changed its name to Louisiana Gold & Gems and moved to a new 2,000-sq.-ft. retail showroom at 12147 Coursey Blvd. The store began in 1986 as a rare coin and precious metals dealership. The emphasis has changed to fine jewelry and diamonds, but the store still maintains a collectible coins department.
Fred P. Gattas Co., Memphis, Tenn., closed its last store and went out of business July 29.
CHANEL INC. MOVES U.S. HEADQUARTERS
Chanel Inc. has relocated its U.S. headquarters and flagship store to a new 17-story, 65,000-sq.-ft. granite-and-glass tower located at 15 E. 57 St., New York, N.Y. The company’s former location at 5 E. 57 St. has closed.
The new building houses the Chanel Boutique for Fashion and Accessories, designed by Karl Lagerfeld; the Chanel Joaillerie Boutique, making its New York City debut; the Chanel Suite, which will be used for high-profile charity events and corporate functions; and the Chanel Fashion Division’s executive, wholesale and public relations offices.
Platt Byard Dovell of New York City designed the base building, wholesale showrooms and offices. Brand & Allen Architects of San Francisco, Cal., designed the interiors of the boutiques and the Chanel Suite. The project was overseen by Christian Gallion, the French architect and interior designer for all Chanel boutiques throughout the world.
Artist’s rendering of Chanel’s new headquarters in New York City.
May Co.’s recent acquisition of the Strawbridge chain gave Finlay its first 27 leased jewelry departments in the Philadephia area.