A diamond out of the rough: the once-venerable Mayor's Jewelers looked ready to collapse two years ago. Now, the new majority owners are turning things around - Strategies

South Florida CEO, Dec, 2003 by Rochelle Broder Singer

In one three-hour event this fall, guests at an exclusive preview of the holiday collection at Mayor's Jewelers bought $400,000 worth of jewelry. It was an amazing evening, given that less than two years ago stores had little merchandise, customers were not coming in, debts were spiraling out of control and a lack of confidence in the company's management nearly derailed the Sunrise-based luxury jewelry store chain.

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Coming to the rescue was Canadian jewelry retailer Henry Birks & Sons Holdings, which in mid-2002 invested $11.5 million in the publicly traded firm in exchange for majority control and the installation of Birks CEO Tom Andruskevich as CEO of Mayor's.

Since then, though the firm is still not entirely out of the woods, Andruskevich has affected what looks to be a remarkable turnaround. Sales at the jeweler's existing stores were up 10.5 percent for the first half of fiscal 2003 (through the end of September), and profit margins hit 40 percent, up from 30 percent in the same period of 2002. How?

First, plans for a national expansion of Mayor's were jettisoned, and all 14 stores outside the chain's core markets in South Florida and Georgia (where the company has 28 outlets) were closed. "Expansion turned out to be a flawed strategy that literally caused the company to bleed money," says Andruskevich. "It was a huge drain on cash flow and profits."

Next, Andruskevich set about motivating Mayor's exhausted employees, who had been through what amounted to an openended, 18-month crisis. A revamped compensation structure, as well as Andruskevich's reputation for success at Tiffany's and at Birks, brought about improvements in morale within the first 90 days of the takeover.

Fewer stores and happier employees, however, mean nothing without merchandise, and Mayor's had little of it, having lost the confidence of manufacturers and distributors. "We methodically met with our top suppliers and partners in the jewelry industry, many of which we did business with at Birks, or I knew from my days at Tiffany's, or others [in management] knew," says Andruskevich. With a new management direction and cash infusion from Birks, "The industry was more than happy to support us with the proper credit terms, the proper payment terms, the proper merchandise."

With Birks in control for more than a year, the company still showed a net loss of $8.2 million for the past two quarters, on sales of $48.3 million--but that was a far cry from the same period in 2002, when sales of $54.8 million (including stores that have since been closed) produced a net loss of $23.4 million. Now, Mayor's has to get more customers into its stores. "Over the past five to seven years, they had let themselves go," says James Porte, president of Weston-based consulting firm Jewelry Marketing Institute. "Now they have to go back into the community, bring people into the store, and re-tell their story."

After months of market research, Andruskevich has implemented a new plan for the chain. A key strategy is to have more exclusive lines and private-label collections developed in-house, with the goal of increasing sales of products only available at Mayor's (current 15 percent of sales) to 40 percent of sales. "We were known as a company that offered a lot of other great brands. So one of our strategies is to focus a lot more on developing a Mayor's brand," he says. With private lines bringing in more profit than designer lines, the shift should help the company's bottom line.

Andruskevich also hopes to broaden his customer base. With moves such as selling diamonds that are under one carat, and carrying more gold and silver jewelry (as opposed to more costly gemstones), he hopes the company will "be a lot more fashion-relevant, and hit the sweet spot of affordable luxury." He is also looking at new ways to gain customer loyalty, and is testing some special concierge services. For example, if someone buys an engagement ring at Mayor's, the company might help him create the proposal, even buying the couple dinner and sending a limousine to pick them up. Or, Mayor's might take a long-time customer golfing at a course she (or he) has always wanted to play.

Other changes are already in the works. The company is building its first free-standing store, and the first Mayor's catalogue generated $1.5 million in sales. Heading into the all-important holiday season this year. Mayor's has two catalogues set to come out, a TV advertising campaign, regular newspaper advertisements--and stores full of new merchandise. Andruskevich hopes it all adds up to a glittery fiscal year.