Famed New York City jeweler and home furnishings retailer, Fortunoff, last week agreed to be bought by the owners of Lord & Taylor. The sale to NRDC Equity Partners LLC is expected to close in early March, subject to bankruptcy court approval and other conditions.
Fortunoff, which operates 20 stores with $450 million in annual sales, has been struggling with lackluster sales under a heavy debt load since 2004 when it was purchased by private equity companies Trimaran Partners and Kier Group.
Plans call for the opening of branded Fortunoff jewelry departments as well as home and bridal registry areas in L&T's 47 stores - including a 100,000-square-foot Fortunoff home furnishing department and smaller Fortunoff jewelry department within the flagship at 39th Street and Fifth Avenue in Manhattan. The New York Times said this could make L&T a bigger competitive threat to Bloomingdale's and Nordstrom.
NRDC also plans to invest $100 million into the Fortunoff business, including both existing and new stores. No closings are planned. Much like its successful turnaround at L&T, NRDC management believes Fortunoff will fare better by moving upscale, carrying better merchandise at higher prices.
Since being acquired by NRDC in 2006, L&T has undergone a stunning turnaround in part by persuading more than 100 upscale brands, including Diesel, Tracy Reese and Ted Baker, to sell to the chain.
In an interview with The Associated Press, NRDC Equity Partners CEO Richard Baker, who serves as chairman of Lord & Taylor, said the acquisition of Fortunoff represents a "perfect opportunity" to refine Lord & Taylor's merchandise offerings.
"We are in the process of reinventing Lord & Taylor. Our goal is to make it more interesting, more exciting, fresh and fast for our customers," he said. As for Fortunoff, he said that the company "spent too much time competing with retailers beneath them. They needed to focus on their roots."
Eventually, sources told the Times, NRDC wants to buy a bridal company to enable Lord & Taylor to become a one-stop destination for engagement rings, wedding dresses and a gift registry.
Writing in Newsday, Steve Poppe, director of marketing at Zude.com, a Long Island-based company that creates web page development tools, said both Fortunoff and L&T need to keep separate and distinct identities for the merger to succeed.
"If Fortunoff becomes just another department of Lord & Taylor, a unique shopping experience will be watered down for both stores," wrote Mr. Poppe. "The history of retailing is cluttered with stores that have combined based upon the 1+1=3 strategy, and it rarely works."
Discussion Question: How would you rate the merger between Lord & Taylor and Fortunoff? What do you think of the plans to introduce Fortunoff departments in L&T and to reposition Fortunoff more as an upscale retailer?