Add Fortunoff to the list of well-known retailers that might disappear from the American landscape.
Sources said the jewelry and housewares chain, confronted by mounting difficulties on all sides, is set to again file for bankruptcy court protection, possibly as soon as Thursday. But instead of finding a white knight, this time the chain could be headed toward liquidation.
The worsening economy has pushed several retailers into bankruptcy in the past several months, including Goody’s, Gottschalks, Steve & Barry’s, Circuit City, Mervyns and Linens-N-Things, and has spurred speculation about many more. Meanwhile, even relatively healthy retailers are slashing costs — with layoffs at all levels — from 7,000 at Macy’s Inc. to 6,700 at Starbucks — as well as cutting 401(k) contributions and freezing salaries.
Fortunoff’s owner, NRDC Equity Partners, put the troubled business up for sale recently. With no taker in sight, business exceedingly difficult and bills piling up, NRDC has decided to seek court protection rather than pump money into a flagging operation with an uncertain future. The move is likely to set the stage for a court-ordered auction of Fortunoff and liquidation.
NRDC executives declined comment. WWD first reported on Friday that a Chapter 11 filing was likely.
Fortunoff has an unusual merchandising formula, which worked well for decades, but now seems like a curse. The chain specializes in home and jewelry, which just happen to be among the most challenged sectors in retailing. According to the Jewelers Board of Trade, a credit and collections bureau, 1,140 jewelry businesses closed in 2008 and bankruptcies were up 18.6 percent in the sector. Three jewelry chains were liquidated — Whitehall Jewelers, Friedman’s and Crescent Jewelers. Zale Corp. has been cutting jobs and closing stores, and Finlay Enterprises, which runs leased jewelry departments inside stores around the country, has been experiencing liquidity problems.
NRDC bought Fortunoff out of bankruptcy in March from Trimaran Capital Partners and K Group.
Once Fortunoff enters bankruptcy proceedings, bottom-fishers will circle, among them The Hilco Organization, which invests in, and consults for, retailers, brands and manufacturers, and also conducts liquidations, such as Circuit City, which is ongoing. Hilco has already been in talks with NRDC. Last year, when Fortunoff was up for sale, Hilco was in on the bidding, but lost out to NRDC, which paid $80 million plus $30 million in debt and other obligations for the $400 million Fortunoff.
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