Jewelry and home furnishings retailer Fortunoff has stopped paying its bills in recent weeks and could be considering Chapter 11 bankruptcy court protection as well as other options to reorganize its business, financial sources said. The company said it is considering strategic alternatives.
One credit source stressed that a bankruptcy filing is only one option. A bankruptcy would give the specialty retailer some breathing room from its creditors.
Another option would be for the founding Fortunoff family, which retains a minority stake and still owns some valuable real estate, to sell some of those assets, sources said. Other sources speculated the company could be bought by another retailer.
Fortunoff said in a statement: "Fortunoff has been and is continuing to work with its financial advisors to consider the complete range of strategic alternatives for the company. Our stores are fully staffed and open for business as usual, and we remain committed to serving our customers."
Meanwhile, other industry sources said there is speculation an Indian investor may look to acquire the retailer — but only if it files for bankruptcy protection.
Another source cited the retail environment and a slowdown in sales of the retailer's home furnishings categories, which include giftware and tabletop, as two of the reasons for the company's fiscal woes.
The credit source also said that, after a majority stake in the retailer was sold to a private equity group in 2005, many factoring firms had stopped assessing the creditworthiness of the company since financial information was no longer being sent to them. Fortunoff, he said, has been getting merchandise from vendors, with suppliers taking on the risk of not getting paid.
One contact close to fine jewelry suppliers said they and others have shipped to Fortunoff since the sale in 2005 at their own risks because the "retailer had a reputation for always paying their bills."
The retailer supposedly stopped paying its bills at the beginning of the year, sources said, and a recent deal to secure a financing package fell through earlier this month.
In August, Fortunoff sold the lease of its New York flagship at 681 Fifth Avenue near 54th Street. The store relocated to 3 West 57th Street.The Fortunoff family sold a majority stake to Trimaran Capital Partners and K Group, which was in part to help finance the $500 million chain's expansion in the New York and New Jersey markets and eventually into other areas across the U.S.
Fortunoff was founded in 1922 by Max and Clara Fortunoff. Their son, Alan, served as president and chief executive officer until his death in July 2000. Since then, his wife, Helene, has stepped up to take the reins; Louis Fortunoff is her son.
Trimaran, headquartered here, has made previous investments in Urban Brands, a plus-size apparel company under the Ashley Stewart name; Reddy Ice, a leading packaged-ice supplier, and Educational Services of America, a special education school operator.
K Group, also based here, makes private equity investments in lifestyle and luxury consumer products and retail businesses, including Harry Winston and Rubbermaid.
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