MONTREAL — Henry Birks & Sons, one of Canada’s most venerable and best-known jewelry chains, has faced many challenges in its 123-year history, but the retailer is now tackling one if its toughest assignments yet in turning around Mayor’s Jewelers.

Birks, based here, assumed majority control of the troubled jewelry chain last month and is working to make the company profitable and more approachable, and at the same time build its own business in the U.S.

"There are limited opportunities to expand in Canada," Birks president and chief executive officer Thomas Andruskevich said in an interview. "In time, we will assess other opportunities in the U.S., as well as other markets."

Andruskevich, who also holds the title of chief executive officer at Mayor’s, is working with executives at Mayor’s on an aggressive plan to reverse the chain’s slide with a blueprint that has worked at Birks, which was in bankruptcy itself in the early Nineties and was also a family-owned company for several generations.

The strategy includes putting an automatic replenishing program into place and remerchandising the stores to cover a wider variety of price points. Mayor’s, based in Sunrise, Fla. had sales of about $164 million last year and now has 28 stores, after scaling back and closing about a dozen locations in the last few months. As part of its growth plan, the company has dramatically reduced its watch offerings to 14, about half of the number of brands it had been offering, and has upped its selection of jewelry. All of the remaining Mayor’s stores will operate under the Mayor’s nameplate.

"On the creative side, Mayor’s is a stronger watch house, while Birks is stronger in the bridal business, and we see an untapped opportunity to develop their bridal jewelry," Andruskevich said. "We also want to build their private label program, which has higher margins and which currently represents only 15 to 20 percent of their business, compared with 75 percent at Birks."

Aida Alvarez, Mayor’s vice president of merchandising, said the chain’s opening price point is about $95 for gold earrings, and the average price point has come down to about $1,200 to $1,500 from around $1,800 to $2,000."We are more interested in focusing on perceived value and carrying more classic, basic stock," said Alvarez, who noted that executives plan for the chain to return to profitability in about two years.

Most of Mayor’s upper management, including Alvarez and Al Rahm, vice president of sales, are still in place. However, Joseph Cicio, who had been brought in as ceo in May, was let go in August when Birks assumed control, and his duties have been taken over by Andruskevich.

While Mayor’s wasn’t the first American chain Birks had its eye on, it was the best fit, according to Andruskevich, who joined the company in 1996 when Birks itself was facing an uncertain future. Birks swept in this summer and paid $15 million for a controlling interest to rescue Mayor’s, which had suffered from a host of financial and other problems in recent years.

"The fact that Mayor’s is based in Florida was a plus," he said. "We did a study three years ago to identify the four main markets where the Birks name had the highest level of awareness. Florida came out on top, followed by Arizona, Boston and Seattle, because a lot of Canadian snowbirds spend the winter there and Mayor’s has a lot of Canadian customers."

There were a number of reasons why Mayor’s got into financial difficulties, resulting in a loss of $54.7 million in last year’s fourth quarter, noted Andruskevich, who formerly worked at Tiffany & Co., as well as Mondi. Mayor’s was acquired by Jan Bell Marketing in 1998, which renamed itself Mayor’s, and the company overextended itself by rapidly opening new units outside of its core Florida market.

Nonetheless, Birks, which now has sales of around $64 million, sees plenty of opportunity in Mayor’s, which was founded in 1910 and is known for carrying some of the best and most exclusive jewelry and watch brands, including Rolex, Roberto Coin, Cartier and Omega.

This is not Birks’ first attempt to gain a toehold in the U.S. market. The last time nearly sank the company, which is one of Canada’s largest fine-jewelry chains with 37 stores.Like many Canadian retailers, the allure of the American retail market, which is more than 10 times the size of Canada, was too tempting for Birks to ignore. Until 1993, when it was sold to Regaluxe S.A. of Italy after filing for bankruptcy protection, Birks had been privately owned by the Birks family for five generations.

Henry Birks opened the first store in 1879 in Montreal, and for the next 22 years, Birks remained a one-store operation. But when the next generation took over, a period of rapid expansion ensued, with new stores opening in 15 Canadian cities between 1901 and 1949.

When Drummond Birks took over in 1972, the expansion continued, this time through acquisitions across Canada. Then the company set its sights on the American market, snapping up Shreve, Crump & Low and the Thomas Long Co., both of Boston; the Schwarzschild Bros. of Richmond, Va., and the jewelry division of Dayton-Hudson Corp. in several U.S. cities.

By the late-Eighties, Birks was at the height of its glory with 4,500 employees in 220 stores — 133 in the U.S. and 87 in Canada — and annual sales of $400 million. But then the company began to experience some tough times, and Birks was forced to shutter some of its unprofitable stores.

By then, the company was being run by Drummond Birks’ three sons: Jonathan, Tom and Barrie. Eventually, Jonathan bought his brothers out in 1990 for $100 million.

Birks continued to close stores and in 1993, the firm filed for bankruptcy protection. That same year, it was saved by Borgosesia, now called Regaluxe, which reportedly bought the company for $75 million. Andruskevich was brought in three years later to turn the company around.

Since his arrival, Birks, which is privately held, has developed a new financial structure and merchandise plan focused on bridal, pearl and diamond jewelry, as well as baby gifts and watches. It has also renovated many of its stores, and has worked to improve communications with its customers and target a younger clientele through new advertising campaigns.

In the meantime, Birks has almost doubled its sales since 1996 and now has an estimated 3.2 percent share of Canada’s $2 billion fragmented fine jewelry market, excluding watches. Now that Birks appears to have all of its ducks in a row, what makes Andruskevich think the jeweler can make a go of it the second time around in the U.S.?"This time is different," he said. "Birks never tried to integrate its U.S. operations before. Now, Birks and Mayor’s will have a common merchandising strategy. Before, Birks expanded too quickly across the U.S. We’re focusing on two core markets where marketing dollars will go a lot farther."

He also pointed out that Birks has come full circle. It was saved by a white knight, and now it is attempting to be the white knight. Will history repeat itself?

"We like to think there will be a happy ending to this story," said Andruskevich. "We’ve created the first step to get them on solid financial footing. Maybe we’ll write the final chapter when we’ve turn Mayor’s into a profitable company."

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