Fortunoff has filed for Chapter 11 bankruptcy protection, as expected.
“The jewelry and home goods businesses have been hit particularly hard by the economic downturn,” Charles Chinni, president and chief executive officer, said Thursday when the filing was made. “However, we are actively seeking a buyer for the business and we will continue to do so in the Chapter 11 process.”
The announcement confirmed reports in WWD over the past week that the long-struggling Fortunoff chain was headed for bankruptcy again. Fortunoff went into bankruptcy for the first time in early 2008. That filing enabled NRDC Equity Partners to purchase the $400 million business relatively inexpensively — for $80 million plus $30 million in debt and other obligations — and lift it out of bankruptcy in March 2008.
Last year, there were other bidders for the chain, including The Hilco Organization and the Great American Group, two liquidators. It’s possible those firms are still interested in the business, which is bound to be valued much less than last year’s purchase price considering Fortunoff’s ongoing troubles and the worsening economy.
In Thursday’s court filing, the company indicated it has been approached by potential buyers that include private equity firms and liquidators with experience conducting going-out-of-business sales. Hilco is currently liquidating Circuit City.
Fortunoff, based in Westbury, N.Y., also said it is seeking court approval of $80 million in debtor-in-possession financing.
The retailer acknowledged it was hit with a “severe liquidity crisis” last month, though there are constant pressures on the business stemming from its earlier tour of bankruptcy proceedings, according to the court papers. For the past year, Fortunoff has been operating with lower-than-normal inventory levels, tightened credit and reduced borrowing capacity. The store’s problems were compounded by years of antiquated merchandising and out-of-date systems, which NRDC had hoped to modernize.
Fortunoff sustained dismal sales over the 2008 holiday season. For the nine months ended Nov. 30, Fortunoff’s net losses were $42.2 million on revenues of $260.1 million.
Further bringing down the business were costs connected with the expansion of the firm’s jewelry line into Lord & Taylor, which is also owned by NRDC. The strategy was in progress but halted midstream as it became apparent Fortunoff was in serious trouble. NRDC even began moving Fortunoff buyers into Lord & Taylor’s headquarters on Fifth Avenue. NRDC was motivated to purchase Fortunoff on the basis its jewelry and home offerings could be rolled into Lord & Taylor’s merchandising.
Zolfo Cooper Management has been hired as Fortunoff’s financial adviser.
Among Fortunoff’s top accessories creditors holding unsecured claims are: Swatch Watch Group, Secaucus, N.J., owed $589,921; Gucci Watch, Secaucus, N.J., $580,715; Victorinox Swiss Army, Boston, $510,110, and Le Vian, Great Neck, N.Y., $506,883.