Mayor’s Jewelers, Inc.

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Mayor’s Jewelers, Inc.

14051 Northwest 14th Street
Sunrise, Florida 33323
U.S.A.
Telephone: (954)846-2709
Fax: (954)846-2887
Web site: http://www.mayors.com

Public Company
Incorporated: 1983 as Jan Bell Marketing, Inc.
Employees: 3,295
Sales: $181.3 million
Stock Exchanges: American
Ticker Symbol: MYR
NAIC: 421940 Jewelry, Watch, Precious Stones, and Precious Metal Wholesalers

Mayor’s Jewelers, Inc. is a chain of luxury jewelry stores that has become the name of a retooled corporation formerly known as Jan Bell Marketing, Inc. After independently running the full-service jewelry departments in 469 Sam’s Clubs warehouse stores, which accounted for approximately 60 percent of its business, Jan Bell has been forced to alter its business plan. The 1998 acquisition of Mayor’s provided Jan Bell with the opportunity to transform itself from a discount mass-market jewelry operation into a national retailer of luxury jewelry and timepieces. To better reflect its new emphasis, Jan Bell decided to adopt the name of Mayor’s Jewelry. Amid uncertainty about its future success, the Sunrise, Florida company also has come under pressure from disgruntled shareholders, who have urged management to consider selling the business.

Establishing Jan Bell in 1983

Jan Bell was founded in Fort Lauderdale, Florida, in 1983 by Alan H. Lipton and Isaac Arguetty. The two men named the company after their wives. Jan Bell found a niche in jewelry by catering to the fast-growing wholesale membership club chains, and it quickly gained a dominant share of the business. Whereas retail jewelers generally marked up items by 200 percent, Jan Bell marked up just 17 percent to 20 percent. By manufacturing some jewelry and buying direct from other makers, eliminating middlemen to be more efficient, Jan Bell was able to offer high-quality merchandise at a reasonable price. The selection was somewhat limited, in keeping with the wholesale club philosophy. Aided by computerized inventory control, Jan Bell focused on high volume and quick turnover to control expenses.

Looking to fuel expansion, in August 1987 Jan Bell made an initial public offering of its stock and began trading on the American Stock Exchange. As wholesale clubs expanded their outlets by approximately 20 percent in 1987, Jan Bell prospered in kind. It added a line of watches to the gold and diamonds that had been its mainstay and made plans to sell through direct-mail marketing. In the late 1980s the company’s earnings grew at a rate of 86 percent per year. After posting revenues of $46.7 million in 1986, Jan Bell grew to $72.5 million in 1987 and $120 million in 1988. With the wholesale clubs anticipating even further growth, investors fell in love with Jan Bell.

In 1988 Jan Bell enjoyed the fourth highest gain on the American Stock Exchange. It continued its climb in 1989, reaching more than $30 per share. From late 1987 until September 1989, Jan Bell’s stock grew by an impressive 427 percent. The company completed its third secondary offering in October 1989, at which point several of its executives sold a number of shares, thus locking in some profit. The stock stalled, but it did not slip radically. Nevertheless, some analysts began to express doubts about Jan Bell. Its stock was trading at a level that was 38 times its earnings, which was considered far too high, especially with worries of a recession on the horizon. Furthermore, the company was overly dependent on the wholesale clubs and would likely begin to face stiffer competition in the jewelry segment. Management, however, expressed continued confidence in the company’s long-term prospects and undertook initiatives to support that growth. In May 1990 Jan Bell acquired a controlling interest in watch distributor Big Ben ’90 for $10 million. The deal was intended to assure Jan Bell of an adequate supply of watches as well as providing personnel with expertise in the wholesale watch business. Also in 1990 Jan Bell spent $3 million to buy Exclusive Diamonds International Ltd.

Despite the company’s optimism and acquisitions, Jan Bell suffered a reversal of fortune in 1990. Two of the wholesale clubs, Price Club and Costco, announced in March of that year that they were either reconsidering the jewelry business or intended to set up their own buying and distribution operation. Jan Bell faced the prospect of losing $40 million to $50 million in sales after generating $181.3 million in revenues for 1989. The reaction from investors was harsh. From a high of $26 per share earlier in the year, Jan Bell’s stock quickly tumbled to $6. The company made efforts to diversify its customer base, adding such retailers as Charming Shoppes, and thereby recovered a good portion of its stock’s value. By June 1992 Jan Bell again traded above the $14 level. Rather than just acting as a jewelry wholesaler to the wholesale clubs, with its merchandise competing against others, Jan Bell began looking to lease space to sell the merchandise itself. This effort culminated in a May 1993 deal with Sam’s Clubs that would restore a great deal of lost luster for Jan Bell. Sam’s agreed not to buy jewelry from other sources and Jan Bell no longer had to reserve 20 percent of its counter space for competitors. Also under the terms of the deal, Jan Bell provided its own sales staff, agreed to buy out Sam’s existing jewelry inventory, and paid Sam’s $7 million up front and an annual tenancy fee of 9 percent of net sales. As Jan Bell made the transition to retailer, Sam’s acquired 117 Pace locations in November 1993, adding significantly to the number of Sam’s outlets that would have to be served.

Bringing in Retail Experience in 1994

In 1994 Jan Bell brought in a management team with more retail experience. First, it hired Peter Hayes to serve as president and chief operating officer. Hayes had almost 20 years of senior management experience in the discount store industry. After 16 years with Hills, he became the president and chief operating officer at Family Dollar before joining Jan Bell. Lipton, who had been the company’s chief executive officer since 1987, then stepped down. He became co-chairman of the board along with Arguetty, who returned to the company after three years with Delheim and Worchester PLC, an international finance company. Lipton was replaced by Joseph Pennacchio, whose background centered around New York City department stores. He spent eight years at Macy’s, working his way up to Merchandise Vice-President. He then became Senior Vice-President of Merchandising for the Abraham & Straus Division in Brooklyn before eventually becoming president of Jordan Marsh in 1992.

The transition from jewelry wholesaler to jewelry retailer proved difficult for Pennacchio and Jan Bell. Although operating more than 400 Sam’s jewelry counters was potentially lucrative, which attracted renewed interest in the company’s stock, it also came with complications. Jan Bell was now extremely reliant on the Sam’s franchise, deriving from it about 85 percent of its business, but it was not allowed to advertise its jewelry counters. The company also had difficulty selling high-margin items, jewelry costing more than $1,000, because of Sam’s policy of accepting only Discover among major credit cards. Jan Bell began to post a string of unprofitable quarters, and again investors were disappointed, driving down the price of the company’s stock to less than $3 per share. By the end of 1995 the company saw a number of departures in management: Hayes, plus the chief financial officer and an investor relations executive. One of the founders, Lipton, also resigned, leaving Arguetty as chairman.

Pennacchio undertook a number of cost-cutting measures to place Jan Bell on firmer footing. He closed the company’s manufacturing operations in Florida, relying on outsourcing to Israel, and even considered selling off the headquarters building and moving into the nearby warehouse and distribution center. In a move that was projected to save $10 million, he laid off 200 workers. He also closed down the company’s wholesale operations, which were mostly devoted to selling watches. After acquiring Big Ben, Jan Bell experienced significant increases in its watch business, only to have sales fall off in 1993 and 1994. By the time it closed the division, the company estimated that it lost money on each watch it sold. Pennacchio also had difficulties with debt payment. After four months of unsuccessful negotiations with note holders, the company expressed publicly that there were doubts about the company’s ability to continue as a going concern. Pennacchio insisted that the company was never close to bankruptcy, and in June 1995 he reached an agreement with creditors.

Pennacchio considered the task of turning around Jan Bell as a three- to five-year effort. He talked about expanding overseas, establishing a Jan Bell credit card, as well as opening “Jewelry Depots” and outlet stores. He also expressed a desire to start a direct-mail operation, a possibility that Jan Bell executives had considered since the late 1980s. In November 1995, the company opened its first jewelry depot in Framingham, Massachusetts, followed by two more units in Worchester, Massachusetts, and Vero Beach, Florida. After the company posted a $74.7 million loss for 1995, however, Pennacchio would not enjoy the luxury of three years at the helm, let alone five. In May 1996 his employment was terminated and Arquetty now took over as chief executive officer.

When Arquetty stepped in, Jan Bell was more dependent on Sam’s than ever. Some 91 percent of sales came from the Sam’s franchise. Approximately 8 percent was wholesale revenues from department stores, supermarkets, discount stores, and jewelry chains. Only 1 percent of sales, or $2.5 million, was realized from the three Jewelry Depots owned directly by Jan Bell. Overall, the company lost as much money in the previous four years as it had made in all the years prior to that. Nevertheless, the company was worth more than its stock price, because the value of its assets was much higher than the company’s capitalization. In October 1996 Miami-based Ocean Reef Management Inc. offered $100 million for the company, but nothing ever materialized from the proposal.

Company Perspectives:

The Mayors experience is consistent at each store, from the elegant setting to the unparalleled client service. With deep green Italian marble and plush carpeting, the décor of Mayors’ spacious stores is true to its heritage while adopting a contemporary luxurious feel. For privacy and comfort, most of the stores also have spacious VIP lounges and dedicated bridal boutiques.

Acquiring Mayor’s Jewelers in 1998

Jan Bell lost another $3.3 million in 1996 before finally returning to profitability in 1997 when it earned $915,000. Late in 1996 Jan Bell expanded its efforts to diversify its retail operations by acquiring three Manhattan Diamond outlets located in shopping malls, but early in 1997 it also closed its two Massachusetts Jewelry Depots, which had not been performing up to expectations. Overall, the company appeared to have finally succeeded in making the transition from wholesale to retail. Rather than continuing to expand into the discount market, Jan Bell made a radical shift in direction in 1998 when it acquired the 24 luxury stores of Mayor’s Jewelers for $92.8 million.

The third generation, family-run Mayor’s was originally founded in Cincinnati in 1910 by Samuel Mayor Getz. Due to health concerns, Getz moved his family and business to Florida, opening a jewelry store in downtown Miami. His son, Irving Getz, began working at the store after returning from service during World War II, and he took over the business in 1947. In the 1960s he would open additional Mayor’s stores in area shopping malls. Irving’s son, Samuel A. Getz, began working with the company full-time in 1980, as Mayor’s continued to add to its presence in South Florida. In 1990 Mayor’s was looking to fuel greater expansion by making an initial public offering of its stock, but the IPO was canceled when the stock market fell drastically after Iraq invaded Kuwait. Mayor’s would add no new stores until a 1994 merger with Atlanta-based Maier & Berkele, founded in the late 1800s, which brought four units located in the Atlanta metropolitan area. By 1997 Mayor’s had 25 stores located in Florida and Atlanta, generating $142.2 million in sales, and ranking as the 28th largest jewelry retailer in the country. Other than Tiffany, there were no true national chains of upscale jewelry stores, so that the acquisition of Mayor’s was the chance for Jan Bell to expand into an open niche. A year later, however, that opportunity would become almost a necessity.

The concession agreement between Jan Bell and Sam’s was scheduled to expire in February 2001, and the parties entered into talks to negotiate an extension. A deal seemed likely, but Sam’s surprised both Jan Bell management and investors when it announced in April 1999 that it would discontinue its relationship with Jan Bell in favor of taking over the jewelry franchise itself. With Sam’s accounting for approximately 60 percent of its revenues, Jan Bell had less than two years to make up for that loss as well as sell off inventory and close up its hundreds of Sam’s operations. Management tried to put on a good face, but clearly the task was daunting. Jan Bell had made some forays in selling jewelry via the internet, which accounted for less than $500,000 in sales in 1999, but the only real near-term possibility of replacing the revenues from Sam’s was in an accelerated expansion of Mayor’s.

Jan Bell added ten stores to its Mayor’s chain in 2000, for a total of 36 located in Florida, Georgia, Virginia, Illinois, Texas, California, Nevada, and Michigan. Jan Bell also decided in 2000 to change its name to Mayor’s Jewelers, a move that would not only reflect the company’s change of focus but also its commitment to the luxury jewelry business. Pursuing that business on a national level, however, was not without complications. For instance, Mayor’s had regional distribution agreements on a number of items, such as new Rolex watches, which it could only sell in Florida and Georgia. Moreover, other companies also sought to establish national chains of luxury jewelry stores, including Tiffany; Cartier; Zales’s upscale division of Bailey, Banks & Biddle; and a concept from the Neiman Marcus department stores called The Galleries of Neiman Marcus. Upscale jewelry sales, fueled by aging baby boomers, were driving the expansion. Unlike in other industries, however, local mom-and-pop jewelry stores were quite viable competitors. Not only were the independents established in their territory with local name recognition that could rival a Tiffany, the chains’ ability to use volume buying power to offer low prices brought little advantage in the luxury jewelry business, where price was not as important as the unique nature of the piece being purchased. Mayor’s had a prestigious reputation in Florida, and Maier & Berkele in Atlanta, but transplanting it to new regions would not come easily.

In 2001 Mayor’s closed its Sam’s operations and continued to pursue its luxury jewelry business. The company came under fire from unhappy shareholders, in particular a former Jan Bell executive named Eliahu Ben-Schmuel who owned 9.56 percent of Mayor’s stock, an amount that made him the company’s second largest shareholder. He told the press that he was worried that Mayor’s rapid expansion would result in debilitating debt. He also argued that the company lacked the proper personnel to guide such an expansion in luxury retail and that it should “sell to a big retailer who has big pockets to take it to the next stage.” In March 2001 the company also would lose an experienced executive in Samuel A. Getz, who had continued to serve as president after Jan Bell acquired the company. A news release maintained that Getz resigned to pursue “other business interests and investments,” but he did agree to act as a consultant to Mayor’s for 18 months. That period of time would likely reveal the prospects for the company’s success on a national basis, or perhaps even see a change in ownership. In April 2001, management hired New York-based investment bank TM Capital Corp. to help the company enhance stockholder value by either selling the business or merging it with another company.

Principal Subsidiaries

Ultimate Fine Jewelry and Watches, Inc.; JBM Retail Company; Regal Diamonds International, Ltd.; Exclusive Diamonds International, Ltd.; Mayor’s Jewelers, Inc.

Principal Competitors

Tiffany & Co.; Cartier; Bailey, Banks & Biddle; The Galleries of Neiman Marcus.

Key Dates:

1910:: Mayor’s Jewelry is established in Cincinnati, Ohio.
1937:: Mayor’s relocates to Miami, Florida.
1983:: Jan Bell Marketing is incorporated.
1987:: Jan Bell makes public offering of stock.
1983:: Jan Bell signs franchise agreement with Sam’s Clubs.
1998:: Jan Bell acquires Mayor’s.
1999:: Sam’s decides not to renew agreement; Jan Bell changes its name to Mayor’s Jewelers.