Landlords of jewelers take brunt of recession

By Michael Stoler | August 11, 2009 03:17PM

Even though the stock market is rising, national and local landlords are bearing the brunt of the recession, especially when the tenants are jewelry retailers.

A National Jeweler article noted that the top 50 North American jewelry chains have closed 891 retail locations in 2009.

Last week, the fine jewelry retailer, Finlay Enterprises and its subsidiary Finlay Fine Jewelry, filed for Chapter 11 bankruptcy. The company had 182 department store-based jewelry departments and stand-alone jewelry stores at the end of the second quarter ending August 1, including 67 Bailey Banks & Biddle, 34 Carlyle and four Congress specialty jewelry stores and 77 licensed counters with Bon Ton department stores.

In February, Finlay announced a plan to close 40 of its less profitable stand-alone stores. The same month, the company initiated a plan to exit its licensed jewelry counter business.

At one time, the company had roughly 800 licensed jewelry counters in department stores such as Lord & Taylor, Bloomingdale’s and Macy’s.

Over the past 18 months other high-profile retailers and manufacturers of jewelry have filed for bankruptcy protection and liquidation.

In June, Upper East Side jeweler David Webb and New York-based Henry Dunay Designs, whose pieces have been showcased in high-end stores, filed for Chapter 11 bankruptcy protection.

Other such companies include Long Island-based Doris Panos Design, Fortunoff Fine Jewelry & Silverware stores, New Jersey-based Christian Bernard and family-owned jewelry retailer Shane.

National chains have included Whitehall Jewelers Ultra which had operated 181 locations, including operating licensed departments in Filene’s Basement, Daffy’s and Burlington Coat Factory, filed for bankruptcy protection for a second time.

Even Tiffany is being affected by the recession. In February, the company announced it was closing its pearl jewelry chain Iridesse. The 16 retail stores devoted exclusively to pearls is slated for shuttering by the end of this year.

Zale, which sold Bailey Banks & Biddle to Finlay in 2007, announced last week a “real estate realignment” plan which included rent relief with landlords as well as store closings. As of July 31, Zale completed the closure of 118 stores, bringing its total closure in 2009 to 160 independent stores plus 31 mall kiosk locations.

Today, Zale operates 1,931 retail locations in the U.S., Puerto Rico and Canada, a reduction of 269 stores since the start of the current recession.

The company also announced that it has been successful in negotiating rent relief with landlords, which will reduce its aggregate rental obligations in 2010. In addition, the company said landlords agreed to settle $29 million in contingent rent obligations on a number of Bailey Bank & Biddle stores.

Michael Stoler is a columnist for
The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.