February 13, 2008
Lord & Taylor Buys Fortunoff
By Tom Ryan
Famed New York City jeweler and home furnishings retailer, Fortunoff, last week agreed to be bought by the owners of Lord & Taylor. The sale to NRDC Equity Partners LLC is expected to close in early March, subject to bankruptcy court approval and other conditions.
Fortunoff, which operates 20 stores with $450 million in annual sales, has been struggling with lackluster sales under a heavy debt load since 2004 when it was purchased by private equity companies Trimaran Partners and Kier Group.
Plans call for the opening of branded Fortunoff jewelry departments as well as home and bridal registry areas in L&T’s 47 stores – including a 100,000-square-foot Fortunoff home furnishing department and smaller Fortunoff jewelry department within the flagship at 39th Street and Fifth Avenue in Manhattan. The New York Times said this could make L&T a bigger competitive threat to Bloomingdale’s and Nordstrom.
NRDC also plans to invest $100 million into the Fortunoff business, including both existing and new stores. No closings are planned. Much like its successful turnaround at L&T, NRDC management believes Fortunoff will fare better by moving upscale, carrying better merchandise at higher prices.
Since being acquired by NRDC in 2006, L&T has undergone a stunning turnaround in part by persuading more than 100 upscale brands, including Diesel, Tracy Reese and Ted Baker, to sell to the chain.
In an interview with The Associated Press, NRDC Equity Partners CEO Richard Baker, who serves as chairman of Lord & Taylor, said the acquisition of Fortunoff represents a “perfect opportunity” to refine Lord & Taylor’s merchandise offerings.
“We are in the process of reinventing Lord & Taylor. Our goal is to make it more interesting, more exciting, fresh and fast for our customers,” he said. As for Fortunoff, he said that the company “spent too much time competing with retailers beneath them. They needed to focus on their roots.”
Eventually, sources told the Times, NRDC wants to buy a bridal company to enable Lord & Taylor to become a one-stop destination for engagement rings, wedding dresses and a gift registry.
Writing in Newsday, Steve Poppe, director of marketing at Zude.com, a Long Island-based company that creates web page development tools, said both Fortunoff and L&T need to keep separate and distinct identities for the merger to succeed.
“If Fortunoff becomes just another department of Lord & Taylor, a unique shopping experience will be watered down for both stores,” wrote Mr. Poppe. “The history of retailing is cluttered with stores that have combined based upon the 1+1=3 strategy, and it rarely works.”
Discussion Question: How would you rate the merger between Lord & Taylor and Fortunoff? What do you think of the plans to introduce Fortunoff departments in L&T and to reposition Fortunoff more as an upscale retailer?
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Building a store by EXPANDING departments and UPGRADING merchandise…WOW! Right now I can hear the SPCF (Society for the Prevention of Cruelty to Field’s Fans) gnashing their teeth in frustration that Macy’s (nee Federated) didn’t spin off MF as well.
It’s good to see the flagship (basically) a full line dept store again (though maybe “again” is a stretch, since I’m not sure it was within my lifetime)…as for “more” upscale: at sales of +$20M/store already, I’m wondering how much more upscale you can go!
This is a great move. Two NY brands under one roof, think of it as the anti-Macy’s/Marshall Field’s plan…the idea here seems to be remembering the great retail traditions and flaunting them.
Lord & Taylor gets huge scale in metro NYC now. Add NRDC’s investment in LinensNThings and you get a lot of storefronts in one market.
This looks like a smart move. It gives L&T more critical mass and brand strength in some businesses (jewelry, watches, tabletop) that can help it differentiate itself from the competition. And it allows L&T to expand the Fortunoff brand outside the immediate New York area into its other pockets of strength. Sephora-at-Penney is an apt parallel in terms of a compelling “store within a store” strategy.
NRDC’s Lord & Taylor turnaround has been excellent. Chances are the Fortunoff purchase will work well. The only issue for NRDC: are they paying too much for Fortunoff? Should they wait until the chain goes Chapter 11 to get a much lower price?
As a comparison, Abercrombie & Fitch, a NY retailer with a long history, went bankrupt in the 1970s, was bought by Oshman’s and then resold to The Limited, who made the company into the powerhouse it is today.
For many years, Fortunoff was a well-respected and successful retailer in the New York area. With this acquisition, Lord & Taylor can leverage that reputation as they integrate Fortunoff categories like jewelry and home furnishings into their department stores. As others have said, this is certainly a win win for both companies.
Having powerful departments for jewelry, home furnishings and a bridal registry will indeed make Lord and Taylor more competitive with Bloomie’s and Nordstrom. Acquiring Fortunoff’s expertise in these areas is a very smart move.
I am very puzzled about part of this, though. I think L&T may actually BE making a similar mistake to Macy’s. Fortunoff is a very, very well known retailer in the New York-New Jersey corridor due to years of massive advertising in papers and TV. Fortunoff has little to no reputation or name recognition in the broader world, however,(which L&T definitely does). Why they are not taking the Fortunoff experience and departments and folding them into the L&T brand for good is beyond me! Additionally, putting the Fortunoff name on L&T departments is counter to the very effort L&T is making to move upscale. People in most of the country would be much happier and more impressed with Lord and Taylor as their Bridal Registry, than with Fortunoff.
I see the merging as a positive action for both retailers. I don’t quite see the question of whether this helps Fortunoff to become an upscale retailer–Fortunoff IS an upscale retailer already.
The synergy is in product offerings with Fortunoff being jewelry and gift giving for the home kinds of products along with more “traditional” department store offerings and Lord & Taylor being apparel focused.
A brilliant move that will aim for the jugular at Macy’s more than anyone, although I predict it will also pull some business from Bloomingdale’s and Neiman-Marcus.
As noted above, these are two iconic New York brands that complement each other. I hope L&T considers converting the four upper floors of the Fifth Avenue flagship to Fortunoff instead of just downsizing the store as expected. It would make that a true shopping destination.
To my mind, Lord & Taylor is the ultimate “aspirational” brand in American retailing and has immense potential. They understand their customer wants an upscale store environment without an edgy, intimidating level of design and luxe (Bloomingdale’s) and the service to be available but not over-bearing (Nordstrom).
This Christmas, the merchandise assortment was smartly edited, especially in holiday trim and giftware, with higher-margin goods that didn’t need massive markdowns at the end of the season.
The new bags, the model search, everything seems to be going in the right direction. My only concern with Fortunoff is that the implanted fine jewelry departments in L&T not seem jolting versus the understated elegance of the rest of the store. They also need to very quickly get their physical plant updated at the 1960’s-era standalone stores.
I’ve never heard of the so-called “upscale” brands Diesel, Tracy Reese, and Ted Baker that were persuaded to sell to Lord & Taylor, so I’m surely not qualified to provide directional comment on this merger. But perhaps I can provide observational comment. I suspect that the heartstrings of many fashionistas were strummed by this retail development, quickly followed by serial swooning. But this merger was one of necessity and survival, signaling the shaky positioning of the ritzy glitzy retail model. The very highest-end, tippity tip top retailers have nowhere to go. They can’t move downscale and they can’t go more upscale. They’re trapped and vulnerable, unlike their midscale competitors who can continually challenge them with impunity.
I think this is potentially a great move but the key is execution. Richard Baker and the NRDC team, and Jane Elfers and her team have done an incredible job at L&T. If they can replicate that with “the Source” then MORE power to them ! I hope that they can. They know, though, that L&T has a much broader and much more valuable identity outside of the tri-state area of NY-NJ-Ct.
As Lord & Taylor has greater recognition I think the two should remain somewhat singular. I also agree that 1 + 1 = 3 does not usually pan out. L&T is understated elegance and becoming more and more upscale, special, and unique every day. Fortunoff IS an upscale retailer in it’s own right. The two should be able to benefit from the strengths of each. The plan to restore Fortunoff to its roots should be good for the retailer and the competition with downscale alternatives should end.
As a long-time admirer of Fortunoff, and a recent admirer of the amazing ascension of L&T under NRDC, I am thrilled with the merger. Fortunoff has phenomenal talent in place for Baker, Elfers, et al to partner with. The combined talent pool will be able to execute this merger effectively and I predict a rare 1+1=3 result. I’m looking forward to shopping at L&T on my next trip to New York!
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Building a store by EXPANDING departments and UPGRADING merchandise…WOW! Right now I can hear the SPCF (Society for the Prevention of Cruelty to Field’s Fans) gnashing their teeth in frustration that Macy’s (nee Federated) didn’t spin off MF as well.
It’s good to see the flagship (basically) a full line dept store again (though maybe “again” is a stretch, since I’m not sure it was within my lifetime)…as for “more” upscale: at sales of +$20M/store already, I’m wondering how much more upscale you can go!
This is a great move. Two NY brands under one roof, think of it as the anti-Macy’s/Marshall Field’s plan…the idea here seems to be remembering the great retail traditions and flaunting them.
Lord & Taylor gets huge scale in metro NYC now. Add NRDC’s investment in LinensNThings and you get a lot of storefronts in one market.
This looks like a smart move. It gives L&T more critical mass and brand strength in some businesses (jewelry, watches, tabletop) that can help it differentiate itself from the competition. And it allows L&T to expand the Fortunoff brand outside the immediate New York area into its other pockets of strength. Sephora-at-Penney is an apt parallel in terms of a compelling “store within a store” strategy.
NRDC’s Lord & Taylor turnaround has been excellent. Chances are the Fortunoff purchase will work well. The only issue for NRDC: are they paying too much for Fortunoff? Should they wait until the chain goes Chapter 11 to get a much lower price?
As a comparison, Abercrombie & Fitch, a NY retailer with a long history, went bankrupt in the 1970s, was bought by Oshman’s and then resold to The Limited, who made the company into the powerhouse it is today.
For many years, Fortunoff was a well-respected and successful retailer in the New York area. With this acquisition, Lord & Taylor can leverage that reputation as they integrate Fortunoff categories like jewelry and home furnishings into their department stores. As others have said, this is certainly a win win for both companies.
Having powerful departments for jewelry, home furnishings and a bridal registry will indeed make Lord and Taylor more competitive with Bloomie’s and Nordstrom. Acquiring Fortunoff’s expertise in these areas is a very smart move.
I am very puzzled about part of this, though. I think L&T may actually BE making a similar mistake to Macy’s. Fortunoff is a very, very well known retailer in the New York-New Jersey corridor due to years of massive advertising in papers and TV. Fortunoff has little to no reputation or name recognition in the broader world, however,(which L&T definitely does). Why they are not taking the Fortunoff experience and departments and folding them into the L&T brand for good is beyond me! Additionally, putting the Fortunoff name on L&T departments is counter to the very effort L&T is making to move upscale. People in most of the country would be much happier and more impressed with Lord and Taylor as their Bridal Registry, than with Fortunoff.
I see the merging as a positive action for both retailers. I don’t quite see the question of whether this helps Fortunoff to become an upscale retailer–Fortunoff IS an upscale retailer already.
The synergy is in product offerings with Fortunoff being jewelry and gift giving for the home kinds of products along with more “traditional” department store offerings and Lord & Taylor being apparel focused.
A brilliant move that will aim for the jugular at Macy’s more than anyone, although I predict it will also pull some business from Bloomingdale’s and Neiman-Marcus.
As noted above, these are two iconic New York brands that complement each other. I hope L&T considers converting the four upper floors of the Fifth Avenue flagship to Fortunoff instead of just downsizing the store as expected. It would make that a true shopping destination.
To my mind, Lord & Taylor is the ultimate “aspirational” brand in American retailing and has immense potential. They understand their customer wants an upscale store environment without an edgy, intimidating level of design and luxe (Bloomingdale’s) and the service to be available but not over-bearing (Nordstrom).
This Christmas, the merchandise assortment was smartly edited, especially in holiday trim and giftware, with higher-margin goods that didn’t need massive markdowns at the end of the season.
The new bags, the model search, everything seems to be going in the right direction. My only concern with Fortunoff is that the implanted fine jewelry departments in L&T not seem jolting versus the understated elegance of the rest of the store. They also need to very quickly get their physical plant updated at the 1960’s-era standalone stores.
I’ve never heard of the so-called “upscale” brands Diesel, Tracy Reese, and Ted Baker that were persuaded to sell to Lord & Taylor, so I’m surely not qualified to provide directional comment on this merger. But perhaps I can provide observational comment. I suspect that the heartstrings of many fashionistas were strummed by this retail development, quickly followed by serial swooning. But this merger was one of necessity and survival, signaling the shaky positioning of the ritzy glitzy retail model. The very highest-end, tippity tip top retailers have nowhere to go. They can’t move downscale and they can’t go more upscale. They’re trapped and vulnerable, unlike their midscale competitors who can continually challenge them with impunity.
I think this is potentially a great move but the key is execution. Richard Baker and the NRDC team, and Jane Elfers and her team have done an incredible job at L&T. If they can replicate that with “the Source” then MORE power to them ! I hope that they can. They know, though, that L&T has a much broader and much more valuable identity outside of the tri-state area of NY-NJ-Ct.
As Lord & Taylor has greater recognition I think the two should remain somewhat singular. I also agree that 1 + 1 = 3 does not usually pan out. L&T is understated elegance and becoming more and more upscale, special, and unique every day. Fortunoff IS an upscale retailer in it’s own right. The two should be able to benefit from the strengths of each. The plan to restore Fortunoff to its roots should be good for the retailer and the competition with downscale alternatives should end.
As a long-time admirer of Fortunoff, and a recent admirer of the amazing ascension of L&T under NRDC, I am thrilled with the merger. Fortunoff has phenomenal talent in place for Baker, Elfers, et al to partner with. The combined talent pool will be able to execute this merger effectively and I predict a rare 1+1=3 result. I’m looking forward to shopping at L&T on my next trip to New York!