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CHICAGO-Following months of setbacks, including a disappointing second quarter, locally based Whitehall Jewellers Inc. is trying to regain its footing by closing 77 underperforming stores. Additionally, the company has hired a new CEO, and is reviewing a buyout proposal.
According to the company, the soon-to-be-shuttered stores posted losses of $5.1 million for the trailing 12 months ended July 31, 2005. Whitehall plans to run inventory-liquidation sales at these stores to generate cash flow, which is expected to generate more than $14 million. Daniel Levy, director and interim chief executive officer, says the sale will give the company's new CEO, Robert L. Baumgardner, positive news to report moving forward.
"We believe that the company's decision to close 77 unprofitable operations will provide Bob and his team a strong foundation of stores with attractive merchandise assortments," Levy said in a statement. "This trimmed down store platform should provide a strong base for Bob to begin his tenure."
With plans to join Whitehall by Nov. 14, Baumgardner has accepted the position to lead the company out of its embattled past. Baumgardner is currently president of Little Switzerland, a wholly owned subsidiary of Tiffany & Co. He is also a former SVP of Bailey Banks and Biddle, a division of Zale Corp. Baumgardner fills a seat that was not long ago left vacant. In September, just weeks before she was about to commence full-time employment as the Whitehall's CEO, the company received a letter from Beryl Raff advising that she was resigning from all positions. The letter came on the heels of NYSE questions arising from unusual market activity.
Things seemed to be turning around for the gem retailer in October, when it announced the financial support of Prentice Capital Management LP and Holtzman Opportunity Fund LP. In exchange for $80 million in total bridge financing from the investment funds, Whitehall gave up 87% of its equity and a majority of board seats. But the company's struggle continued as it was suspended from trading on the New York Stock Exchange prior to the opening of trading on Oct. 28.
The company is now reviewing--but unlikely to accept--an offer made last week by Newcastle Partners, LP. Newcastle extended an offer to acquire the company for $15.4 million or $1.10 per share. As offered in the proposal, Newcastle would pay off the company's recent bridge loan. However, Whitehall, under the leadership of Prentice, "cannot conclude that the proposal is reasonably likely to result in a superior proposal."
The company also reported financial results for the second quarter ended July 31, 2005. Net sales for the quarter fell 5.4% to $68.4 million compared to $72.3 million in the first quarter of last year. Comparable store sales decreased 6.2% during the quarter, compared to a decrease of 0.6% last year. Overall, the company posted a net loss of $24.1 million or $1.72 per share.
Whitehall Jewellers Inc. is a national specialty retailer of fine jewelry, operating 389 stores in 38 states. The company operates stores in regional and super regional shopping malls under the names Whitehall Co. Jewellers, Lundstrom Jewelers and Marks Bros. Jewelers.
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