TMCnet News
Its visionary gone, Shreve's began tumbling(Boston Globe, The (KRT) Via Thomson Dialog NewsEdge) Sep. 24--By most appearances, Shreve, Crump & Low's party last November to celebrate its new flagship store was a smashing success: More than 200 guests sipped champagne under a two-story Steuben glass sculpture as women tried on diamonds, and Aerosmith's bassist entertained the crowd. But what most people didn't know was that Shreve's, Boston's grand dame of jewelers, had recently fired its chief executive and laid off more than a dozen employees. The owners, Kim and Ann Birks, had even contemplated selling the business over the last year as they spent millions of their personal fortunes to keep the company afloat. What no one figured, even those closest to the business, was how quickly Shreve's would collapse. Less than a year after opening the store, Shreve's and its sister chain Schwarzschild Jewelers were losing up to $240,000 a week. In May, nearly the entire board of directors resigned. And this month, Shreve's parent company, Tyringham Holdings, filed for bankruptcy court protection. An auction to sell the business is set for this week. "Everything bad that could have happened all happened at once," said Ann Birks, 58, who inherited the business after her husband, Barrie, died of cancer in 2002. "It was cataclysmic." Shreve's downward spiral began soon after the death of 53-year-old Barrie Birks, a fifth-generation jeweler and the kind of business owner who gave handwritten birthday and Christmas cards to each employee. He adored the Boston landmark, which traces its roots to a 1796 store across from Paul Revere's silversmith shop in Downtown Crossing. Shreve's built its reputation serving Boston's high society from the Cabots to the Crowninshields to the Kennedys. In recent decades, however, Shreve's struggled until Barrie Birks bought it out of bankruptcy in 1992 and made it profitable again. But with his death, Shreve's lost its visionary, at a time when key shifts in the marketplace were making it hard for independent jewelers to survive. Like other retailers, jewelers suffered after the Sept. 11, 2001, terrorist attacks, and chain businesses grabbed a greater share of the market. About 500 independent jewelers go out of business a year, and for each one, a chain store has taken its place, according to Ken Gassman of the Jewelry Industry Research Institute. Ann, along with daughter Kim, kept ownership of Shreve's to continue the family legacy. "It was my connection to everything that reminded me of my husband," Ann Birks said. But since neither had had training in the jewelry business, they turned over day-to-day control to executives who ripped up the blueprint that had made Shreve's a Boston icon and pushed the company in a direction that alienated customers and employees. The decision to hand over the reins is one the Birks would later regret. "As things deteriorated and people looked to me and Kim as we came through the stores, we just didn't feel we had the expertise to do that," Ann Birks said. "I knew things were wrong, but I didn't have the tools in my arsenal to make it right." After Barrie Birks's death, the board recruited Merritt Mayher from Tiffany, the respected chain jeweler, to become the company's new chief executive. Mayher oversaw both Shreve's and its Virginia sister chain, Schwarzschild Jewelers, as well as the consolidation of buyers and other operations to reduce costs. "Shreve, Crump & Low is one of the great jewelry brands in America. It had gotten very sleepy and had let some changes in the jewelry industry pass it by," said Mayher, whose extended family is from Boston. "It seemed like a good opportunity to revive the brand." Mayher wanted to broaden Shreve's to reflect a shift in the jewelry industry. No longer could the company rely so heavily on men buying diamond engagement rings or big anniversary gifts; it also had to attract women with disposable income who wanted to buy their own jewels. To that end, Mayher brought in more fashionable and less expensive pieces such as necklaces with dangling amethyst and blue topaz gems that cost under $1,000. But Mayher also faced another big challenge: deciding what to do with the 75-year-old flagship store that overlooked Boston Common. The building's landlord had planned major renovations that would have required Shreve's to move out for a period of time. Shreve's wanted a secure future so executives searched throughout the city for a new home. The ideal location, it turned out, was one block away in the former FAO Schwarz location at the corner of Boylston and Berkeley streets. But the prime real estate came with a high price tag: about $130,000 a month. Shreve's employees began grumbling among themselves and secretly contacting Ann and Kim Birks, who were living in Montreal. They were upset about Shreve's straying from its roots and Mayher's distant leadership stretched between Shreve's and Schwarzschild in Virginia, according to Susan McDonough , who has worked at Shreve's for 19 years, and Cathy Cronin , Shreve's diamond buyer for the past three years. Mayher acknowledged that change can be difficult. "Like any retail endeavor we had some hits and misses," she said. "My experience is from a corporate background with a larger organization. By the same token, the merger with Richmond meant I had to spread my attention between two businesses and they probably felt like they were getting less than 100 percent focus." Over time, Steve Elkin, a member of Tyringham's board of directors and former chief executive at New York department store Bergdorf Goodman, took on a larger role as a consultant to Shreve's and Schwarzschild. He hired a merchandising consultant who brought in such high-end lines as jeweler-to-the stars Kieselstein-Cord , known for alligator bracelets -- far different from anything Shreve's had carried. These lines would be the centerpiece of the new flagship, displayed on the crucial street level. The diamonds and more traditional items, including its signature ceramic gurgling cod pitcher, would be on the second floor. While Elkin was often helpful, Mayher said, he had spent his career in publicly traded companies with larger coffers and his vision often assumed the ability to harness more resources and execute more quickly than the organization -- with about 150 employees -- actually could. "I was not there that often," Elkin said. "The chief executive makes her plan." In the months leading up to the new store opening, sales fell 25 percent, renovations took longer and cost more -- totaling $7 million , and the company bought new merchandise it couldn't afford, according to the Birkses and documents provided to the Globe. Just weeks before the grand opening, the board fired Mayher. The timing couldn't have been worse, but the Birkses believe they needed to take action. "The board wanted to give Merritt time to get in, get accustomed, put out fires, and move forward," Kim Birks said. "When that move forward didn't happen, we knew we needed to get new leadership." Elkin stepped in as acting chief in September and scrambled to launch the store and lead Shreve's through the critical holiday season, when retailers typically make up to 40 percent of their annual revenues. Within weeks of taking over, he fired the Boston store manager, cut advertising, implemented a round of layoffs, and insisted that the store open on Sundays even though no one wanted to work that day. When Shreve's opened to the public in November, the problems only worsened. Customers didn't get the new Shreve's. The beloved landmark had been transformed into an intimidating retailer that looked more like an upscale department store (it carried many lines that Bergdorf Goodman had) than anything that resembled Shreve's. "I was shocked by what I saw," said Alan Collachicco, who began shopping at Shreve's in 1969. "The new administration came in and simply wiped away an old Boston institution with wonderful people and great merchandise." Employees said Elkin never responded to merchandising suggestions and a store survey about the holiday season. A copy of the survey provided to the Globe reported consumer complaints about unanswered phone calls on the sales floors and running out of Red Sox merchandise. By the end of 2005, Shreve's and Schwarzschild saw sales decline 26 percent to $31 million from $42 million in 2000. They also racked up their biggest losses tallying $9 million in 2005; by contrast, the companies under Barrie Birks turned a $1.1 million profit in 2000 . At the beginning of this year, the Birkses said vendors began to worry about late payments. The renowned Cartier jeweler pulled its line, and Shreve's top sales associate left to work for Tiffany. By April, the Birkses knew Elkin had to go and decided not to renew his contract. "I took great pains to make the company work," Elkin said. "There are always going to be differences of opinion." The company was suddenly in the Birkses' hands, and their hands alone. They hired consultants to get a better grip on the finances and find a buyer for a business they realized they could no longer run. "We were quietly grieving for my father. So when it came down to strategy decisions and product mix, we stayed quiet and that's been a learning process," said Kim Birks, now 27, who never intended to get into the business until her father's death. "In hindsight, it would have been better to be more involved." After struggling to find a buyer, the Birkses concluded that the best chance of survival was to file for bankruptcy court protection in a federal court in Richmond. The Birkses continue to solicit bidders for Shreve's and Schwarzschild, but if no one else steps forward, they have an agreement with Carlyle & Co. Jewelers of North Carolina, which will pay $9.8 million for the company's assets. Still, Carlyle has only committed to keep operating the Schwarzschild business. The future of Shreve's remains unclear. "We're hoping there's a knight in shining armor, like Barrie was 14 years ago," said Shreve's employee McDonough. The Birkses, meanwhile, have set up a private severance fund for employees. In recent weeks, employees began re arranging the Boston flagship, moving the diamonds and more traditional merchandise downstairs and the fashion lines to the second floor. But the company has stopped buying merchandise, and some items are out of stock. "My father never would have wanted to see the Shreve's name or brand get tarnished," said Kim Birks. "But if we can walk away from this and have both businesses survive and flourish, I'd feel my father was proud of us." To see more of The Boston Globe, or to subscribe to the newspaper, go to http://www.boston.com/globe. Copyright (c) 2006, The Boston Globe Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |