After working its turn-around magic on Florida-based Mayors Jewelers, management at Birks of Canada is evaluating expansion possibilities both domestically as well as in international markets.

 

Thomas Andruskevich, president and chief operating officer of Birks & Mayors, said that the company is considering two major expansion strategies:

 

• Wholesaling proprietary Birks branded products to jewelers worldwide.

 

• Opening retail locations, perhaps in Europe and Asia.

 

Wholesaling Just Over Horizon

The company could be selling its guild-level Birks branded jewelry, which is largely designed and manufactured internally, to other jewelers as early as the second half of 2008, just over a year away. The Birks brand apparently has a cache beyond its Canadian roots, and is known as a high quality brand by consumers. Currently, only about 5 percent of Birks sales are to external customers.

 

International Expansion Viewed

Management also said that it is considering opening stores in various countries and cities across the world, and mentioned that London and Beijing were on the list of possible sites. However, it will be at least 2009 or 2010 before the company is expected to open its first store outside the bounds of its current market in North America.

 

The company is evaluating three types of stores for its international roll-out:

 

• Store-in-a-store

 

• Free-standing stores

 

• Franchise locations

 

Van Cleef Roll-Out Will Add to Revenues

Birks has some expertise with a store-in-a-store concept with its Van Cleef initiative. It has Van Cleef boutiques in some of its stores in Vancouver and Toronto. Further, management said that it is expecting to add Van Cleef boutiques in its stores in two additional markets in Canada. Finally, the company could become the exclusive distributor for the Van Cleef brand in Canada.

 

Based on its success with the Van Cleef initiative in Canada, management also said that it is discussing opening Van Cleef boutiques in stores in two existing markets in the U.S.

 

Domestic Acquisitions A Possibility

Birks & Mayors has stepped up its focus on the possibility of strategic acquisitions, especially in the U.S. While management indicated that it has sought acquisitions of either troubled chains that had turn-around potential or existing guild-level chains that would provide a strategic boost for the company, it said that it has seen more merger and acquisition opportunities in the past few months than in prior periods.

 

After significant financial distress over a long period of time, Mayors Jewelers, with stores in Florida and Georgia, was finally taken over by Birks of Canada earlier in the decade. Both operations have learned from each other, and additional synergies exist.

 

Online Business Growing

The company also noted that its online business was “growing quite nicely,” but that it still represented only a tiny portion of the company’s total annual sales, projected to be about $292 million in the current fiscal year ending March 2007.

 

Profits Up; Outlook Bright

Despite disappointing results in its U.S. stores in the quarter ended December, 2006, when same-store sales were down 1 percent due to weak demand in Florida, the company posted a significant increase in profits in the quarter. Reported net income rose 25 percent to $19.6 million in the December quarter. Same-store sales in Birks’ Canadian stores rose by 8 percent in the December period.

 

For its full fiscal year ending March 2007, Birks & Mayors is expected to generate sales of between $291 and $294 million, an increase of between 6 percent and 7 percent over the prior year. Net income is projected to be in the range of $8.5 to $9.5 million for the year, a 58 percent increase (at the mid-point projection) over the prior year.