Finlay Losses Widen to $107.3 Million

American jewelry retailer Finlay saw its annual net loss increase ten fold, as it is attempting to shift its business model from a store in store operator to stand alone stores operator. It recorded a net loss of $107.3 million for the 2008 period, compared to a net loss of $10 million in 2007 despite a 5.2 percent rise in sales.

The company suffered from a number of factors that affected its expenses. In connection with the shift in focus, Finlay recorded impairment charges of $34.6 million in the year ended January 31, 2009.

Interest expense increased by $8 million, primarily because of higher average borrowings under its revolving credit facility, which increased to $515.4 million from $346.7 million in 2007.

Discontinued operations include the 93 Macy’s departments which closed in January 2009. The net loss from discontinued operations for 2008 was $2 million compared to net income of $5.1 million in 2007.

Annual sales rose to $754.31 million. They included $309.7 million of sales generated by stand-alone jewelry stores compared to $223.8 million in 2007. The increase primarily relates to the acquisition of Bailey Banks & Biddle in November 2007.

Comparable store sales decreased 11 percent. Gross margin decreased by $29.9 million compared to 2007, and, as a percentage of sales, gross margin decreased by 6.2% from 45.2% to 39%. 

“The implementation of our strategic plan will result in a significant reduction in our sales from over $750 million from our two business segments in 2008 to a go forward specialty jewelry store business that is expected to achieve annual sales in the range of $150 million to $200 million,” the company said. 

“The plan includes the liquidation of inventory and the termination of license agreements or leases in the affected department store based fine jewelry departments and specialty jewelry stores. In addition, we intend to liquidate excess inventory in our go forward specialty jewelry stores as a means of generating cash and reducing such excess inventory,” the company said about its plans.