09/06/2015
Whitehall Jewellers combines a unique formula of upscale quality merchandise at a wonderful price with superior customer service to create the ultimate jewelry shopping experience.
Whitehall Jewellers, Inc., is a leading American specialty retailer of fine jewelry, primarily gold and diamonds, which owns and operates 386 stores in 38 states across the country. Under the names of Whitehall Company Jewellers, Lundstrom Jewelers, and Marks Brothers Jewelers, the company runs stores in upscale city and suburban shopping malls. Whitehall reported a string of consecutive sales records and earnings in the 1990s. Much of its success was due to its ability to take advantage of the highly seasonal aspect of jewelry sales. The company's rapid growth continued until the economy began to slow in 2000. A couple of years later, an accounting scandal was uncovered that resulted in the firing of its CFO and cost Whitehall millions of dollars in legal fees and restitution as its stock price plummeted. A new strategy of focusing on the higher end of the market failed to pull the company out of the red, and Whitehall was bought out by an affiliate of Prentice Capital Management and Holtzman Opportunity Fund in 2006.
Early History
Marks Brothers Jewelers began its long history in 1895, when a retail jewelry store opened in the center of downtown Chicago. In 1903 Hugo Marks acquired the store from his uncle Ben Roth and began running it with his brother Al as Marks Bros. Jewelers.
Émigrés from Eastern Europe, the brothers welcomed the growing middle and upper classes of the city that were inclined to spend their money on high-quality, elegant diamonds, watches, rings, earrings, and fashionable hat pins. Within a very short time, Marks Brothers Jewelers had garnered a reputation as one of the most reliable and trustworthy jewelers in the city of Chicago, with some of the finest diamonds in the entire Midwest.
During the early years of the 20th century, and through the end of World War I, Marks Brothers Jewelers developed its reputation as a first-rate jeweler. At that time, Chicago was a city that provided ample opportunity to satisfy the ambition of entrepreneurs yearning for success. The railroads had made Chicago hog-butcher to the world, and families such as Kraft and Hormel made their fortunes from the stockyards on the south side of the growing metropolis. The families that managed this new wealth spent their money on items that indicated their status in society, such as diamond-studded tie pins and gold brooches, to highlight the dresses of women attending gala winter balls. The prosperity of the city was also shared by the growing middle class, who also frequented Marks Brothers Jewelers and purchased items for special occasions, such as diamond engagement rings. By 1919, the company had not only established and solidified its reputation as a jeweler, but had also laid a firm financial foundation for its continuation into the future.
The "Roaring Twenties," as they were called in the United States, had a particularly load roar in Chicago. The Volstead Act, which prohibited the production, sale, and consumption of alcoholic beverages, was a godsend to gangsters who illegally distributed b**r, w**e, and hard liquor to customers in "speakeasies" (private membership clubs). The ownership of these clubs and the territories they were located in generated bitter and violent battles between the gangsters for the large amounts of cash involved. In addition, many individuals in Chicago were making large sums of money speculating on the stock market, and there seemed no end to the growing wealth in the city. Many of these individuals who had made large sums of money legally and illegally bought their diamonds at Marks Brothers Jewelers.
Although the stock market crash of October 1929 sent the entire U.S. economy into a downward spiral, Marks Brothers Jewelers was able to survive this difficult period. Sales dropped dramatically, of course, and the company was forced to lay off many of its employees, but the brothers were able to gather together their family in order to run and operate the store themselves. As the Great Depression continued throughout the decade of the 1930s, sales at the company remained stagnant. Yet a glimmer of more profitable times was just around the corner.
World War II and the Postwar Period
Even before the beginning of World War II, the country's economy began to improve. President Franklin Delano Roosevelt implemented a comprehensive national program to place the United States on a wartime production schedule, with the manufacture of materials for troops that would be sent overseas to fight the Axis Powers of Germany and Japan. The resurgence of American manufacturing and production stimulated the economy and lifted the country out of the throes of the Depression. As a result, employment rose and people were paid comfortable wages. No longer worried about putting food on the table, people were able to spend more money on luxury items, such as marriage bands and diamond rings. Gradually, with the revitalization of the economy, specialty retailers like Marks Brothers Jewelers benefited from the increase in consumer purchasing power.
Marks Brothers Jewelers rode the wave of postwar American economic prosperity. Employment was high, wages were increasing, and America was the undisputed economic leader of the free world. All of these developments meant that many more American citizens were doing better than they had ever done before, and were able to pursue leisure activities and buy luxury items like no time in the past. This meant higher sales for Marks Brothers Jewelers, especially as more and more young couples decided that expensive diamond rings and gold wedding bands were necessities for their weddings.
Marks Bros. had five stores by 1946, making it the largest chain in downtown Chicago. The business passed to three children of Hugo Marks in 1948, and they were responsible for extending the franchise as far as Rodeo Drive in Beverly Hills.
Throughout the 1950s and 1960s, Marks Brothers Jewelers prospered, albeit unobtrusively. Still managed and run by family members, the company was run as a relatively small but highly regarded operation, with a modest-sized, long-term staff that was knowledgeable about diamonds and fine jewelry. A loyal customer base that grew steadily over the two decades was also a significant factor.
The company began to open a few stores in shopping malls as the phenomenon grew in the 1960s. By the time the decade had come to an end, Marks Brothers Jewelers had increased its revenues dramatically since the end of World War II.
Growth and Expansion
The jewelry specialty retail business changed significantly during the 1970s, as companies which had traditionally operated as one-store retailers began to expand their business by establishing new stores in different parts of one city or by expanding into different cities altogether. Thus although a well-known company might have its flagship store in downtown New York, it would begin to open stores in Chicago and Los Angeles, for example, and also take advantage of the enormous demographic changes that led to the creation of the suburban "mall." This latter development changed the jewelry retail business forever, since many companies decided at this time to rent mall space in order to attract the growing and affluent middle class that was moving to the suburbs.
Marks Brothers Jewelers did expand its operations during the 1970s, and gradually opened nine additional stores in various sections of downtown Chicago. However, there was no serious consideration of expanding company operations farther than the city limits. This attitude changed in 1979 with the arrival of a new and younger management team. Hugh Patinkin became chairman, president, and CEO, while his brother Matthew Patinkin assumed the position of executive vice-president of store operations, and John Desjardins was brought on board to act as executive vice-president of finance and administration. By this time, the company had a dozen stores: the Whitehall Co. Jewellers brand had been added. The company's first Lundstrom Jewelers store opened in Florida soon after.
Throughout the 1980s, the new management team implemented a comprehensive strategy to expand and improve company operations. Rejecting the trend toward developing high-volume superstores that sold diamonds and jewelry, such as Service Merchandise, Marks Brothers Jewelers remained faithful to its own brand of a unique, small store concept. What this meant was that the size of a Marks Brothers store averaged around 800 square feet, but could be as small as 400 square feet, while the average size of most jewelry stores averaged 1,500 square feet. In addition, management at Marks Brothers decided to locate new company stores in center court locations in malls. The center court location provided the company with a high profile, and the small store concept helped keep rent and operating costs to a minimum. By the beginning of 1990, the new management team had opened 100 new stores in malls across the country.
The impressive expansion achievement of Marks Brothers was not done through an acquisition strategy but by a detailed and careful analysis that resulted in choosing prime mall locations one by one. Most of these new stores were opened under the names of either Whitehall Company Jewellers or Lundstrom Jewelers. The modus operandi of the management team was to first open a Whitehall Company Jewellers store, and later open a Lundstrom Jewelers store, an upscale rendition of the Whitehall store in regard to its merchandise, in the same mall. In this way management minimized competition, and customers were not usually aware of the fact that the parent company, Marks Brothers, operated the two stores.
In 1995, the company continued its aggressive growth strategy by opening 14 additional stores, and in 1996 there were 19 new store openings. Most of these stores were located in two new locations, San Diego, California, and Orange County, California. The success of these stores, especially in an extremely competitive environment where upscale merchandise and elegant surroundings were of utmost importance, was largely based on the knowledge and effectiveness of a highly trained sales force.
Whitehall Jewellers combines a unique formula of upscale quality merchandise at a wonderful price with superior customer service to create the ultimate jewelry shopping experience.
