Report on Bevilles Jewelry – Insight into Retail Operations and Restructuring

Valuable lessons from the Bevilles collapse


Source: jewellermagazine.com
Author: Coleby Nicholson
Report on Bevilles Jewelry - Insight into Retail Operations and Restructuring

Image courtesy of [iosphere] / FreeDigitalPhotos.net

When Bevilles collapsed owing $14 million, and being the first major jewellery retailer to fail in 18 years, the chance to dissect a disaster was too good to pass up.

The recent collapse of the 27-store jewellery chain Bevilles caught many by surprise, especially given that late last year the business announced a major rebranding project that included the roll out of “new-look” stores across Australia.

In addition to a new logo and tagline “Feel Fabulous”, Bevilles made plans to enhance the shopping experience with a streamlined store layout and a fresh colour scheme. It also planned to offer a greater selection of diamond jewellery and watches.

Importantly, after 80 years of heritage in giftware, Bevilles’ new retail strategy included phasing out its giftware range.

The announced restructure and relaunch of the Bevilles brand last October came after a more significant announcement in January 2013 of a major “alliance” with Tara Jewels, an Indian company operating in both the manufacturing and retail channels.

Tara Jewels, established in 2006, conducts a vertical business model; the jewellery manufacturing arm has quickly expanded with a presence across five continents and more than 20 countries, while its jewellery retailing arm operates 30 retail stores in India.

At the same time as revealing the Indian alliance, Bevilles announced it would be closing six stores, eventually reducing its store count from 29 to 23.

Voluntary administration
With that in mind, the local jewellery industry was caught by surprise when it was announced on 1 April that Bevilles had been placed in voluntary administration, owing creditors $14 million.

At the time, Bevilles CEO Michelle Beville told Jeweller, “We have been constrained by external factors that have not allowed us to move to the new formats as quickly as planned.

“The decision to enter voluntary administration was brought about by a number of factors, including a changing retail environment in which the current business model wasn’t viable due to higher operating costs and customers seeking specialist boutique experiences.”

Beville said a restructure plan would be proposed to creditors, and assessed by appointed administrators PPB Advisory. Just one month later the Beville family revealed that its bid to reacquire the retail chain had been successful.

The deal was finalised on Friday 2 May, when it was announced that under the new structure, Bevilles Corp, headed by Michelle Beville, would retain 16 existing stores.

Prior to the company being placed into voluntary administration Bevilles operated 27 stores and, while eight had since been closed, the three remaining stores that would not be acquired by the new entity will close by 30 June.

Before the appointment of the official administrators, PPB Advisory, Bevilles employed 477 staff, but under the new entity that had been be reduced to 237.

Detailed financials

As part of any business administration or liquidation, the official administrators must prepare a report to creditors and, in this case, David McEvoy & Ian Carson produced a 94-page detailed analysis of the Bevilles collapse.

While it was not meant for public viewing, or to be poured over by competitors and the wider jewellery industry, the report provides some valuable insights into not only the Bevilles business but the inner workings of a major retail jewellery chain.

When dissected, the administrators’ report offers valuable lessons for large and small jewellers alike as well as the wider Australian and New Zealand jewellery industry.

Indeed, for all the doom and gloom Aussie and Kiwi jewellers have experienced in recent times (post the global financial crisis), when compared to other retail categories, there has been no collapse of a major retail jeweller for 18 years.

The Bevilles collapse is the first significant jewellery chain collapse since 1996 when Universal Retailers was liquidated, putting the Prouds and Goldmark chains stores on the chopping block.

That event actually resulted in a major restructure of the local jewellery industry with Prouds being purchased by the New Zealand based James Pascoe Group, and Goldmark being acquired by, the then, ASX listed Angus & Coote. (James Pascoe went on to eventually acquire Angus & Coote in 2006 along with its Goldmark and Edments stores making it one of the world’s largest jewellery retailers.)

The only other significant retail collapse since Universal Retailers was Kleins, the 186-store budget fashion accessories and jewellery chain, which went belly-up in 2007.

However, while not a fine jewellery chain, the Kleins failure had much more to do with it being a franchise operation, and failings in its corporate structure, rather than with its retail-trading strategies.

Detailed data

Having obtained the creditors’ report, a number of Bevilles failings immediately became apparent to Jeweller, and it was decided to seek expert analysis on the financial data and the administrator’s commentary with the view of presenting a case study for other jewellery storeowners and managers.

The following analysis is based solely on the official Bevilles’ administrators’ report, while the Michael Hill figures are from its 2013 annual report to the New Zealand Stock Exchange. Other observations from our independent commentators are provided based on extensive industry experience and generally accepted jewellery retailing “benchmarks”.


David Brown, president Retail Edge Consultants, a firm specialising in advice to independent jewellery storeowners, highlights some interesting statistics,

  • Bevilles overall store sales dropped from an average of just over $3 million per door in 2011 to $2.67 million per door in 2013.
  • As a matter of interest, even its 2013 results are more than double the average sales for an independent jewellery store.
  • During the same period, Michael Hill stores averaged just over $2 million but managed a healthy 9.4 per cent increase in EBIT over 2012.
  • Michael Hill increased its Australian revenue by 4.3 per cent from 2012 to 2013, in the same consumer market that Bevilles lost 9 per cent.
  • When you look to what is happening “out there” (the economy, the industry), you take your eye off what is happening “in here” (your performance, your KPIs, your strategies).
  • In “soft” markets, typically there are fewer people buying luxury goods, which means you need to get more money from the people who are still buying. This is achieved by: raising the average retail value; concentrating on close ratios; add on sales and margins rather than trying to renegotiate your rent.

Colin Pocklington, managing director of Nationwide Jewellers, Australia and New Zealand’s largest group of independent jewellers, is well credentialed to provide a financial analysis of the Bevilles data. While he is also a JAA Board member, Pocklington makes the following observations as a qualified CPA and a member of the Associate Chartered Institute of Secretaries (now the Governance Institute).

Coincidentally, he was also the group finance manager at Prouds, and led the management buyout team in 1989 when the liquidator for Hooker Retail sold the business to Universal Retailers, and again when Universal Retailers was liquidated in 1996.

Pocklington says that, “Tough trading periods often bring undone businesses with underlying structural issues,” and points out that,

  • In the two years from 2011 to 2013, Bevilles’ sales declined by 14 per cent however, in the same period, Michael Hills sales increased, albeit moderately.
  • In 2013 Michael Hill had a profit before interest and tax of 9 per cent of sales whereas Bevilles had a loss of 9 per cent of sales.
  • The drop in sales exposed some structural issues in the Bevilles business, the main areas being gross profit, rent and wages.
  • In addition, it would also appear that Bevilles suffered a loss of market share, as the fall in sales was below the industry trend. No doubt this is an issue that Bevilles is examining carefully.

Rent and staff

Brown notes that Bevilles blames a combination of a retail downturn and high fixed rental costs (among other factors) as part of the reason for its collapse.

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