Dame Elizabeth Taylor’s holiday appearance at Geary’s Beverly Hills to promote her line of jewelry was met with flashing cameras and crowds in the hundreds. The tagline for the event was, “Something wonderful is about to happen.”
Chalk it up to wishful thinking.
Taylor’s diamond-centric movie-star image has not been enough lately to make sales sparkle for House of Taylor Jewelry Inc., a publicly-traded West Hollywood company that sells her brands called Elizabeth and House of Taylor as well as a line of Kathy Ireland jewelry to boutiques around the country.
House of Taylor Jewelry has seen a slowly declining share price since it first went public on the Nasdaq in 2005. Shares are now off 91 percent and were lingering last week between 40 and 50 cents.
In fact, shares have slipped so perilously low, trading under a dollar consistently since mid-September, that the company has received a notice from Nasdaq warning of delisting by late April if the price doesn’t rise above $1 for 10 straight days.
“From a legal standpoint, I’m not allowed to comment on the stock,” said Jack Abramov, the chief executive of the company. “Elizabeth (Taylor), Kathy (Ireland), and my family are the largest shareholders and there hasn’t been a lot of buying and selling. The number of shares being traded is not reflective of the value of the company.”
Though the company has achieved distribution to about 400 independent retail stores in the last two years of operation, the company’s sales for the third quarter ended Sept. 30 showed a significant drop. Sales were $4.9 million, down from $12 million in the same quarter the previous year. The company also hasn’t earned much, losing money nine out of the last 10 quarters, including $2.42 million in the third quarter.
The poor third-quarter performance was largely attributed to a $6.4 million decrease in the company’s sales of loose diamonds. House of Taylor has been buying diamonds from DeBeers and selling them directly to retailers in order to grow its presence in the marketplace and cement Taylor’s image as a diamond lover.
“It helped us get penetration into the retail channel,” Abramov said. “We knew if we could offer high quality diamonds at a consistent price, retailers would be more willing to buy jewelry from us.”
But diamonds are a commodity and some retailers have started going directly to diamond suppliers for their wares, he said.
And at the same time, House of Taylor has decided to focus more on branded products at affordable prices, especially the Kathy Ireland line, which has distribution through the United States and military exchanges around the world and is sold at prices ranging from about $200 to $3,500. The Elizabeth line has prices up to $1 million and is sold at only a handful of high-end jewelry stores.
House of Taylor isn’t the only company in the sector suffering at the moment though, said Kenneth Gassman, an independent jewelry analyst in Virginia. The whole industry is performing poorly along with the rest of the retail industry.
“Jewelry is a competitive industry driven by discretionary spending,” he said. “Gas prices are up. People have no home equity to borrow. Unemployment is rising. The first thing people cut is jewelry.”
During the Christmas season, average mass market jewelers saw sales down an average of 7 or 8 percent. Some were down as much as 30 percent. However, Gassman doesn’t cover House of Taylor specifically, mostly because he says he doesn’t understand their business model.
“I spent 20 years on Wall Street and I’m not sure I understand these folks’ business,” Gassman said. “I read the prospectus and it was too vague for me so I’ve never followed the company. What are the assets of the business? What do they really own? What do they sell? For better or for worse, they dropped off my radar.”
For his part, Abramov, who is the third largest shareholder in the company behind Taylor and Ireland, is optimistic about the future. A company press release noted the mid-range House of Taylor line saw a “slight sales increase” for the first nine months of 2007, while slight decreases in the other two lines were attributed to a lack of capital that hindered its ability to produce jewelry.
But recently the company closed a $30 million credit facility and secured $5.8 million in equity financing.
“While our financial results are not currently in line with our long-term objectives this additional capital substantially increases our financial flexibility and provides the necessary support for our long term growth strategies,” said Abramov in the press release.
In December, House of Taylor Jewelry signed a deal with Los Angeles-based PD Financial Corp., which operates PeachDirect, a direct to consumer business. The deal is expected to create a new stream of revenue for House of Taylor by selling its branded jewelry through catalogues and Web portals.
