Diamonds may be forever, but some diamond retailers are certainly not. That’s the brutal truth facing bankrupt jewelry chain Friedman’s and its newly selected advertising firm, The Buntin Group of Nashville.
After the Savannah, Ga.-based company faced a cash squeeze and could not adequately stock its stores last year during the all-important Christmas selling season, it filed a Chapter 11 petition days later. Now, in a span of less than six months, a new advertising campaign must be created and rolled out in time to give the slimmed-down 450-store chain a chance to lift off.
It’s an important project for the 90-person ad firm. Buntin stands to handle annual billings of more than $15 million for Friedman’s—an estimate based on the $24 million the company spent several years ago when it had 44% more stores. The 14 Buntin staffers working on the account have branding experience with other retailers like Dollar General and Tractor Supply Co., as well as jewelry sellers Zales and the defunct Service Merchandise. Still, they’re working with a client soiled by years of media attention on class-action lawsuits, an SEC investigation of accounting irregularities, bankruptcy and the delisting of Friedman’s shares.
Claiming that his ad firm was not hired to perform damage control or crisis PR, 32-year-old president Jeffrey Buntin Jr. says the assignment is about “seeing opportunities in the future.” He notes that the retailer has taken steps to shore up its operations and mend its relationships with the public. A year ago, the board replaced its chief executive officer with former Service Merchandise CEO Sam Cusano, who hired a Zales Jewelers executive as president and has instituted an online confidential hotline for ethics complaints from employees, customers and vendors.
Some analysts agree with Buntin’s assessment, saying that the general jewelry-shopping public may be unaware of the company’s financial and ethical blemishes. However, they do see a major challenge from Wal-Mart. Many Friedman’s stores are located in strip malls anchored by Wal-Mart, which is aggressively courting the middle-income and working class jewelry customer that has been Friedman’s target market. And sales at Blue Nile, a Web-based jewelry retailer with revenue expanding 25% annually, are likely to reach $260 million next year.
Buntin is tight-lipped about plans to better position Friedman’s in this increasingly competitive market. He says only that his firm is rolling out six different marketing strategies and hopes to have them tested by the end of the summer.
Whatever success the new ad campaign finds with customers, an embittered investment community will be a tougher sale. Sheldon Grodsky of Grodsky Associates, a securities brokerage firm in South Orange, N.J., complains that 20 months after Friedman’s said it would restate previous years’ financial reports, it still hasn’t done so. “In the world of accounting irregularity, they’re an all-star,” he says.
Investor relations aren’t the responsibility of Buntin, which will have its hands full with advertising and marketing. “We’ll find a unique niche for Friedmans to live in, and we’ll bring it to life,” Jeffrey Buntin says. Grodsky remains skeptical. “If they are willing to spend money on trying to revitalize the company, they can, but the company is never going to go anywhere if they don’t release their financial statements on time.”
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