Last month, Alex and Ani filed a “comprehensive financial and operational restructuring” support agreement with its debt holders and equity sponsors. The first step in the restructuring process was filing Chapter 11 proceedings in Delaware’s bankruptcy court. In announcing the restructuring, the company also said it was looking for a buyer.
In the filing, the company claims between $100 million to $500 million in assets and an equal amount in liabilities. Some 17 of its 30 largest creditors are owed rent, including nearly $4 million to Simon Properties and $3.3 million to Brookfield.
Currently, Alex and Ani holds just over 70 leases, but it also maintains distribution through its e-commerce website, accounting for some 45% of sales in 2019, and wholesale accounts, making up 43% of revenue that year.
Rise and fall of Alex and Ani
Founded in 2004 by jewelry-insider Carolyn Rafaelian, the company had a spectacular rise – reaching a valuation of $1 billion in 2016 – and an equally spectacular fall. Rafaelian takes much of the credit as well as much of the blame for where the company is today.
Alex and Ani’s missteps are legion, including grievous mismanagement, excessive executive turnover and numerous lawsuits. Dysfunctional operations left it unable to adapt to changing consumer preferences and increased competitor incursions.
Then the pandemic hit and sales fell precipitously from an estimated $400 million in 2019 to somewhere in the neighborhood of $240 million in 2020. Yet a 40% decline last year isn’t remarkable for a brand sold almost exclusively in non-essential retailers that were closed throughout much of the year.
London-based Lion Capital is the company’s current majority shareholder, having acquired a 40% stake in 2014 and increasing its share to 59% in 2019. At that time, Rafaelian was removed as CEO and Robert Trabucco, former CFO of Sterling Jewelers, a division of Signet, took command with Rafaelian heading up design.
But that didn’t last long and she was out by May 2020. And under the restructuring agreement, Rafaelian must sell her remaining shares in the company.
Alex and Ani has almost single-handedly dug itself into a deep hole and now it has to dig itself out. Despite the past struggles, it still has plenty to work with. The value isn’t in the company but in the brand.
Looking back to go forward
For such a young company, Alex and Ani has quite a checkered history, but by looking back, the company can see a way forward.
Here’s what history shows and how to apply its learnings to today:
Simple, scalable design model
During the formative years from 2004 to 2009, Rafaelian was honing the brand. She secured a patent for the design of the wire bracelets and fine-tuned the charms that let wearers express themselves.
Manufactured in Rhode Island from recycled metal, the original appeal was the personal meaning imbued into each design. The company offers a wide array of stylized charm designs and licensed images. And each bracelet comes with a “meaning card,” which tells the bracelet’s story.
The charms run the gamut for most every personal or gifting occasion and emotional sentiment, with a touch of the mystical added in. The website explains:
“The universe speaks to us in signs and symbols. Find yours. We are designed to connect you to every single part of your soul’s destiny. Your life is made up of the connections you create — to yourself, your loved ones, spirit, nature, humanity, and the universe itself. Our jewelry is meant for you to express your unique self.”
The designs are simplicity itself and addictive, since the bracelets are made to be collected and worn stacked. It’s an eminently scalable design model. Rafaelian created it, but any good brand marketer with a team of designers could carry it forward.
However, Tiffany Stoval, whose Atlanta West Jewelry store has carried the line for years, suggests that recent designs have gotten too mundane and ordinary.
“Some of the designs look like they are designed by kids for kids, like a snowman or a candy cane. Now if they came out with a really pretty snowflake with crystals, that would sell well, but not the chessy kids’ stuff,” she advises.
The meaning is what customers buy and Alex and Ani has an ever-replenishing well of meaning to draw from.
Price points perfect for uncertain times
The years following the 2008/2009 recession were the glory days for the brand. Sales grew from $20 million in 2011 to $350 million in 2015. Alex and Ani opened its first store in Newport, RI and the line was picked up by Bloomingdale’s, Nordstrom and a rush of independent jewelry and gift stores.
Besides coming on the scene with a meaning-infused, fashionable new look in jewelry, Alex and Ani was affordable with single bracelets averaging $30 or so. The price point was perfect for recession-weary customers who wanted an emotional pick-me-up without spending too much money.
Fast-forward to today and pandemic-weary customers still need the same lift. And remarkably, Alex and Ani has held its affordable price points making it perfect for our time with the threat of inflation looming.
“Where else can you buy a set of three bracelets for under $100?” asks Stoval. “For yourself or to give as a gift, it’s so easy to come in and bam, you’re out the door with something that looks like it costs at lot, but it doesn’t.”
Alex and Ani may not be fine jewelry, but it is jewelry and it offers a lot of value at a price point perfect for impulse or add-on purchases.
Disciplined management required
Then around 2015/2016 once sales reached about $500 million, the company’s fortunes started to turn. Throughout its heyday, Alex and Ani had a two-person team at the top with Rafaelian the inspired and inspiring creative visionary and Giovanni Feroce, a hard-charging, former Army major, managing business operations. It was a formula that worked.
As his name suggests, CEO Feroce was a fierce business manager who took care of all the operational details, leaving the design side to Rafaelian. Feroce brought discipline and military precision to company operations and invested early in business intelligence, consumer data and e-commerce.
But in early 2014, Feroce left the company and not long after many of his top staff went with him. Highly-qualified Harlan Kent, former president and CEO of Yankee Candle, took the helm but he only lasted a year. And that marked the beginning of the end for Alex and Ani as the mercurial Rafaelian took full control.
“Alex and Ani was our best line ever,” shares Jennifer Tell, the third-generation owner of Poughkeepsie, NY’s Sierra Lily gift shop. “We did over $1 million in that line alone in 2014, then it started petering out,” as the space devoted to Alex and Ani shrank from five cases down to one today.
Atlanta West Jewelry’s Stoval tells much the same story. “We used to have ten feet of showcases for Alex and Ani, basically a shop-in-shop concept. Now it is down to two feet. When the CEO left, that is when I started seeing a big difference.”
Having met Rafaelian many times over the years, Tell says she was magical and inspiring, but it takes more than vision to make a successful business. It takes disciplined management.
Now Lion Capital has brought in an experienced business manager in Trabucco, but whether he stays after the restructuring is still a question. And whether one person alone can both inspire the staff, reenergize customers and manage operations is another.
The team approach to divide and conquer at the senior management level is proven and can work again.
Controlled distribution is key
As the business started to falter, distribution became more haphazard. The number of company-owned stores grew to over 100 and the company leaned aggressively into direct-to-consumer e-commerce, effectively disenfranchising its wholesale retailing partners.
“Around 2017/2018 they did a horrible disservice to brick-and-mortar retailers by having these crazy 40%-off sales on their website,” Sierra Lily’s Tell shares. “Customers would bring in emails or call us up and ask for the same discount. When a company does that, it’s not a partnership anymore. You don’t want to promote the line because they have become your biggest competitor.”
And when Alex and Ani started turning up in discount retailers, it was a double whammy against independents.
“The worst thing that happened for us was when it showed up at Marshall’s and Nordstrom Rack,” Atlanta West Jewelry’s Stoval says. “When it was sold there for less than we can buy it for, that was a hard one to swallow.”
It is a delicate balance for specialty brands, like Alex and Ani, to effectively manage its wholesale business while simultaneously trying to grow direct-to-consumer. It doesn’t have to be an either/or choice, but the brand’s marketing needs to draw customers and attract sales throughout the distribution network.
Bringing wholesale partners back and finding new ones will ultimately strengthen the brand and the company. They were critical to success in the early days and can be so again.
It’s affordable price point makes it especially appealing to independent retailers, even high-end jewelry stores like Stoval’s.
“We are a fine jewelry store. We sell diamonds and Rolexes, but Alex and Ani fits in well. It brings customers in. A shopper will make a small purchase for herself or as a gift then go over to the diamond case and see something she wants, like an anniversary ring. She goes home, tells her husband and he comes right in and spends $3,000,” she explains.
Alex and Ani can come back
Upon hearing the news of Alex and Ani’s bankruptcy, I was ready to write it off as a company whose time has come and gone. With Rafaelian out of the picture, I believed the creative spark behind Alex and Ani’s amazing success went with her. But after doing more research, I’m convinced otherwise.
Rafaelian left behind the intellectual property that powered the brand in the early days. And the company found an organizational structure that worked with business managers like Feroce and Kent in charge of operations. But after they left, the company started to slide.
I share the vision that Lyndon Lea who heads up Lion Capital expressed in an interview with Medium. He said Alex and Ani’s challenges resulted from “several years of mismanagement due to a failure to implement proper systems, controls, and processes within the company as it grew. Covid notwithstanding, I believe that if we can do some simple things, proven processes that have been used widely, the business can be turned around. It’s not splitting atoms. The company’s best times could still be ahead of it.”