Kleinfeld's bankruptcy rumor

[Craig Lipset]

Has anyone else heard anything of the "Kleinfeld's is going into bankruptcy"
rumor?

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Shani Levitt & Craig Lipset
Qui...@Cheerful.com
http://home.att.net/~quincycat

[Craig Lipset]

Craig Lipset wrote in message <66f5s9$k...@bgtnsc03.worldnet.att.net>...

>Has anyone else heard anything of the "Kleinfeld's is going into
bankruptcy"
>rumor?
>

Here's the answer to that question, courtesy of the December 1st issue of
Forbes:

Of silk purses and sows’ ears
By Luisa Kroll
IN SEARCH OF the perfect wedding dress, brides-to-be travel from as far away
as Hong Kong and England to I. Kleinfeld & Sons in Bay Ridge, Brooklyn, N.Y.
The lure is the selection: more than 1,000 dresses, ranging in price from
$800 to $10,000. Hedda Schachter (née Kleinfeld) and her husband, Jacob,
started selling wedding gowns some 30 years ago, until their 1992
retirement.
But little did the more recent prospective brides and their eager families
know that Kleinfeld’s was teetering at the brink of Chapter 11. In August
Kleinfeld’s stopped paying its largest creditors. In November New York
City-based Gordon Brothers Capital, an investment concern, stepped in and
bought the business at what was apparently a rock-bottom price.
Kleinfeld’s illustrates what can happen when someone tries to expand a
business without really understanding it. The Schachters lived and breathed
their work, actually living above the store and personally greeting
customers and inspiring their staff. “Kleinfeld’s success was primarily due
to a little old lady working the sales floor and running the business,” says
Peter Grimes, publisher of the bridal industry trade magazine Vows.
By 1992 this “little old lady” was selling $22 million to $23 million worth
of bridal rags every year. But the Schachters, both around 70, were getting
on and wanted to retire. In December 1990 they sold the business to Michel
Zelnik, the French-born former chief executive of garment manufacturer
Bidermann Industries U.S.A., a Chapter 11 victim. The Schachters stayed on
for a transition period of 18 months.
Hardly were the Schachters off on their world travels to China, Africa and
South America when the business started downhill. Zelnik wasn’t much
interested in pressing flesh and chatting with customers. He would leave
that to the hired hands. The store shuffled through five presidents in five
years. “It needed something more than an absentee owner,” admits Zelnik.
Meanwhile, sales were slipping, markdowns increasing and manufacturers
becoming wary.
Zelnik opened up new departments: accessories, shoes and jewelry. Wanting to
expand Kleinfeld’s beyond Brooklyn, he leased bridal departments at
prestigious Saks Fifth Avenue stores. But you couldn’t just call a Saks
department “Kleinfeld’s.” They chose the name “The Wedding Dress.” Zelnik
and Saks opened wedding boutiques in Saks’ stores in New York, Georgia,
California, Texas and Florida.
While Zelnik was getting tony, others moved into Kleinfeld’s markets. David’
s Bridal, the first big chain to sell wedding gowns off the rack, shook up
the low end of the market, while Vera Wang applied pressure at the high end.
Not only that but the number of marriage-age couples steadily declined.
In October Saks took full control of the bridal boutiques, and a few weeks
later Zelnik turned the Brooklyn store over to Eugene Kohn, a blunt-speaking
30-year veteran retailer. Unlike Zelnik, he plans to be at the Brooklyn
store daily. “I’m going to make sure that the basics are repeated over and
over,” says Kohn. Expansion? “I won’t even ask that question for 18 months,”
Kohn says, adding “I’m not so sure we can replicate this unique experience
elsewhere.”
Moral: Don’t try changing a folksy specialty store into an upscale chain.