IDEX Online Research: Is Finlay Anticipating an Acquisition?

Finlay Enterprises could be on the verge of announcing an acquisition. Using stronger and more direct language than at any time in the recent past, Finlay chairman and CEO Art Reiner told Wall Street analysts that “I anticipate that we will be successful . . . in adding other specialty store franchise which will leverage Finlay’s position in the higher end market.”

Reiner’s remarks came during a conference call announcing second quarter (three-month fiscal period ended July) results to investors. Reiner has spoken of Finlay’s need to find new avenues for growth, especially since it is exiting roughly one-quarter of its jewelry leased departments this year. However, in the past, Reiner has used much softer language when describing his efforts to find replacement business. Even when faced with investor questions about Finlay’s growth prospects, he has answered in very general terms.

Finlay Enterprises operates leased jewelry departments in many major U.S. department stores such as Federated, Dillards, Bon Ton, and others.

Reiner said that he was “confident that we will add new businesses to Finlay[s]” operations. He further noted that management thinks the Carlyle Jewelers model is a good one. Finlay acquired the 32-store North Carolina-based guild Carlyle Jewelers in May 2005.

Reiner went on to say that Finlay was “working diligently” to find new Carlyle-type growth opportunities. He said that Finlay would continue to open new Carlyle stores – two are opening this year and two more are planned in 2007 – and that Finlay was actively seeking acquisitions similar to the higher-end Carlyle stores.

Finally, Reiner said that he hoped to have something more specific to tell shareholders about the company’s expansion plan, perhaps by the time third fiscal quarter results (period ending October 2006) are announced. We expect those results to be reported at the end of November.

During most of the first half of the current decade, Finlay operated just over 1,000 doors in host department stores in the U.S. At the end of the second fiscal quarter (July 2006), Finlay operated 820 doors. Based on announced closings over the next twelve months, Finlay will operate about 725-to-735 units as of July 2007, unless it can find a new avenue for growth.