Financial Reporting

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Fortunoff loose-diamond auction nets nice recovery

July 01, 2009

New York--SimplexDiam Inc. announced this week that its auction of Fortunoff's loose diamonds recovered more than 73 percent of the retailer's cost, according to a press release from SimplexDiam.

The New York-based liquidation specialists held the auction online earlier this month. The auction included small (70 pointers and below), uncertified stones only.

"We knew we'd attain a tangibly better recovery than the competition, that's why we took the project," SimplexDiam Chief Executive Officer Yogesh Madhavani said in the release. "Both the bidders and the estate seem quite happy with the result."

By comparison, other recent wholesale auctions in the jewelry industry have recovered between 35-55 percent of the wholesale cost, the release states.

Taking into account that retailers usually pay a 20 percent markup on loose diamonds under 70 points (meaning they own loose stones at 120 cents on the wholesale dollar), this means that SimplexDiam recovered 87.6 percent of the wholesale cost (73 percent of 120 cents), according to calculations included in the release.

SimplexDiam stated that there hasn't been a trade auction in recent recorded history that's within 25 points of their recovery rate.

Shail Madhvani, SimplexDiam's vice president of finance, called the auction a "high watermark" for the company.

"Intelligent selection, based on multiple variables, allows us to maximize value for the bidder and the estate," he said. "It has taken us decades to understand the secondary market this well. We still work hard each time to improve our models."

SimplexDiam values and purchases diamonds and fine jewelry, and has been involved in a number of the industry's most high-profile recent bankruptcies, including bidding and winning the residual inventories in the cases of Friedman's Jewelers, Whitehall Jewelers and Christian Bernard Stores Corp.
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