The Swarovski Group laid off 122 people in Cranston yesterday as part of a major restructuring of its North American operations.
Austria-based Swarovski, known for its crystal accessories and gifts, is drastically changing how it sells in America. The company is significantly reducing U.S. production of its crystal jewelry and will stop selling it through major department stores.
Consequently, the company laid off 146 people in its North American Consumer Goods Business yesterday, including the 122 in Cranston. The Rhode Island location is the company's North American distribution center, and its North American headquarters for jewelry manufacturing.
Cuts were made in sales, shipping, design and marketing with the majority ---- about 95 employees -- cut from the jewelry manufacturing sector of its business. The facility was producing 75 percent of the Swarovski jewelry sold in the U.S.
Now, about 25 percent of Swarovski jewelry sold in the U.S. will be made in Rhode Island, with the other 75 percent produced in Thailand.
Swarovski's two buildings in Cranston will remain the North American Operations Center for its crystals business and contain 485 people after the layoffs, according to Daniel J. Cohen, president of Swarovski U.S. Holding Ltd.
"The cuts are because we are pulling out of department stores," said Cohen, adding that selling through the large stores has become unprofitable.
All the laid-off employees will receive a severance package based on tenure and experience. Swarovski does not typically offer severance packages to hourly jewelry workers, but wanted to take care of its Rhode Island employees, said Cohen.
"We've been here 45 years. We definitely feel an attachment to the state and the community," said David Himsey, Swarovski's executive vice president of people, risk and organization. "We made an exception to our severance policy."
Swarovski's decision to stop selling jewelry in places such as Nordstrom and Bloomingdale's is part of a major North American rebranding campaign as the company looks to boost profit, globalize its business and change its image.
"This is not about going somewhere to cut costs, like you hear about so often," said Himsey. "This is about (growth). . ."
Swarovski is a $2-billion, privately held company that sells not only crystal jewelry, figurines, chandeliers and picture frames but also high-end optical equipment and cutting tools for the construction industry. The crystal business makes up 70 percent of the company's sales -- about $1.4 billion -- and employs about 10,000 people, according to Cohen. About 25 percent of that revenue comes from American sales.
All the crystals, even the animal figurines, are made in Austria. But the crystals are configured for wholesale and made into jewelry in other parts of the world, including Cranston.
Over the past five years, the company's crystal jewelry business globally has tripled, while its North American jewelry business has increased by just 25 percent, said Cohen. Swarovski has attributed the difference in sales to its retail model in the US.
In America, the company sells its jewelry, as well as its home decor and gift items, through department stores. But those stores pushed Swarovski to introduce new products more often than the company releases products in other ares of the world, said Cohen. The department stores were counting on new products to drive consumer traffic, he said. Sales at U.S. department stores open at least a year dropped by 3.87 percent from February 2003 to June 2003, compared with the same period the year before, according to the Bloomberg Same-Store Index.
"In the U.S., we got ourselves into a situation where we had too many new items," said Cohen.
The company was introducing 700 to 800 new jewelry products in U.S. department stores annually, compared with about 150 at stores in other parts of the world, he said. In addition, Swarovski was dealing with extra products it had to take back from the stores and costly markdowns. Ultimately, the jewelry segment of its U.S. business started losing money.
The company "looked at the department stores and didn't see a pretty picture," said Cohen.
However, the stand-alone Swarovski retail locations -- like the one in the Providence Place mall -- were doing well. The company has 53 Swarovski-branded retail stores across the country and sells its products through 2,500 speciality retailers.
The costs pushed Swarovski to rethink its North American consumer goods business. While the company is pulling its jewelry out of department stores, it will continue to sell other products, such as gifts and home decor, through the stores. It will also introduce a limited number of new jewelry products just four times a year, on the same schedule that it introduces new products in other parts of the globe.
The company is planning to open 10 Swarovski retail stores in the U.S. by the end of the year, and might eventually have as many as 120 stores across North America, said Cohen.
"We're repositioning ourselves to become a new luxury brand," he said.
One retail observer, though, said that it might be a mistake for Swarovski to pull its jewelry out of U.S. departments stores.
"I am disappointed that Swarovski is pulling out of department stores -- I believe they have been well represented by those stores," said Walter Loeb, a retail consultant with Walter Loeb & Associates in New York. "It may be difficult for them to recapture the volume in their speciality stores."
However, Swarovski sees the rebranding and reorganizing of its North American operation as a way to grow the company's jewelry business -- which might soon include accessories.
"We know that we'll employ additional people down the road as we grow," said Himsey.
